INSTRUCTOR MANUAL for Advertising and Promotion An Integrated Marketing Communications Perspective, by StudyGuide

CHAPTER 1 AN INTRODUCTION TO INTEGRATED MARKETING COMMUNICATIONS Chapter Overview The purpose of this opening chapter is to provide the student with an overview of the field of advertising and promotion and its role in the marketing process. We introduce the concept of integrated marketing communications (IMC), its evolution, and examine how various marketing and promotional elements must be coordinated to communicate effectively. We also discuss the reasons for the increasing importance of the IMC perspective in planning and executing advertising and promotional programs. Marketers understand the value of strategically integrating the various communication functions rather than having them operate autonomously. The move to integrated marketing communications also reflects an adaptation by marketers to a changing environment, particularly with respect to consumers, technology, and media. The various elements of the promotional mix are introduced in this chapter along with a brief discussion of these basic tools of IMC. We discuss how many companies are taking an audience contact or touch point perspective in developing their IMC programs and consider four basic categories of touch points. This chapter also examines the various tasks and responsibilities involved in advertising and promotion management and a model of the integrated marketing communications planning process is presented. Lastly, we give an overview of the perspective and organization of the rest of the text.

Learning Objectives 1. Describe the role of advertising and other promotional elements in marketing. 2. Discuss the evolution of the integrated marketing communications (IMC) concept. 3. Explain the increasing value of the IMC perspective in advertising and promotional programs. 4. Identify the elements of the promotional mix. 5. Identify the contact points between marketers and their target audiences. 6. Describe the steps in the IMC planning process.

Chapter 01—An Introduction to Integrated Marketing Communications

Chapter and Lecture Outline I.

INTRODUCTION TO ADVERTISING AND PROMOTION

The chapter begins with a brief discussion of the changing roles of advertising and promotional strategy in modern marketing. Instructors should note the role and importance of an organization’s promotional efforts in various industries and markets. These might include the automotive market, the beer industry, soft drinks, and consumer electronics. The opening vignette on Charmin provides a very good overview of this how various IMC tools are used by major marketers to communicate with their target audiences. II.

THE GROWTH OF ADVERTISING AND PROMOTION

Advertising and promotion are integral parts of our social and economic systems. Advertising has evolved into a vital communication system for both consumers and businesses. In market-based economies, consumers rely on advertising and other forms of promotion to provide them with information they can use in making purchase decisions. Corporations rely on advertising and promotion to help them market their products and services. Evidence of the increasing importance of advertising and promotion in the marketing process comes from the growth in expenditures in these areas over the past decade. In 1980, advertising expenditures in the U.S. were $53 billion and $49 billion was spent on sale promotion. By 2016, total marketing communications expenditures in the United States were estimated to be nearly $571 billion, with $127 billion being spent on traditional media advertising (television, radio, magazines, newspapers outdoor, cinema), $68 billion going to digital/online advertising, $51 billion going to direct mail and other forms of direct marketing such as e-mail marketing, $25 billion spent on sponsorships and experiential/event marketing, and the remaining $300 billion being spent on consumer and trade promotion. Advertising expenditures outside of the U.S. increased from $55 billion in 1980 to an estimated $382 billion by 2017. Billions more are spent by both domestic and foreign companies in other promotional areas such as direct marketing, event sponsorship, interactive marketing, sponsorships and public relations. The tremendous growth in expenditures for advertising and promotion reflect the growth of the U.S. and global economies. Expansion-minded marketers are taking advantage of growth opportunities in various regions of the world and taking advantage of integrated marketing opportunities through methods such as event sponsorship and the use of the Internet. Particularly noteworthy is the increase in the amount of marketing communications dollars being spent online. Total spending on digital advertising by U.S. marketers is expected to reach $100 billion by 2020 and represent 45 percent of all media advertising spending. Spending on Internet advertising – which includes mobile, social, display, and search ads – is growing rapidly and is expected to account for 41 percent of advertising expenditures by 2019. Professor Notes

Chapter 01—An Introduction to Integrated Marketing Communications

III.

THE ROLE OF MARKETING A. Many students may already have had a marketing course; however, it is still helpful to define marketing and stress that it involves more than just selling or other promotion functions. For more than two decades, the American Marketing Association, the association that represents marketing professionals in the United States and Canada, defined marketing as: the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives. This definition of marketing focused on exchange as a central concept and the various activities involved in the marketing process. Many experts argue that exchange is the core phenomenon or domain for study in marketing. The discussion can focus on the nature of exchange and what is needed for this process to occur including: two or more parties with something of value to one another; a desire and ability to give up their something of value to the other party; and a way for the parties to communicate with one another. B. Revised Definition of Marketing—In 2007 the AMA adopted a revised definition of marketing: Marketing is the activity, set of institutions, and processes for creating, communicating, and delivering exchange offerings that have value for customers, clients, partners and society at large. This definition of marketing is more reflective of the role non-marketers to the marketing process. It also focuses on the important role marketing plays in developing and sustaining relationships with customers and delivering value to them. Value is the customer’s perception of all of the benefits of a product or service weighed against all the costs of acquiring and using it. Benefits can be functional, experiential or psychological. Costs include the money paid for the product or service as well as other factors such as acquiring information, making the purchase, learning how to use a product/service, maintaining, and disposing of it. C. The Marketing Mix—The four elements of the marketing mix (product, price, place, and promotion) can be introduced and the task of combining these elements into an effective marketing program for facilitating exchange with a target audience should be noted. The instructor should point out that while this course focuses on the promotion element of the marketing mix, the promotional program must be part of a viable marketing strategy and coordinated with other marketing mix variables. This leads into a discussion of the concept of integrated marketing communications. Professor Notes:

Chapter 01—An Introduction to Integrated Marketing Communications

IV.

INTEGRATED MARKETING COMMUNICATIONS

The Evolution of IMC—In the past, many marketers built strong barriers around the various marketing and promotional functions, planning and managing them separately with different budgets, different views of the market and different goals and objectives. In the 1990s, however, many companies began moving toward the concept of integrated marketing communications (IMC), which involves coordinating the various promotional elements along with other marketing activities that communicate with a firm’s customers. As marketers embraced the concept of IMC, they began asking their ad agencies to coordinate the use of a variety of promotional tools rather than relying primarily upon media advertising. A number of companies began looking beyond traditional advertising agencies and using other types of promotional specialists to develop and implement various components of their promotional plans. As the advertising industry recognized that IMC was more than just a fad, terms such as new advertising, orchestration and seamless communication were used to describe the concept of integration. A task force from the American Association of Advertising Agencies (4As) developed one of the first definitions of integrated marketing communications defining it as: A concept of marketing communications planning that recognizes the added value of a comprehensive plan that evaluates the strategic roles of a variety of communication disciplines—for example, general advertising, direct response, sales promotion, and public relations- and combines these disciplines to provide clarity, consistency, and maximum communications impact. Integrated marketing communications calls for a “big picture” approach to planning marketing and promotion programs and coordinating various communication functions. With an integrated approach, all of a company’s marketing and promotional activities should project a consistent and unified image to the marketplace. However, advocates of IMC have argued for an even broader perspective that considers all sources of brand or company contact that a customer or prospect has with a company, product or service.

A Contemporary Perspective of IMC—As IMC evolves and becomes marketers develop a better understanding of the concept, they are recognizing that it involves more than just coordinating the various elements of the marketing and communications program to reflect “one look, one voice.” IMC is being recognized as a business process that helps companies identify the most appropriate and effective methods for communicating and building relationships with customers and other stakeholders. Don Schultz of Northwestern University, who has been one of the major proponents and thought leaders in the area, developed a new definition of IMC which is as follows: Integrated marketing communications is a strategic business process used to plan, develop, execute and evaluate coordinated, measurable, brand communications programs over time with consumers, customers, prospects, employees, associates and other targeted relevant external and internal audiences. The goal is to generate both short-term financial returns and build long-term brand and shareholder value.

Chapter 01—An Introduction to Integrated Marketing Communications

This definition views IMC as an ongoing strategic business process rather than just tactical integration of various communication activities. It also recognizes that there are a number of relevant audiences that are an important part of this process beyond just customers. C.

Reasons for the Growing Importance of IMC—There are a number of reasons why marketers are adopting the concept of IMC. A very fundamental reason is that they recognize the value of strategically integrating the various communication functions rather than having them operate autonomously. The move also reflects an adaptation by marketers to a changing environment, particularly with respect to consumers, technology and media. One of the major developments that has led to the adoption of IMC is the fragmentation of media and the shift from mass to micromarketing. Advances in technology are also impacting IMC, which is discussed in Digital and Social Media Perspective 1-1. The IMC movement is also being driven by a “marketing revolution” that is changing the ways companies market their products and services. Major characteristics of this marketing revolution include: • • •

•

A shifting of marketing dollars from traditional media advertising to other forms of promotion as well as nontraditional media. The rapid growth of the Internet and social media which is changing the nature of how companies do business and the ways they communicate with consumers. A shift in marketplace power from manufacturers to retailers. Due to consolidation in the retail industry, small local retailers are being replaced by large regional, national, and international chains that are using their clout to demand promotional fees and allowances. Retailers are also and using new technologies such as checkout scanners to assess the effectiveness of manufacturers’ promotional programs which is prompting many marketers to shift their focus to tools that can produce short term results, such as sales promotion. The growth and development of database marketing which is prompting many marketers to target consumers through a variety of direct-marketing methods such as telemarketing, direct mail and direct response advertising. Demands for greater accountability from advertising agencies and changes in the way agencies are compensated which are motivating agencies to consider a variety of communication tools and less expensive alternatives to mass media advertising.

Chapter 01—An Introduction to Integrated Marketing Communications

McGraw-Hill Connect ®: IMC for Bee & Gee's Shampoo Products Type of Activity: Case Analysis Activity Summary: Bee & Gee is a multi-product, multi-brand, packaged goods company with a significant presence in the personal care and grooming category. Within each product category, it has numerous brands that sometimes compete with each other in the same geographical markets. Each year, the brand managers of each individual brand at Bee & Gee review the marketing communications elements used for the brand during the current year and start the planning process for next year's promotion. In this activity, students will answer questions about IMC elements and planning. Activity Learning Objective: 01-02 Discuss the evolution of the integrated marketing communications (IMC) concept. CONCEPT REVIEW: Though advertising has been the dominant form of marketing communication, a variety of other elements such as direct response, sales promotions, public relations, interactive marketing, and event sponsorships have become an increasingly important part of a firm's promotional portfolio. Most marketers began moving toward the process of integrated marketing communications (IMC), which involves coordinating the various promotional elements and other marketing activities that communicate with a firm's customers. As marketers embraced the concept of integrated marketing communications, they began asking their ad agencies to coordinate the use of a variety of promotional tools rather than relying primarily on mass media advertising. Many agencies responded by acquiring PR, sales promotion, and direct-marketing companies and touting themselves as IMC agencies that offer one-stop shopping for their clients' promotional needs.

Difficulty: Medium Bloom’s: Analyze AASCD: Analytical Thinking V. The Role of IMC in Branding—One of the major reasons for the growing importance of integrated marketing communications over the past decade is that it plays a major role in the process of developing and sustaining brand identity and equity. Brand identity is a combination of many factors including the name, logo, symbols, design, packaging, and performance of a product or service as well as the associations that come to mind when consumers think about a brand. It is the sum of all points of encounter or contact that consumers have with a brand, which includes the various forms of integrated marketing communication used by a company. Figure 1-1 shows the world’s 10 most valuable brands from the 2015 Interbrand rankings.

Chapter 01—An Introduction to Integrated Marketing Communications

VI.

THE PROMOTIONAL MIX: THE TOOLS FOR IMC

The Role of Promotion—Promotion is defined as the coordination of all seller-initiated efforts to set up channels of information and persuasion to sell goods and services or promote an idea. It should be noted that promotion is best viewed as the communication function of marketing. The discussion of integrated marketing communications should point how other marketing elements such as brand name, package design, price or retail outlets implicitly communicate with consumers. However, most of an organization’s communication with the marketplace takes place through a carefully planned and controlled promotional program which utilizes elements of the promotional mix. The promotional mix is defined as the basic tools or elements that are used to accomplish organization’s objectives. The role and function of each promotional mix element in the marketing program can be discussed along with its advantages and limitations. A.

Advertising—any paid form of nonpersonal communication about an organization, product, service, or idea by an identified sponsor.

Advantages • cost-effective way for communicating, particularly with large audiences • ability to create images and symbolic appeals and for differentiating similar products and services • valuable tool for creating and maintaining brand equity • ability to strike responsive chord with audience through creative advertising • opportunity to leverage popular advertising campaigns into successful IMC programs which can generate support from retailers and other trade members • ability to control the message (what, when and how something is said and where it is delivered) Disadvantages: • • • •

cost of producing and placing ads can be very high, particularly television commercials can be difficult to determine the effectiveness of advertising credibility and image problems associated with advertising vast number of ads has created clutter problems and consumers are not paying attention to much of the advertising they see and/or hear

The nature and purpose of advertising differs from one industry to another and across various situations as does its role and function in the promotional program. The common classifications of advertising to the consumer market include national, retail/local and direct-response advertising as well as primary versus selective demand advertising. Classifications of advertising to the business and professional market include industrial, professional and trade advertising. These classifications are described in Figure 1-4. Professor Notes

Chapter 01—An Introduction to Integrated Marketing Communications

Direct Marketing—a system of marketing by which organizations communicate directly with target customers to generate a response and/or a transaction. Direct marketing has not traditionally been considered an element of the promotional mix. However, because it has become such an integral part of the integrated marketing communications program of many organizations, this text views it as a component of the promotional mix. Advantages: • Changes in society (two-income households, greater use of credit) have made consumers more receptive to the convenience of direct-marketed products. • Direct marketing allows a company to be very selective and target its marketing communications to specific customer segments. • Messages can be customized to fit the needs of specific market segments. • Effectiveness of direct-marketing efforts is easier to assess than other forms of promotion. • Many companies now have extensive data bases that can be used to target current and prospective customer, particularly through digital media. Disadvantages: • Consumers and businesses are being bombarded with unsolicited mail and phone calls which makes them less receptive to direct marketing. • Direct marketing has image problems. • There can be problems with clutter as there are too many direct-marketing messages competing for consumers’ attention.

Digital/Internet Marketing—Digital media allow for a back-and-forth flow of information whereby users can participate in and modify the content of the information they receive in real time. The major interactive medium is the Internet, which is a global collection of computer networks linking both public and private computer systems. While the most prevalent perspective on the Internet is that it is an advertising medium, it is actually a medium that can be used to for other elements of the promotional mix as well including sales promotion, direct marketing, and public relations. The extensive penetration of smartphones) is leading to a rapid growth in mobile marketing whereby marketing messages are sent directly to these devices. Digital and Social Media Perspective 1-2 discusses how the digital revolution has impacted integrated marketing communication since the beginning of the new millennium and given rise to the growth of social media and mobile marketing. Advantages: • The Internet can be used for a variety of integrated marketing communication functions including advertising, direct marketing, sales promotion, public relations and selling. The Internet is also the foundation for social media sites such as Facebook and Twitter, which are becoming an integral part of many marketers IMC programs, as well as mobile marketing. • Messages can be tailored to appeal to the specific interests and needs of the target audience. •

The interactive nature of the Internet leads to a higher degree of customer involvement when customers are visiting a website. 1-8

Chapter 01—An Introduction to Integrated Marketing Communications

•

The Internet makes it possible to provide customers with a great deal of information regarding product and service descriptions and specifications, purchase information and more. Information provided by marketers can be updated and changed continually. The Internet has tremendous creative potential as a well-designed website can attract a great deal of attention and interest among customers and be an effective way to generate interest in a company as well as its various products and services.

Disadvantages • The Internet is not yet a complete mass medium as some U.S. households do not have access to the Internet and many do not have broadband access. In some countries this percentage is much higher. • There are problems with the Internet as an advertising medium as many Internet users do not pay attention to banner ads and the click-through rate on most is extremely low. • There is a great deal of clutter on the Internet which makes it difficult for advertising messages to be noticed and/or given attention. D.

Sales Promotion—Marketing activities that provide extra value or incentive to the sales force, distributors, or the ultimate consumer and can stimulate immediate sales. Sales promotion is generally broken into two major categories: consumer-oriented and trade-oriented activities. Advantages: • provides extra incentive to consumer or middlemen to purchase or stock and promote a brand • way of appealing to price sensitive consumer • way of generating extra interest in product or ads • effects can often be more directly measured than those of advertising • can be used as a way of building or reinforcing brand equity

Disadvantages: • many companies are becoming too reliant on sales promotion and focusing too much attention on short-run marketing planning and performance • many forms of sales promotion do not help establish or reinforce brand image and short-term sales gains are often achieved at the expense of long-term brand equity • problems with sales promotion clutter as consumers are bombarded with too many coupons, contests, sweepstakes and other promotional offers • •

consumers may become over-reliant on sales promotion incentives which can undermine the development of favorable attitudes and brand loyalty. in some industries promotion wars may develop whereby marketers sales promotion incentives extensively which results in lower profit margins and makes it difficult to sell products at full price

Chapter 01—An Introduction to Integrated Marketing Communications

It is important to address the potential terminology problem concerning the use of the terms promotion and sales promotion. In this text the term promotion represents an element of the marketing mix by which firms communicate with their customers and includes the various promotional mix elements. However, many marketing and advertising practitioners use the term promotion in reference to sales promotion activities. We use the term promotion in the broader sense. When discussing sales promotion activities, we are referring to this one specific element of the promotional mix. E.

Publicity/Public Relations Publicity—nonpersonal communications about an organization, product, service, or idea that is not directly paid for nor run under identified sponsorship Public Relations—a management function which evaluates public attitudes, identifies the public policies and procedures of an individual or organization with the public interest, and executes a program of action to earn public understanding and acceptance The distinction should be made between publicity and public relations noting that public relations generally has a broader objective than publicity, as its purpose is to establish and maintain a positive image of the company among its various publics. Publicity is an important communications technique used in public relations; however other tools may also be used. Advantages of Publicity: • credibility of publicity is usually higher than other forms of marketing communication • low cost way of communicating • often has news value and generates word-of-mouth discussion among consumers Disadvantages of Publicity: • lack of control over what is said, when, where and how it is said • can be negative as well as positive

Personal Selling—direct person-to-person communication whereby a seller attempts to assist and/or persuade prospective buyers to purchase a company’s product or service or act on an idea. Advantages: • direct contact between buyer and seller allows for more communication flexibility • can tailor and adapt message to specific needs or situation of the customer • allows for more immediate and direct feedback • promotional efforts can be targeted to specific markets and customers who are best prospects Disadvantages: • high cost per contact • expensive way to reach large audiences • difficult to have consistent and uniform message delivered to all customers

Chapter 01—An Introduction to Integrated Marketing Communications

Professor Notes

McGraw-Hill Connect ®: WPU's Competitive Promotional Mix Analysis Type of Activity: Click and Drag Activity Summary: The newly appointed president of a university in the Midwest wants to propose an IMC campaign to attract the best student prospects and their parents to the university. He hires an independent marketing consulting firm to conduct a competitive analysis of the promotional mix by examining IMC elements used by peer/competitor universities. From the descriptions of the competitive IMC activity, students will identify the specific subtype of promotional mix element and match those with the six broad types of promotional mix elements. Activity Learning Objectives: 01-04 Identify the elements of the promotional mix. 01-05 Identify the contact points between marketers and their target audiences. CONCEPT REVIEW: Promotion has been defined as the coordination of all seller-initiated efforts to set up channels of information and persuasion in order to sell goods and services or promote an idea. Most of an organization's communications with the marketplace take place as part of a carefully planned and controlled promotional program. The basic tools used to accomplish an organization's communication objectives are often referred to as the promotional mix. The promotional mix includes six elements: advertising, sales promotion, publicity/public relations, personal selling, direct marketing and digital/interactive media. Each element of the promotional mix is viewed as an integrated marketing communications tool that plays a distinctive role in an IMC program. Each may take on a variety of forms. And each has certain advantages. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

VII.

IMC INVOLVES AUDIENCE CONTACTS

The various promotional mix elements are the major tools that marketers use to communicate with current and/or prospective customers as well as other relevant audiences. Many companies are taking an audience contact perspective in developing their IMC programs whereby they consider all of the potential ways of reaching their target audience with their messages. The various ways that a customer can come 1-11 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01—An Introduction to Integrated Marketing Communications

into contact with a company or brand is are shown in Figure 1-5. It is the responsibility of those involved in the marketing communications planning process to determine how each of these contact tools can be used to communicate with the target audience and how they can be combined to form an effective IMC program. Tom Duncan notes that there are four basic categories of contact or touch points which include: •

Company-created touch points are planned marketing communication messages such as advertisements, websites, news/press releases, packaging, sales promotion offers and point-ofpurchase display.

•

Intrinsic touch points are interactions that occur with a company or brand during the process of buying or using a product or service such as discussion with retail sales personnel or customer service representatives.

•

Unexpected touch points are unanticipated references or information about a company or brand that a customer or prospect receives that is beyond the control of the organization. This includes word-of-mouth messages as well as information from various media sources.

•

Customer-initiated touch points are interactions that occur whenever a customer or prospect contacts a company. These contacts often involve inquiries or complaints that must be handled properly by the company such as through customer service departments.

A. Paid, Owned, and Earned Media Another categorization of the various types of customer touch points that has become very popular is that of paid, owned, and earned media as shown in Figure 1–7. •

Paid media refers to channels a marketer pays to leverage and includes traditional advertising media such as television, radio, print, outdoor, and direct mail as well as various forms of digital advertising such as paid search and online display and video ads.

•

Owned media refers to channels of marketing communication that a company controls, such as its websites, blogs, and mobile apps as well as social media channels such as Facebook, Twitter, Instagram, and YouTube.

•

Earned media is exposure for a company or brand that it did not have to pay for and is generated by outside entities such as the media or the general public. Earned media has traditionally been viewed as exposure for a company or brand generated by its public relations/publicity efforts or through favorable word of mouth.

VII.

THE IMC PLANNING PROCESS

Integrated marketing communications management is defined as the process of planning, executing, evaluating, and controlling the use of the various promotional-mix elements to effectively communicate with target audiences. It involves coordinating the promotional mix elements to develop a controlled and integrated program of effective marketing communication. It involves various decision areas such as: • •

which promotional tools to use and how to combine them effectively determining the size of and distributing the advertising and promotional budget

Chapter 01—An Introduction to Integrated Marketing Communications

•

determining the influence of various factors on the promotional mix including the type of product, target market, decision process of the buyer, stage of the product life cycle, and channels of distribution

This process is guided by the development of the integrated marketing communications plan which provides the framework for developing, implementing, and controlling an organization’s IMC program and activities. At this point it is helpful to go through the Integrated Marketing Communications Planning Model presented in Figure 1-8 of the text. The steps in the Integrated Marketing Communications Planning Model include: 1.

Review of the Marketing Plan—The first step in the IMC planning process is to review the marketing plan which is a document that describes the overall marketing strategy and programs developed for an organization, a product/service line, or an individual brand.

Promotional Program Situation Analysis - Internal Analysis - External Analysis

Analysis of the Communication Process—This involves determining how the company can effectively communicate with customers in the target market. An important part of this stage of the IMC planning process is developing communication objectives which refer to what the firm seeks to accomplish with its promotional program.

Budget Determination—Two basic issues must be addressed with regard to the IMC budget: • How much money will be spent on marketing communication • How the money will be allocated across the various IMC tools

Developing the Integrated Marketing Communications Program—The most involved and detailed part of the promotional planning process occurs at this stage as decisions have to be made regarding the role and importance of each IMC tool and their coordination with one another. Each IMC tool has its own set of objectives, budget, messaging, and media strategy. These include: • Advertising message and media strategy and tactics • Direct marketing message and media strategy and tactics • Interactive/Internet Marketing message and media strategy and tactics • Sales promotion message and media strategy and tactics • Public relations/publicity strategy and tactics • Personal selling—sales strategy and tactics

Monitoring, Evaluation and Control—The final stage of the IMC planning process involves monitoring, evaluating, and controlling the promotional program. At this stage, the marketing should be gathering feedback concerning how well the IMC program is working and whether it is meeting its objectives. It is important to note that information regarding the results achieved by the IMC program is used in subsequent IMC planning and strategy development.

Chapter 01—An Introduction to Integrated Marketing Communications

Professor Notes:

McGraw-Hill Connect ®: SaGa's IMC Planning Process Type of Activity: Click and Drag Activity Summary: SaGa is a European fashion store chain that specializes in accessible, trendy clothes and accessories for men and women. SaGa is getting ready to launch in the U.S., and their advertising agency is developing the promotional plan by using the Integrated Marketing Communications Planning Model. Students will match the actions of SaGa and its ad agency with the stage they correspond to in the Integrated Marketing Communications Planning Model. Activity Learning Objective: 01-06 Describe the steps in the IMC planning process. CONCEPT REVIEW: Integrated marketing communications management involves the process of planning, executing, evaluating, and controlling the use of the various promotional-mix elements to effectively communicate with target audiences. Planning plays an important role in the development and implementation of an effective integrated marketing communications program. This process is guided by an integrated marketing communications plan that provides the framework for developing, implementing, and controlling the organization's IMC program. Those involved with the IMC program must decide on the role and function of the specific elements of the promotional mix, develop strategies for each element determine how they will be integrated, plan for their implementation, and consider how to evaluate the results achieved and make any necessary adjustments. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

Teaching Suggestions This initial chapter is designed to provide the student with an overview of the field of advertising and promotion and a brief look at the role of IMC in the marketing process. The instructor should be careful not to go into an in-depth discussion of marketing since this is covered in detail in Chapter 2. You should introduce the concept of integrated marketing communications discuss its evolution, and note how this approach differs from more traditional perspectives of advertising and promotional planning. In this edition, we have provide an updated perspective of IMC which recognizes that it involves more than just coordinating the various elements into a “one look, one voice” approach. It is important to define the six elements of the promotional mix, discuss their role as marketing communication tools, their advantages and limitations. Note that our view of the elements of the promotional mix goes beyond the traditional communication tools of advertising, sales promotion, publicity/public relations and personal selling, as 1-14 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01—An Introduction to Integrated Marketing Communications

we also include direct marketing and digital/internet marketing as part of the mix. Direct marketing and digital/Internet have become major methods by which modern-day marketers communicate with their target audiences and we feel they are best viewed as distinct IMC tools. You should also emphasize that there are a variety of ways by which customers come into contact with a company and/or its brands. There is a discussion of IMC involving audience contacts and Figure 1-5 of the text is an excellent way of showing the various contact tools. New to this edition is a discussion of the categorization of the type of contact points into paid, owned and earned media. When discussing these various types of contact points, you might use Figure 1-7 to explain what is included under each category a company’s ability to control or influence them. It is important to review the various factors that underlie the adoption of an IMC approach to advertising and promotion by many companies. You might also spend some time discussing the pros and cons of IMC. Although we advocate the IMC approach in this text, the discipline is still evolving. Excellent articles regarding the role and status of IMC can be found in special issues of the Journal of Advertising Research (March 2004, Volume 44. No. 1) and the Journal of Advertising (Winter 2005, Volume 34, No. 4). During an introductory lecture, there is latitude to discuss various issues and aspects concerning each promotional mix variable. For example, various perspectives regarding advertising such as its social and economic effect might be noted along with common complaints and criticisms of advertising. We do not suggest going into a detailed discussion of these charges at this early stage of the course. We feel that students are best able to evaluate and appraise various arguments for and against advertising and other promotional mix elements toward the end of the course. Thus, the final chapter of the text evaluates the social and economic aspects of advertising. We feel that it is important in either the first or second lecture to cover the integrated marketing communications planning model shown in Figure 1-8 in some detail. This text is built around this model and it provides the student with the “big picture” as to the decision sequence and various considerations involved in the development of an advertising and promotional program. It is also important to communicate to students that advertising and promotion management is a process. A great deal of internal and external analyses, as well as the coordination of the promotional mix elements, is required to develop an effective program of marketing communications that can be integrated into an organization’s overall marketing strategy and tactics.

Answers to Discussion Questions 1. Discuss the role of integrated marketing communications in the marketing program for a brand such as Charmin. Discuss how Procter & Gamble uses various IMC tools to market Charmin and maintain its position as the leading brand of toilet tissue. (LO 1-2, 1-5) Integrated marketing communications play a very important role in the marketing program for Charmin. A variety of IMC tools are used to provide consumers with information about the various items in the Proctor & Gamble product line as well as to build and maintain its brand image. Charmin uses all aspects of the promotional mix to market its toilet paper. Charmin still spends heavily on mass media advertising through television, magazines, and banner ads to drive awareness, communicate information and maintain its brand identity. Digital/Internet advertising has also become an important part of the IMC program for Charmin as online display ads are used as well as a variety of social media tools such as Facebook, Twitter and YouTube. Publicity/public relations is also an important part of the IMC program of Charmin. P&G uses a PR agency to handle its

media relations and generate publicity for the brand such as through PR activities that result in stories in magazines, newspapers and various online news source as well as generate 1-15 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01—An Introduction to Integrated Marketing Communications

earned media attention on social media. Another example of how Charmin has pushed the envelope in its use of social media and beyond is a series of Charmin Intermissions created by Publicis New York. The Charmin Intermissions are :60 and :30 television commercials that invite consumers to use the bathroom and “enjoy the go” instead of watching a traditional commercial. Each Charmin Intermission is tagged and promoted in social media to the surprise and delight of millions of relieved consumers throughout the country. Charmin has also moved into mobile marketing by sponsoring and then acquiring the SitOrSquat app that helps consumers find the cleanest public restrooms worldwide and also provides user-generated listings of bathroom locations, ratings, hours of operation, and other details. Nearly a million consumers have downloaded the app and it has generated a tremendous amount of earned media from bloggers on social media and news stories in traditional media. Sales promotion is also an important part of the promotional mix for Charmin including both consumer and trade promotions. Trade promotions are used to encourage retailers to stock and promote the Charmin product line and by getting them to use point-of-purchase displays and other tactics while consumer promotions such as contests, sweepstakes, coupons, price-off deals and other incentives are used to generate sales. Personal selling is also an important part of P&G’s marketing program for Charmin. The company has a sales force that calls on retail accounts and works to encourage them to carry and promote the brand as well as participate in various IMC programs. 2. Evaluate Procter & Gamble's decision to make digital and social media such an important part of the IMC program for Charmin. Why do you think P&G has been successful in using social media in the IMC program for Charmin? (LO 1-2, 1-5) The opening vignette illustrates how Procter & Gamble (P&G) has adapted its marketing strategy for Charmin to respond to changes taking place in the way marketers communicate with consumers. It provides an excellent example of how the roles of advertising and other forms of marketing communication are changing in the modern world of marketing. In the past, advertising was a relatively simple process as most companies relied primarily on ads run in the mass media to deliver their marketing messages to large numbers of consumers who watched television, listened to radio, and read magazines and newspapers. However, today’s marketers recognize that the rapidly changing media environment is making it increasingly difficult to reach their target audiences and communicate effectively with them. The mass media are losing their viewers, listeners, and readers to the highly fragmented but more narrowly targeted digital media that allow consumers to be more actively engaged in the communication process. Consumers are no longer passive message recipients who will sit back and receive unfiltered advertising messages dictated by marketers. They want to be in more control of the content they receive from the media, and they are seeking out information, as well as entertainment, from a myriad of sources. The various marketing communication tools used by Procter & Gamble for the Charmin brand show how companies are using integrated marketing communications (IMC) to reach their target audiences. P&G still uses traditional mass-media advertising through TV, magazines, and newspapers as well as out-of-home media to drive awareness, communicate information, and drive sales for the Charmin product line. P&G also uses these offline channels to influence online behavior by driving consumers to its website (www.charmin.com), which provides information about the various Charmin products, coupons, and other promotional offers, tips, and articles, and information on various causes supported by the brand through the Charmin Relief Project. Charmin is also promoted through various social media platforms that have become an increasingly important part of the digital marketing campaigns of many companies. Consumers are encouraged to connect with Charmin through Facebook and Twitter while commercials and other entertaining videos for the brand are available on YouTube as well as Vine. Charmin is also using mobile marketing to connect with consumers on their 1-16 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01—An Introduction to Integrated Marketing Communications

smartphones by sponsoring the SitOrSquat app (Exhibit 1–1). Publicity for Charmin and its various marketing communication campaigns is generated through social which results in a great deal of earned media for the brand. P&G has been successful in using social media as part of the IMC program for Charmin because the company and its agencies have been very creative and recognized the importance of having entertaining as well as relevant content to connect with consumers that uses humor as a key ingredient. Charmin engages consumers on social media not just by focusing on toilet paper, but rather on the human experience of everything bathroom related. The Charmin social media team is very active on social media and uses a variety of platforms including Facebook, Twitter, and YouTube as well as mobile marketing. The team continually monitors consumer sentiment and feedback across the various platforms to fine-tune its messaging and keep the content relevant and engaging. 3. Discuss the role integrated marketing communications plays in the marketing program of companies and organizations. Discuss some of the ways the use of the various promotional mix tools has changed over the past decade and factors driving these changes. (LO 1-1) Integrated marketing communications plays a critical role in the marketing program most companies and organizations as it provides them with a way to communicate with consumers and help them influence their purchase decisions or other types of behavior. IMC differs from traditional advertising and promotion in that it recognizes the value of using a variety of communication tools rather than just relying primarily on media advertising, which might be supplemented with tactical promotions. IMC involves coordinating all a company’s promotional elements, as well as marketing activities, in a synergistic manner to send a consistent message to the target audience. While traditional advertising relies primarily upon the use of ads through the mass media to communicate with the target audience, IMC recognizes that consumers’ perceptions of a company and/or its brands are a synthesis of the bundle of messages or contacts they have with the firm. These contacts include media advertisements, packaging, sales promotion, messages received through interactive media such as websites and other digital media, point-of-purchase displays, and other forms of communication. The IMC approach seeks to have all of a company’s marketing and promotional activities project a consistent, unified message and/or image to the market and consider which particular element of the promotional mix is the most effective way to communicate with customers in the target audience. There are many reasons why the IMC approach is becoming so popular among marketers. Probably the most fundamental reason is that marketers are recognizing the value of strategically integrating the various communication functions rather than having them operate autonomously. By coordinating their marketing communication efforts, companies can avoid duplication, take advantage of synergy among various communication tools, and develop more efficient and effective marketing communication programs. The movement toward IMC is also being driven by changes in ways companies market their products and services. As discussed on pages 11-14 of the text, there is an ongoing revolution that is changing the rules of marketing and the role of traditional media advertising. Important aspects of this revolution include: a shifting of marketing dollars from media advertising to other forms of promotion, a movement away from relying on advertising-focused approaches (which rely on mass media such as television and magazines) to solve communication problems, a shift in marketplace power from manufacturers to retailers, the rapid growth of database marketing, demand for greater accountability from advertising agencies and the way they are compensated, and the rapid growth of the Internet. The growth of the integrated marketing communications is very likely to continue as it is being driven by fundamental changes in the way companies market their products and services. Moreover, many marketers and advertising agencies recognize the importance of taking an IMC approach and are 1-17 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01—An Introduction to Integrated Marketing Communications

becoming advocates of integration. The move to integrated marketing communications also reflects an adaptation by marketers to a changing environment, particularly with respect to consumers, technology and media. Major changes are occurring among consumers, particularly with respect to media use and buying and shopping patterns. Many consumers are turned off by traditional advertising which is leading marketers to look for alternative ways to communicate with their target audiences. The continued fragmentation of media markets and rapid growth of interactive media and online services are also creating new ways for reach consumers. While IMC will continue to have its critics and may undergo some changes, it is very unlikely that we will see a return to the traditional system where advertising in mass media dominates and advertising and other forms of promotion function autonomously. 4. Discuss some of the ways technology is making it possible for consumers to avoid advertising messages and the impact this is having on the advertising and media industries. (LO 1-2, 1-3) As discussed in Digital and Social Media Perspective 1-1, consumers have been avoiding advertising messages for years simply by using a remote control to change channels during the commercial break of a television show or switching radio stations in their cars during a commercial break. Digital video recorders (DVRs) have given consumers yet another way to avoid TV ads by allowing consumers to fast-forward through the ads during playback of a recorded show. As marketers shift more of their advertising spending online, they must deal with another weapon used by consumers to avoid advertising, which is ad-blocking software. Most consumers have installed ad blocking software on their desktops and laptops and many on now doing so on their mobile devices such as smartphones and tablets. Apple began adding ad-blocking software to the operating system for its Safari mobile browser in 2015 and a few months later ad-blocking capabilities became available for mobile devices using the popular Android operating system. The ability of consumers to avoid advertising messages is having a significant impact on the advertising and media industries. Radio stations rely almost entirely on advertising as a source of revenue while TV stations get the majority of their income from the monies marketers pay to air their commercials. Without advertising, television networks and local stations would have to rely almost entirely on viewers for revenue and the average household would have to pay much more for subscription TV service and get fewer channels. The television industry has already modified its measurement audience measurement system to account for delayed viewing that occurs when people play back recorded TV shows. In addition to the television industry, web publishers (including online magazines and newspapers) and social media sites would be devastated if they lost most of their advertising revenue. Most newspapers and magazines have been unsuccessful in getting people to pay for subscriptions to their digital editions and/or they find a way around their firewalls. Digital advertising is critical to the survival of companies such as Google, Facebook, and Snapchat, all of which generate nearly all of their revenue from advertising. Although consumers may not like being bombarded by advertising messages, it is important for them to realize that the revenue generated by these ads, which in turn depends on the size of the audience they can deliver, is what allows these companies to survive. 5. Discuss how the digital revolution is impacting the way marketers plan and implement their integrated marketing communications programs. Identify three specific technological developments and discuss how each is affecting the IMC program of companies. (LO 1-3, 1-4) As discussed in Digital and Social Media Perspective 1-2, there are many technological developments that are impacting IMC. Cable and digital satellite systems have vastly expanded the number of channels available to television viewers which is contributing to the fragmentation of media markets. The average household in the U.S., as well as many other countries, now receives 135 television channels versus 60 at the beginning of the new millennium. The proliferation of channels as well the penetration of new technologies such as DVRs, video-on-demand, and shows that can be streamed to 1-18 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01—An Introduction to Integrated Marketing Communications

HDTV sets, personal computers or tablets via Netflix or Hulu Plus is also impacting television. The long-predicted convergence of television with computers has become a reality as consumer now have many other viewing options beyond the programming offered by the television networks. The rapid penetration of the Internet is another development as it has led to media fragmentation as hundreds of millions of consumers are now online and can visit a myriad of different websites. However, time spent online, particularly on social media, competes for time spent with traditional media such as television, radio, newspapers and magazines. One of the most significant changes is the penetration of smartphones as more than half of U.S. adults now own one and are using them to access the Internet. The growth in tablets such as the iPad and various devices using Google’s Android operating system are also bring yet another type of screen into the lives of many consumers. Most magazines and newspapers have developed digital versions of their publications for consumers who want to read them online as well as on their mobile devices. Marketers are responding to these changes by increasing their spending on highly targeted media that reach specific market segments. Monies once spent in broadly targeted mass media are now being allocated to more websites and social media that reach specific market segments. Marketers are developing mobile marketing applications that can deliver messages and promotional offers directly to consumer’s mobile devices and can be targeted to specific locations or consumption situations. They are also recognizing that it has become increasingly difficult to reach consumers through the mass media and are using a variety of other IMC tools such as sponsorships, branded entertainment, publicity/public relations, digital and social media (such as Facebook and Twitter) and in-store media to reach consumers. The Internet is another technological development having a tremendous impact on the way companies design and implement their entire business and marketing strategies as well as their integrated marketing communications programs. Companies ranging from large multinational corporations to small local firms have developed websites to promote their products and services by providing current and potential customers with information, building images for their companies and brands and even selling their products or services directly over the Internet. While many view the Internet as an advertising or promotional medium, it really is a marketing communications tool that can be used to execute all elements of the promotional mix. Companies can advertise on the Internet by running banner ads or sponsorships on the websites of other companies or organizations. Marketers can offer sales promotion incentives such as coupons over the internet and they can offer contests and sweepstakes online and encourage consumers to visit their websites to enter them. Many companies are using the Internet for direct marketing. Many companies have made the Internet a major part of their direct-marketing efforts and encourage consumers to visit their websites to view their merchandise and to place orders online. Companies are also using the Internet for publicity and public relations activities as many activities such as the sending of press releases can now be done online. Many companies also maintain press releases on their websites, which can be accessed by the media and other relevant publics to learn more about these companies and their products and services. 6. Discuss the opportunities and challenges facing marketers with regard to the use of mobile marketing. What are some of the ways marketers can use mobile marketing as part of their IMC program? (LO 1-4, 1-5) The Mobile Marketing Association defines mobile marketing a set of practices that enables organizations to communicate and engage with their audience in an interactive and relevant manner through any mobile device or network. It includes promotional activity designed for deliver to cell phones, smartphones, tablets and other handheld devices and includes apps, messaging, commerce and customer relationship management. The growing popularity of smartphones, tablet PCs, and other handheld mobile devices along with the decision of the various wireless carriers to open their mobile phones services to these messages has opened up new marketing opportunities. Marketers are already sending interactive messages to consumers that contain promotional offers such as coupons that can be redeemed at the point-of-purchase. Many of these mobile messages are specific to a consumers’ 1-19 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01—An Introduction to Integrated Marketing Communications

location or consumption context. One of the major factors driving the growth of mobile marketing is the development of shopping services and apps that consumers can use to make shopping more efficient, productive and fun. Marketers are also developing their own brand specific applications such as games, video, and promotional offers as part of their mobile marketing programs. One of the challenges marketers will face with mobile marketing is possible resistance from consumers. Many consumers do not want to be bombarded with messages to their smartphones or other mobile devices. Thus, marketers will be dependent upon consumers “opting in” to receive these messages. However, it is likely that most marketers will tie-in their mobile marketing efforts to other components of their IMC programs such as sales promotions or incentives to visit a website. Thus, mobile marketing will become yet another way for marketers to deliver messages to consumers and get them to take some form of action that helps in the marketing process. Another challenge for mobile marketing is the small screen size of mobile devices, particularly smartphones, which limits the type of messages that be sent to mobile devices. Marketers must also develop responsive websites that can be adapted to smaller screens found on mobile devices. 7. What is meant by a customer contact or touch point? Choose a specific company or brand and discuss how it is using the four categories of contact points discussed in the chapter. (LO 1-5) Customer contact points are each and every opportunity the consumer has to see or hear about the company’s product/brand or have an experience or encounter with it. These contact points can be created by the company and include planned messages delivered through media advertising, packages, collateral materials, in-store displays, and public relations activities. They also can come from interactions with the brand that occur during the process of buying or using the brand as well as from information that consumers receive from word-of-mouth messages. Marketers must determine how important the various contact tools are for communicating with their target audience and how they can be combined to form an effective IMC program. Students should be encouraged to select a company or brand and discuss the various ways consumers come into contact with it. They might use IMC Contact tools shown in Figure 1-5 of the chapter as a framework for conducting the contact point analysis. You might also ask them to discuss which contacts points are most effective or influential in shaping consumers’ impressions of the company or brand. For example, media advertising may be the most important influence for an image-laden product such as clothing or cosmetics while information from a website may be the most important influence for a high-tech brand such as a consumer electronics product. 8. What is meant by the categorization of touch points into paid, owned and earned media? Choose a specific company or brand and discuss how it is using these three categories of media. (LO 1-5) Paid media refers to channels a marketer pays to leverage and includes traditional advertising media such as television, radio, print, outdoor, and direct mail as well as various forms of digital advertising such as paid search and online display and video ads. Owned media refers to channels of marketing communication that a company controls, such as its websites, blogs, and mobile apps as well as social media channels such as Facebook, Twitter, Instagram, Snapchat, and YouTube. Earned media is exposure for a company or brand that it did not have to pay for and is generated by outside entities such as the media or the general public. Earned media has traditionally been viewed as exposure for a company or brand generated by its public relations/publicity efforts or through favorable word of mouth. However, with the growth of digital media, earned media exposure is taking place online through social media and the viral marketing efforts of marketers. Students should be asked to choose a company or brand and analyze how it is using the three categories of touch points as part of its Integrated Marketing Communications program. 1-20 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01—An Introduction to Integrated Marketing Communications

9. Find an example of company or brand that has reduced its spending on traditional mass-media advertising and is allocating more of its IMC budget to digital media. Do you agree with this decision or do you think this company or brand should be maintaining its spending on traditional media advertising? (LO 1-5, 1-6) There are many example of companies and brands that have reduced their spending on traditional mass media advertising and have shifted these monies to digital media. Student should be able to find examples in industry publications such as Advertising Age or AdWeek or by researching a company or brand through other sources available online. A very good example of a company that has made a major shift from mass media advertising to digital is Nike. For decades Nike relied primarily on mass-media advertising as their primary way to communicate with consumers and deliver its marketing messages. However, Nike is moving away from the use of mass-media advertising as they feel there are other IMC tools that may be more effective and provide a better return-on-investment for their marketing expenditures. Nike now views digital media as a more cost effective way to reach its target audience of younger consumers as they can be reached more easily online rather than through traditional media. Moreover, it is often very difficult to measure the return-on-investment for mass media advertising, as there is no direct way to determine who is viewing, hearing, or reading a television, radio or print ad. Nike, like many other companies, prefers to use more targeted integrated marketing tools such as the Internet and social media where it is easier to measure response to an ad using various measures such as page views, click throughs, and other analytics. Nike is also using digital media to conduct direct marketing as well as build online communities of customers with whom they can interact on a regular basis. The use of social media has also become very important to Nike as they now have social media sites for nearly all of their brands which can be used to communicate with consumers and engage them in various ways. Rather than relying on traditional media, Nike often will release new commercials and other types of videos through various forms of social media such as Facebook as well as on their YouTube channel. Nike also recognizes that the use of social media is important is maintaining its image as a cool, interesting, innovative, and relevant brand among younger consumers. Most students will agree with the decision by Nike to allocate most of their IMC budget to digital media. However, there are also strong arguments as to why Nike should continue to use traditional media such as television and magazine advertising. Nike built its brand through the effective use of television and print advertising developed by its long-time agency Wieden+ Kennedy. For several decades W+K developed very powerful and impactful TV commercials that used some of the world’s top athletes such as Michael Jordan, Bo Jackson, Tiger Woods, Kobe Bryant, Lebron James and others. One can argue that Nike should not totally abandon the approach that was very successful in making it the world’s most valuable sports brand. There is also a great deal of selectivity available today for traditional media through cable television, sports programming and magazines that reach various segments of the athletic and fitness market. Nike may be able to reach the younger consumer through traditional media and do so in an impactful way.

10. Why is it important for those who work in marketing to understand and appreciate all the various integrated marketing communication tools and how they can be used effectively? (LO 1-6) In today’s business world, marketers use a variety IMC tools to communicate with their customers. The various promotional mix elements have to be viewed as component parts of an integrated marketing communications program. An individual IMC activity such as advertising or sales promotion cannot be managed without considering its relationship to other promotional mix elements. Individuals working in various areas of advertising and promotion are expected to understand and use a variety of marketing communication tools, not just the one in which they specialize. For example, 1-21 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01—An Introduction to Integrated Marketing Communications

advertising agencies no longer confine their services to creating and placing ads. Many agencies are involved in sales promotion, public relations, Internet/interactive media, direct marketing, event sponsorship and other communication areas. Thus, it is important for those who work in advertising and promotion, either on the agency or client side, to understand and appreciate the value and limitations of all the promotional mix elements and how they can be combined to develop an effective program of integrated marketing communications.

Additional Discussion Questions (not shown in text) 11. Compare the definition of integrated marketing communications developed by Don Schultz with the original definition developed by the American Association of Advertising Agencies. How do they differ? (LO 1-2) The new definition of IMC developed by Don Schultz of Northwestern University is as follows: “Integrated marketing communications is a strategic business process used to plan, develop, execute and evaluate coordinated, measurable, brand communications programs over time with consumers, customers, prospects, employees, associates and other targeted relevant external and internal audiences. The goal is to generate both short-term financial returns and build long-term brand and shareholder value.” This definition differs from the seminal definition of IMC developed by the 4As in several ways. It views IMC as an ongoing strategic business process rather than just tactical integration of various communication activities. It also recognizes that there are a number of relevant audiences that are an important part of the marketing communications process. These include customers, prospects suppliers, investors, interest groups, and the general public as well as internal audiences such as employees. The definition also reflects the increasing emphasis that is being placed on the demand for accountability and measurement of the outcomes of marketing communication programs. The original definition developed by the 4As has been criticized for focusing primarily on coordinating the various communication tools with the goal of making them look and feel alike. Both academicians as well as practitioners are recognizing that the broader perspective of IMC offered in the definition by Schultz is needed as it views the discipline from a more strategic perspective. 12. Choose a company and discuss how it communicates with its customers at the corporate, marketing, and marketing communications levels. (LO 1-1) Messages can originate at all three levels since all of a company’s corporate activities, marketing mix activities, and marketing communications efforts have communication dimensions and play a role in attracting and maintaining their customers. Students should be encouraged to choose a company and analyze how it communicates with its customers at each of these levels. At the corporate level the analysis should focus on how a firm’s business practices and philosophies, policies and procedures, hiring practices, corporate culture, and other factors communicate with customers and other relevant stakeholders. At the marketing level, the analysis should focus on how the company communicates through various elements of the marketing mix. The physical product communicates a great deal to consumers through elements such as shape, design or appearance of the actual product or the packaging. The price of a product may also send a message about quality. The brand name of a brand also is a form of communication. Companies also communicate with consumers through the choice of retail outlets where they choose to sell their products. Selling a product only through upscale specialty or department stores may communicate that it is a high-quality item. On the other hand, selling a product through discount stores or mass merchandise outlets may send a cue of lower quality. There are many examples of how consumers communicate with consumers through their marketing activities. You might talk about products such as expensive watches (Concord, Movado, or Rolex) and how they are priced high, sold only through jewelry store or high-end department stores, and designed to reflect an image of quality, prestige and style. On the other hand, brands such as Timex 1-22 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01—An Introduction to Integrated Marketing Communications

and Casio are designed more for function or sport, are priced lower, and sold in drug stores, sporting goods stores and mass merchandise outlets. At the marketing communications level, the analysis should focus on the various IMC tools the company uses such as advertising, direct marketing, its website, sales promotion messages, publicity/public relations activities such as event sponsorships, and personal selling efforts. The analysis of the company should consider whether all of these IMC tools communicate with one look, voice, and image and position and identify the company and/or brand in a consistent manner. 13. Why are marketers putting so much emphasis on developing strong brands? Choose one of the Best Global Brands listed in Figure 1-1 and discuss how the company has used integrated marketing communications to build a strong brand image. (LO 1-3) There are a number of reasons why marketers are putting so much emphasis on building strong brands. Consumers have a tremendous number of choices available in nearly every product or service category and are have less time available to make purchase decisions. Thus they are putting a great deal of emphasis on well-known and trusted brand names to help simplify their decision making process. Also, consumers are often willing to pay a price premium for well-known brands which provides marketers with higher profit margins and helps them avoid price competition. Consumer product companies, as well as business-to-business marketers, recognize that brand equity is a very important asset and they are taking steps to build and maintain brand equity. Students should be encouraged to select one of the top 10 brands listed in Figure 1-1 and analyze how the company has used IMC to build a strong image. This analysis might include examination of the company’s advertising, sales promotion programs, product and service quality, public relations efforts, sponsorships, website and other communication elements. 14. The various classifications of advertising to consumer and business-to-business markets are shown in Figure 1-4. Choose one category of advertising to consumer markets and one to the business-to-business market and find an ad that is an example of each. Explain the specific goals and objectives each company might have for the ad. (LO 1-4) Students should be encouraged to choose one of the various classifications of advertising to consumer and business-to-business and professional markets, find an ad that they feel is an example of each and explain the company, association or organization’s goals and objectives for the ad. Basic descriptions of each classification of advertising is provided in Figure 1-4 along with insight as to what the goals or objectives might be for using this type of advertising. This assignment is helpful in getting students to recognize that the nature and purpose of advertising varies from one industry to another and/or across situations. For example, you might encourage them to find an example of advertising done either by a company or an industry trade association where the focus is on primary demand stimulation. Advertising campaigns by the Beef Board, National Pork Producers Council, or Potato Board are all very good examples of primary demand advertising. Students might also be encouraged to look in some industry or trade publications for examples of business-to-business or advertising targeted at retailers. Publications such as Progressive Grocer or Drug Store News are a good source of trade advertising. 15. What is meant by primary versus selective demand advertising? Provide examples of each. Discuss when a marketer might focus on primary demand stimulation versus selective demand stimulation. (LO 1-4) Primary demand advertising is designed to stimulate demand for the general product class or entire industry. Selective demand advertising focuses on creating demand for a specific company’s brand or a product or service. Primary demand advertising is often done by industry trade associations to generate demand for the product category. This is often done for commodity products where it is 1-23 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01—An Introduction to Integrated Marketing Communications

difficult to differentiate an individual brand or association members recognize the value of promoting the product category. Examples include products such as milk, orange juice, pork, beef, potatoes, avocados and raisins. Primary demand advertising is sometimes done by a company whose brand(s) dominates the market and will benefit the most from demand generation. For example, Gatorade has over 70 percent of the sports drink market and its ads often promote the value of its products for hydration versus water. Most advertising focus on selective demand as the goal is to create demand for a specific brand. Thus the advertising will emphasize reasons for purchasing a particular brand and focus on differentiating a particular brand of a product or service from the competition.

Chapter 02—The Role of IMC in the Marketing Process

CHAPTER 2 THE ROLE OF IMC IN THE MARKETING PROCESS Chapter Overview The purpose of this chapter is to examine the marketing process and the role of advertising and promotion in an organization’s integrated marketing program. A basic model of the marketing and promotional process is presented, which can be used as a framework for analyzing how advertising and promotion fit into a company’s marketing program. The chapter examines the various decision areas under each element of the marketing mix and how they influence and interact with advertising and promotional strategy. The chapter also introduces and/or refreshes the student on the concepts of target marketing, segmentation and positioning. The target marketing process is introduced, and the specific elements of this process—identifying markets with unfulfilled needs, market segmentation, selection of a target market, and positioning—are described in detail.

Learning Objectives To examine the marketing process and the role of advertising and promotion in an organization’s integrated marketing program. 1. Describe the role of advertising and promotion in an organization’s integrated marketing program. 2. Define target marketing. 3. Discuss the role of market segmentation in an IMC program. 4. Describe positioning and repositioning strategies. 5. Identify the marketing-mix decisions that influence advertising and promotional strategy.

Chapter and Lecture Outline I.

INTRODUCTION

A model is presented at the beginning of the chapter (Figure 2-1) which is a useful framework for analyzing how promotion fits into an organization’s marketing program. The model consists of four components: • • • •

The organization’s marketing strategy and analysis The target marketing process Marketing planning program development (which includes the promotional decisions) The target market

Chapter 02—The Role of IMC in the Marketing Process

The first part of the chapter is devoted to examining the four components of this model and the role advertising and promotion play in each. As noted in the text, it is important to note that a firm’s promotional program is directed not only to the final buyer but also to channel or trade members who distribute its products/services to the ultimate customer. The role of promotion is discussed for building and maintaining demand not only in the consumer market, but among the trade as well. Professor Notes

II.

MARKETING STRATEGY AND ANALYSIS

The marketing process actually begins with the development of a marketing strategy whereby the company determines the product or services area and particular markets in which it wants to compete. A strategic marketing plan usually evolves from an organization’s overall corporate strategy and serves as a guide for specific marketing programs and policies. The development of a marketing strategy is based on a situation analysis (as discussed in Chapter 1) from which a firm develops an understanding of the market, the opportunities it offers, the competition and various segments or target markets the company may wish to pursue. Steps in the Development of a Marketing Strategy A.

Opportunity Analysis—A careful analysis of the marketplace should lead to alternative market opportunities or areas where the company feels there are favorable demand trends, where customer needs and/or wants are not being satisfied and where it could compete effectively. Market opportunities are usually identified by examining demand trends in various market segments. The discussion can focus on how market opportunities are identified and recent examples of companies finding and exploiting them. The chapter lead-in discusses how Buick is repositioning itself to target millennials. IMC Perspective 2-2 discusses the growth of the Hispanic market, and the difficulty in reaching it, which could be an interesting point of departure for a discussion about the opportunity created by new and growing segments. Competitive Analysis—In developing marketing strategies and programs a company must analyze the competition its products or services face in the marketplace. Competition can range from direct brand competition to other products and services that satisfy consumers’ needs and/or compete for their dollars. Competitors’ marketing programs have a major impact on a firm’s marketing strategy and must be carefully analyzed and monitored. Various aspects of advertising and promotion such as promotional spending, media and creative strategy, and sales promotion are often directly affected by competitors. An important aspect of marketing strategy development is the search for an advantage over the competition. A competitive advantage refers to something unique or special a firm does or possesses that gives it an edge over competitors. Competitive advantage can be achieved in a variety of ways, including having quality products that are differentiated from the competition and command premium prices, providing superior customer service, having the lowest production costs or dominating channels of distribution. Competitive advantage can also be achieved through having excellent advertising and promotion that creates and maintains product/service differentiation and brand equity. You might want to discuss how many companies have used advertising to achieve brand equity. It is also important to note the concerns of many advertising and marketing people that reductions in media advertising and increased spending in trade promotions may lead to losses in brand equity and competitive advantage. 2-2

Chapter 02—The Role of IMC in the Marketing Process

Target Market Selection—After evaluating marketing opportunities for products/services in various markets, a company selects one or more as a target market for which it will develop a marketing program(s). This target market becomes the focus of the company’s marketing efforts. Selection of the target market is not only a very important part of a firm’s marketing strategy, but also has implications for advertising and promotional strategy and tactics.

Professor Notes

III.

THE TARGET MARKETING PROCESS

The concept of target marketing is introduced, noting that there are four distinct steps involved in this process—identifying target markets with unfulfilled needs, market segmentation, selecting a target market, and positioning through marketing strategies. From this point, the chapter will go on to discuss in detail the processes required in each step. A.

Identifying Markets—Target marketing involves the identification of the needs and wants of specific groups of people (or segments), selection of one or more of these groups as targets, and the development of marketing strategies aimed at each. This approach has found increased applicability for a number of reasons. • the diversity of consumers’ needs • increasing use of segmentation by competitors • more managers are trained in segmentation The instructor should note that this process leads to a more homogeneous grouping of potential customers, which allows the marketer to develop more precise strategies designed to reach them. Market Segmentation—Once the marketer has identified who it is that is to be targeted; these potential customers are grouped based on the fact that they have similar needs and/or behaviors that are likely to cause them to respond similarly to marketing actions. This breaking up of the market is referred to as the market segmentation process. This process includes five distinct steps: • Finding a way to group consumers according to their needs • Finding a way to group the marketing actions—usually the products offered—available to the organization • Developing a market-product grid to relate the market segments to the firm's products or actions • •

Selecting the target segments toward which the firm directs its marketing actions; and Taking these actions. 1. A number of bases for segmentation are available to the marketer including the following: (Figure 2-4 will be helpful here.) • Geographic—The market is divided into geographic units with alternative marketing strategies targeted to each. •

Demographic—division involves demographic variables such as age, sex, family size, income, education, and social class, among others.

Chapter 02—The Role of IMC in the Marketing Process

•

IV.

Psychographic—Markets are divided based on the personalities and/or lifestyles of consumers. (The instructor should note that lifestyles have become a commonly employed segmentation strategy.) Programs such as VALS and PRIZM are commonly employed by marketers for this purpose. • Behavioristic—This form of segmentation divides consumers into groups according to their usage, loyalties or buying responses to a product. These characteristics are then usually combined with one of the previously mentioned bases to develop segment profiles. • Benefits—Specific benefits offered by a product or service may also constitute a basis for segmentation. In many instances a variety of benefits may be derived for the same product among different groups. (For example, the instructor might ask students to suggest benefits to be derived from the purchase of a watch, noting that at certain times of the year these benefits will change based on the recipient of the watch!) 2. The Process of Segmenting a Market—This section concludes by reminding the student that market segmentation is indeed a process that develops over time and is a critical part of the situation analysis. Selecting a Target Market—Having conducted the segmentation analysis, the marketer will be faced with two subsequent decisions: 1. Determining how many segments to enter 2. Determining which segments offer the most potential. The first of these decisions may lead the marketer to three potential strategies: • Undifferentiated marketing would involve the decision to ignore the segment differences and develop one product for the entire market. It should be noted that few firms pursue this strategy today. • Differentiated marketing involves the decision to compete in a number of segments, developing different marketing strategies for each. • Concentrated marketing takes place when a firm decides to concentrate its efforts on one specific segment in an attempt to capture a large share of that market. (The examples of Volkswagen and Rolls Royce provided in the book will illustrate this point well.) Market Positioning—Positioning has been defined as “the art and science of fitting the product or service to one or more segments of the broad market in such a way as to set it meaningfully apart from the competition.” DEVELOPING A POSITIONING STRATEGY Approaches to Positioning—This section discusses the approaches to positioning as well as a number of strategies for developing a position. Several distinct positioning strategies are offered including: Positioning by Product Attributes and Benefits—Setting a product apart by stressing a specific characteristic or benefit offered. Marketers attempt to identify salient attributes, those that are important to consumers and are the basis for making a purchase decision. Positioning by Price/Quality—In this strategy price/quality characteristics are stressed. For example, some products set themselves apart by assuming a very high price/quality association, while others become “price products.” Positioning by Use or Application—How a product is to be used may in itself lead to a positioning strategy. The shoe industry example offered in the text, and products such as Arm and Hammer baking soda and Black & Decker have capitalized on this strategy. Positioning by Product Class—The Amtrak example provided in the text in reflects this strategy in which the product is positioned against others that, while not exactly the same, provide 2-4

Chapter 02—The Role of IMC in the Marketing Process

E. F.

G. H.

the same class of benefits. The pork campaign (“The other white meat”) is another example that might be cited, as well as the Dole campaign cited in the text. Positioning by Product User—In this strategy the product is positioned at a particular group of users. The Globe Shoes example in Exhibit 2-19 demonstrates this strategy in practice. Positioning by Competitor—in many cases the competition may be used to define the positioning strategy. Companies can position their products to set themselves apart from the competition, show superiority, etc. Positioning by Cultural Symbols—The Jolly Green Giant and Chicken of the Sea’s mermaid are all examples of cultural icons, as are the Wells Fargo stagecoach, and Ronald McDonald. Repositioning—Declining sales or changes in market conditions may lead a firm to reposition. Companies such as Sears, and J.C. Penney are a few of the examples of companies that have attempted (both successfully and unsuccessfully) to assume a new position in the market. The Gatorade and MTV examples provide more current examples. Determining the Positioning Strategy—while not noted in the text, the development of a positioning strategy involves six distinct steps: • Identifying competitors • Assessing consumers' perceptions of competitors • Determining competitors' positions • Analyzing consumers' preferences • Making the positioning decision • Monitoring the decision

Professor Notes

McGraw-Hill Connect ®: Selecting Target Markets Type of Activity: Click and Drag Activity Summary: In this activity, students will match the various segmentation strategies with the examples of brands using those strategies. Activity Learning Objectives: 02-02 Define target marketing. 02-03 Discuss the role of market segmentation in an IMC program. 02-04 Describe positioning and repositioning strategies. CONCEPT REVIEW: It is not possible to develop marketing strategies for every consumer. Rather, the marketer attempts to identify broad classes of buyers who have the same needs and will respond similarly to marketing actions. Market segmentation is "dividing up a market into distinct groups that (1) have common needs and (2) will respond similarly to a marketing action. The more marketers segment the market, the more precise is their understanding of it. But the more the market becomes divided, the fewer consumers there are in each segment. Thus, a key decision is: How far should one go in the segmentation process? 2-5 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 02—The Role of IMC in the Marketing Process

Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

IV.

DEVELOPING THE MARKETING PROGRAM

The next stage of the marketing process involves combining the various elements of the marketing mix into a cohesive and effective marketing program. This requires that all elements of the marketing mix be combined effectively and that they be consistent with one another. It is important to stress that each element of the marketing mix is multidimensional in nature and includes a number of decision areas. In discussing the various elements of the marketing mix attention should be given to how each influences and interacts with promotion. A.

Product Decisions—An organization exists because it has some product, service, idea or cause to offer customers. Discussion can focus on benefits or values offered by the product and the fact that products and services satisfy not only functional but social and psychological needs as well. Product decision areas of branding and packaging are particularly important from a promotional perspective because of the role the brand name and package play in communicating attributes, information and meaning to the consumer. 1. Branding—Choosing a brand name for a product is important from a promotional perspective because brand names communicate attributes and meaning. One important role of advertising in respect to branding strategies is creating and maintaining brand equity. Brand equity can be thought of as an intangible asset of added value or goodwill that results from the favorable image, impressions of differentiation, and/or the strength of consumer attachment to a company name, brand name, or trademark. 2. Packaging—The role and function of packaging has changed because of the self-service emphasis of many stores and the fact that as many as two-thirds of all purchases made in the supermarket are unplanned. The Bumblebee Tuna package is an excellent example of how packaging can create new opportunities—sometimes for existing products. Price Decisions—The price variable of the marketing mix refers to what the consumer must give up in exchange for a product or service, Marketing managers must be concerned with establishing a price level, developing pricing policies and monitoring consumers’ and competitors’ reactions to price in the marketplace. Factors a firm must consider in determining price levels include: • costs • demand • competition • perceived value Interesting findings from the PIMS project concerning the relationship between price, product quality and advertising are discussed in the text. Distribution Channel Decisions—Marketing channels or the place element of the marketing mix refers to the set of interdependent organizations involved in the process of making a product or service available to customers. Differences in direct versus indirect channel arrangements 2-6

Chapter 02—The Role of IMC in the Marketing Process

should be discussed. In discussing the latter, the importance of resellers in marketing and promotional strategy should be introduced. The Internet has become a new channel for a number of companies, and has had a demonstrable impact on the distribution system. Attention should be given to the need to develop promotional programs for the trade or resellers to encourage them to stock and promote a product. Developing Promotional Strategies: Push or Pull?—When a promotional push strategy is used, the goal is to persuade the trade to stock, merchandise and promote a company’s products by aggressively selling and promoting to resellers. This can be done by having the company’s sales representatives call on resellers and offering special programs such as promotional allowances and cooperative advertising. Trade advertising in publications that serve the industry such as Progressive Grocer or Drug Store News may also be used as part of a push strategy. When a promotional pull strategy is used, the goal is to create demand among end users which will in turn encourage retailers to carry a brand. Heavy spending on consumer advertising and sales promotion is an important part of a pull strategy.

Professor Notes

McGraw-Hill Connect ®: Positioning Strategies for Multiple Brands Type of Activity: Click and Drag Activity Summary: In this activity, students will match the various positioning strategies with the examples of brands using those positioning strategies. Activity Learning Objective: 02-05 Identify the marketing-mix decisions that influence advertising and promotional strategy. CONCEPT REVIEW: Positioning has been defined as "the art and science of fitting the product or service to one or more segments of the broad market in such a way as to set it meaningfully apart from competition." The position of the product or service is the image that comes to mind and the attributes consumers perceive as related to it. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

Chapter 02—The Role of IMC in the Marketing Process

Teaching Suggestions This chapter is designed to provide the student with an overview of the overall marketing process and the role advertising and promotion play in the marketing program. The chapter may be somewhat of a review for some students, particularly those who have had a basic marketing course. However, we feel that this chapter is more than just a review of marketing principles or fundamentals. We have written the chapter to show the role advertising and promotion play in the marketing process as well as how promotional strategy is influenced by and interacts with marketing strategy and the various elements of the marketing program. Students will benefit from the discussion of the marketing mix from a promotional strategy perspective even if they have had an introductory marketing course. We have found that the model of the marketing and promotion process is a very good framework for analyzing how promotion fits into an organization’s marketing program. The three components of the model cover the basic areas of marketing and the model shows that promotional programs must be developed for the trade as well as for the ultimate customer in the target market. It is important to stress to students the important role resellers play and the need to develop promotional programs to motivate the trade to get them to stock, merchandise and promote a company’s products. You might point out to students that the recent trends in the allocation of promotional budgets have seen a shift in monies away from media advertising and toward trade promotions. Another shift in budgets has been affected by the advent of the Internet. Students will see that the Internet has both benefited and negatively impacted traditional media. These issues are discussed is considerable detail in the sales promotion and Internet chapters.

Answers to Discussion Questions 1. The lead-in to this chapter discusses Buick's attempt to reposition its cars to a younger audience. Explain why this may or may not work. (LO 2-4) A number of General Motors cars are no longer being sold new—Oldsmobile, Pontiac and Saturn for example. The average age of Buick and Cadillac owners skews high (high 50’s to low 60’s).GM knows that if they don’t attract more younger buyers Buick , and maybe eventually Cadillac may also soon be gone. As a result, Buick has embarked on this campaign to attract younger buyers. The Buick campaign features young and attractive actors in a variety of settings ranging from small gatherings to formal meetings to baby showers. The idea is to show that younger people buy Buick— not just grandfathers and grandmothers. In addition, a number of new Buick models have been introduced, that in general are smaller, and sportier than the previously “boat size” automobiles previously on the market. Even a convertible has been re- introduced—clearly, a car for younger people. As a result, there is evidence that Buick is being successful as the average age of the buyer has dropped from 64 to 57. On the other hand ,images don’t change over night. If you ask younger people today, many (if not most) still perceive the brand as “their grandfather’s car”, and would not consider it in their consideration set. It may take a generation for this image change to occur. The question is, can GM wait that long? 2. Many companies compete in a number of market segments. Discuss an example of one such company and describe how it communicates with its customers in different market segments. (LO 2-4)

Chapter 02—The Role of IMC in the Marketing Process

Perhaps the best example might be an automobile company like Toyota. First of all, Toyota makes cars, trucks, SUV’s and vans, offering a vehicle for the needs and wants of a variety of segments. The car segment offers a range from its low-priced entry the Yaris to the higher end Avalon. In between are sports oriented vehicles, family vehicles and, of course, the hybrid Prius. Toyota also offers six varieties of SUV’s again, reaching various segments based on price as well as lifestyle, as the selection ranges from a small fuel-efficient RAV 4 to the large V8 Land Cruiser. Models at various prices offering specific benefits are offered in between. Lexus, made by Toyota is targeted to the luxury car market. Another good example is the Marriott hotel chain. A visit to the Marriott website shows that the chain includes offerings from over 15 brands ranging from economy pricing to luxury suites, and appealing to pleasure travelers, business travelers, families and long-stay occupants. The Marriott products reach a variety of segments based on a number of segmentation criteria.

3. Discuss the role that IMC assumes in the marketing mix. That is, how is this element of the mix coordinated with pricing, distribution, and product functions? (LO 2-5) IMC can be used to develop a brand image by focusing on the source, message, and media available to create the image sought. The source of the message (consider the use of Tiger Woods or Lance Armstrong as a spokesperson before and after their problems) creates an image of the type of person that might use the brand. The message—that is, what is said about the brand—positions the brand the way the marketer wants it to be perceived. Is it a luxury brand (Jaguar) or a low-cost brand (Walmart) or a combination (Kohls, Target). The photography, the background and the message all contribute to the brand’s overall image. Advertisers have discovered a new-found emphasis on media in developing a brand image. As one might expect, the medium in which the ad appears impacts the perception of the brand. An ad appearing in Vogue or GQ will be impacted differently than one in Time or The Economist. Ads appearing in or on different websites will be impacted by that medium as well. Recently, an ad featuring U2’s Bono appeared in a number of upscale print media including Vogue and Vanity Fair. The clothing ad had a setting with a small aircraft in the background in what appeared to be Africa. As one might imagine the ad was designed to create a high-class image for the brand by using well known and liked celebrities in an image that spoke to high class. At the same time, ads for other brands may use non-celebrities such as everyday looking people to create their own image of being for everyone not just beautiful people. The Dove campaigns targeted to women are a classic example of successfully employing this strategy.

4. As the media environment changes, explain how this impacts the role of advertising and promotion. Why is the IMC process different than it was, say, 20 years ago? (LO 2-1) A careful analysis of the marketplace should lead to alternative market opportunities for existing product lines in current or new markets, new products for current markets, or new products for new markets. Market opportunities are areas where there are favorable demand trends, where the company believes customer needs and opportunities are not being satisfied, and where it can compete effectively. The Manischewitz company—you may have heard the ad slogan “Man-O-Manischewitz! What a wine!”—a marketer of kosher foods, has revived its decades-old slogan to take advantage of a new marketing opportunity. Based on research that showed that four out of five buyers of kosher foods are not traditional Jewish consumers, Manischewitz has increased its marketing efforts in an 2-9 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 02—The Role of IMC in the Marketing Process

attempt to capture more of the mainstream market. Knowing that there has been an increase in interest in ethnic foods and health consciousness and that, as a result of the recession, more consumers are eating meals at home, the company hopes to reach more consumers (Exhibit 2–1). The company’s new IMC program includes a multimillion-dollar advertising budget, web programs, in-store promotions, a “Cook Off,” and public relations activities designed to promote its kosher food line. One of the major changes from 20 years ago is in media. The internet, social media and mobile, of course, have changed everything, and public relations now plays a much more important role in the IMC program. Traditional media, while still important, seems to be getting much less attention. 5. Discuss the difference between benefit and demographic segmentation. Give examples of companies employing each. Is it possible for a company to employ both forms of segmentation simultaneously? (LO 2-4) Demographic segmentation is the segmenting of markets based on age, income, sex, race, etc. Clearly, there are products targeted to the sexes. Those marketed to men and women, including media as well as products themselves. We have shown in the text that the teenage market is much different than those in midlife and those in older age brackets. Higher income groups are marketed to differently than lower income groups. Think of the strategies for Jaguar, Mercedes, and Bentley versus those for VW, Kia and Hyundai. The pricing is different, the product quality is different, and certainly the IMC strategies are different. Remember that Lexus and Infinity, are distributed in different dealerships. Benefit segmentation relates to the development of segments based on the specific benefits sought. Think about low fat, or gluten free products, or electric cars, or high gas mileage cars versus SUV’s and sports cars—what benefits drive the sale? 6. IMC Perspective 2–1 discussed the millennial generation. Discuss some of the ways that this market segment is different from previous age cohorts. (LO 2-3) It seems that each generation has been seen as different. First it was the baby boomers, then gen X, and now millennials. While one has to be careful when stereotyping, it does seem that millennials are different from previous generations and require different IMC strategies to effectively reach them. The world of this generation has changed. Consider that: The average salary for young college graduates has dropped 15 percent, or about $10,000, since 2000. In 1990 youth unemployment was 11%; now it is 16%. It costs about 5 times as much to go to college as it did 20 years ago. Financial security is uncertain, as is Medicare and Social Security. As a result, millennials have very different lifestyles. Many move home after college, others live in apartments with one or more roommates. Many live close to the city center so they have transportation and don’t have to buy a car. They often don’t buy cars, as their salaries are not that high, and they would rather have a smart phone than a car payment. In general, they are just much less materialistic than their predecessors. Media wise, this is the Internet generation. YouTube is used way more often than TV. Print usage (both newspapers and magazines) barely exists. Millennials sleep with their phones, and are mesmerized with social media. Mobile is transforming almost every aspect of their lives. (For additional information on millennials, see the chapter lead-in.) For previous generations who saw the introduction and growth of digital media, the transition has been slow to quickly. For millennials, there was no transition. Digital has been their life from birth, and it is reflected in almost everything they do. 7. IMC Perspective 2–2 discusses the importance of the Hispanic market. What makes this subculture different, and what must marketers do to successfully target them? (LO 2-2) Like other segments, the Hispanic segment must be understood if one hopes to successfully market to them. As noted in IMC Perspective 2-2, this segment is not constituted by just one group. Hispanics

Chapter 02—The Role of IMC in the Marketing Process

include those with descendants from Mexico, Cuba, Puerto Rico and other Latino countries, with each having its unique set of values, beliefs, lifestyles, etc. Perspective 2-2 has presented some of the ways that companies are targeting these markets. Programming on television, Latino formatted radio, and digital media that are specifically targeted to the Hispanic community are just some of the ways marketers have adapted their strategies for this segment. There is an increased prevalence of Latino spokespersons, and—in some markets—Spanish language provided alongside English messages. The size and growth of this market in the U.S. mandates that marketers not only pay attention to the segment, but develop specific IMC strategies designed to appeal to it. Over the next 40 years, the population of this segment is estimated to grow by 167%, making it the fastest growing segment in the U.S. An article in Forbes Magazine in September 2013, listed five requirements for reaching Hispanics: 1. Define clear goals and objectives for reaching Hispanics 2. Engage in “hyper-local” strategies 3. Place your best talent on this market segment 4. Gather data and engage in using analytics to understand this market 5. Develop a new business management model. A quick Google search will result in numerous other articles that address the requirements successfully marketing to this segment. Like all other segmentation approaches, one must understand the segment, and adapt strategies to meet their needs.

8. What is meant by repositioning? Discuss some companies that have successfully employed this strategy. (LO 2-4) Sometimes due to a downturn in sales, changing marketing conditions, or other reasons, companies may need to change their positioning strategy, also known as re-positioning. Perhaps the most often cited example of this is Rolling Stone magazine which changed from a predominantly music oriented medium to include articles that reach a broader audience. Another example, is MTV, which started as a channel playing music to one that now contains much broader programming and only a small portion of music playing. It is not difficult to find companies that have repositioned themselves in recent years. A few of these include: Cadillac—the flagship of the GM line has tried to move away from the image of “my grandfather’s car to attract a younger market. Using rock stars, young athletes and others involved in sports and entertainment, and product placements are just a few strategies Cadillac has employed. IBM—once a computer company, IBM now has a completely different image as a solutions provider. Xerox—the copy machine company has almost no identity with copying services. 2-11 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 02—The Role of IMC in the Marketing Process

Kia and Hyundai—these Korean manufactured automobiles have been forced to reposition from a low price positioning to one of higher quality. Both are doing so quite successfully. Abercrombie—previously Abercrombie and Fitch, the difference between the Abercrombie of today and 20 years ago is worlds apart. While many companies successfully re-position, many others are less fortunate. To successfully reposition, brands must commit to the strategy in total. Failure to do so, will lead to failure in the marketplace.

9. Many companies have maintained their same brand identity for years by keeping the same logos, packaging, and so on, while others have made changes. Give examples of companies employing both of these strategies and discuss their results. (LO 5-5) What comes to mind when you see the package or logo of Coke, Jaguar, Budweiser, Target or the Penn State football team? Each of these brands is clearly identifiable, with strong recognition and image identification (In 2012, Penn State changed its uniform for the first time in over 50 years by putting names on the back of the players’ jerseys.). When a consumer sees a Target store logo, as an example, it is clear as to what it means, and what is inside of that store. The BMW and Jaguar logos are clearly recognizable. UPS has extended its brown label to their packaging and shipping stores. On the other hand, what comes to mind when you see the package or logo of less well known and identifiable brands? Can you tell me what the Xerox logo looks like? What about Duracell batteries? Do you easily recognize a Postal Annex sign? While the first group sends a clear signal about what they stand for through their packages and or logos, the latter does not—either as a result of not building the brand image, or changing it too often. To establish a strong brand image, brands must promote and establish their logos and packages to add an extra communications contact point. They must also stick with this position and identity and not change it too often. In 2013, Saab, American Airlines, VH1 and the Miami Dolphins NFL team all changed their logos—some drastically, others minimally. Time will tell how this works out.

10. Some marketers feel that grouping consumers into age cohorts like millennials, baby boomers, and so forth, results in unreliable generalizations and that such strategies might not be successful. Give the pros and cons of this argument. (LO 2-2) This chapter discusses the strategy of segmentation, whereby groups exhibiting common characteristics (demographic, psychographic, etc.) are targeted with similar marketing and IMC strategies. Simply put, the assumption is that the commonalities between the groups allow for efficiencies in implementation, cost savings, and more effective strategies overall. Some believe that this strategy may not be as effective—particularly if taken to the extreme. We already noted in the chapter that not all Hispanics are the same, and that stereotyping them as such could backfire on the marketer. Likewise, all millennials are not the same. While you may be very similar to your friends, for example, you no doubt know many others who are in your age range, in your college, etc, who are very different from you. Their lifestyles, values, interests, etc. make them seem almost alien, and you share nothing in common.

Chapter 02—The Role of IMC in the Marketing Process

When marketers segment, they are stereotyping to an extent. And while this strategy has been proven to be effective, it can also be dangerous if the marketer is to assume that by segmenting on any particular basis leads to one homogenous group that requires only one marketing strategy.

Additional Discussion Questions (not in text)

11. In recent years a very good example of a successful IMC strategy is GEICO’s successful market approach. What factors have led to the success of this company? (LO 2-1) GEICO started off with a successful segmentation and target marketing strategy. By fulfilling the unmet needs of these segments, GEICO became quite successful. Rather than resting on this concentrated strategy, however, the company continued to pursue an aggressive strategy, expanding into different segments with a variety of product offerings. If you examine GEICO’s marketing strategy now, you will see that the company pursues a highly integrated approach, targeting a variety of segments. Their advertising and promotion budget has grown dramatically, and they develop very different IMC strategies for each segment they enter. Look at the variety of advertisements and commercials GEICO employs, depending on the segment targeted. Also pay attention to the variety of media the company uses. From TV commercials to internet advertising, direct mail, promotions and sponsorships, GEICO seems to appear everywhere. The company truly has a very pervasive media strategy. GEICO has also successfully pursued a strong customer relationship strategy with their customers. They maintain a high degree of customer satisfaction, and hold on to their customers by keeping them satisfied.

12. Marketers continue to increase their marketing efforts to the Hispanic market, while at the same time evidence suggests that younger Hispanics are becoming more integrated into the mainstream. What are the implications of these acculturation issues for the future of marketing? (LO 2-3) As shown in the text, the Hispanic market—already very substantial in some areas of the country— continues to grow in size. This alone makes it an attractive market segment. While many of the younger Hispanics become more and more a part of the overall market in respect to values, lifestyles, etc., some will do so to a lesser degree. What this means is multiple market opportunities. For those who emulate the overall market, products and services that are adopted by the “mainstream” will become more desirable to the Hispanic market. Evidence of this exists, as many of the high-end name brands now have high adoption rates among Hispanics. In addition, many of the media adopted by the mainstream market will now experience higher rates of adoption among Hispanics, including those who communicate in English. At the same time, there will always be those who do not assimilate into the “mainstream”, continuing to hold on to their cultural heritage as opposed to becoming “like everyone else”. For this group, brands that are targeted to Hispanics, rather than the mainstream market, will achieve success as Hispanics maintain their identity, and use products and brands that appeal to them on this basis. 2-13 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 02—The Role of IMC in the Marketing Process

Overall, the growth of the Hispanic segment, and the increases in socioeconomic status that are also occurring make the Hispanic market attractive to many marketers. Marketers will have to determine which of the sub-segments of this market they wish to target—those who will attempt to integrate into the mainstream and purchase products and brands associated with that group, or those who will maintain their own identities and use brands more associated with them. The likelihood is that marketers will attempt to do both, as both are likely to increase in attractiveness.

13. As noted, packages are now becoming communications tools, serving as advertising vehicles. At the same time, packages are changing the other marketing mix elements as well. Discuss how packages are being used to impact price and distribution strategies as well as promotional strategies. (LO 2-2) One such example is that of Coors Light’s cans, which change colors when the product is at the preferred drinking temperature. This is just one of many examples, of the use of packaging more effectively in the marketing mix. In the Coors case, the uniqueness of the package design is, in itself, a potential selling point. As the same time, it is a beneficial package element that helps insure that the product is consumed at the point at which it will have the most flavor. From a promotional standpoint, packages can be effective in attracting attention, differentiating the product, and creating a brand image. The role of the package is to communicate and establish a position for the product and/or brand. Packages are also being used to make the product more convenient. Think about how lids have changed. Plastic is becoming more popular than cans, tuna can now be carried in an easy-open pouch instead of a can. Separate tops for consuming drinks while participating in sports, walking, etc. have now become more attractive. Package sizes are used to differentiate—family size bottles, to regular size cans, to half-cans, or mini-cans make consumption more convenient. Ultimately, the different packages impact the price variable. Sticking with the drink example, the sports packaged drinks cost more than the same amount of beverage in a non-sports package. Convenience packages of potato chips, cookies, etc. used for school children’s lunches cost more than larger bags, etc. Typically, larger size containers cost less (on a relative basis) than do these convenience packaged items. Many companies have changed their package designs to accommodate retailers. With the enormous battle for shelf space comes a marketing opportunity or necessity. Uniquely designed packages that do not fit or take up too much room on the shelves must give way to those that do. Packages that are more durable are also being required in an attempt to eliminate or reduce breaking or spilling. Finally, from an IMC perspective, the package communicates a lot about the brand. The examples of Heinz or Arm & Hammer baking soda immediately communicate about what is inside of the package, its quality, and it’s longevity. Expensive brands rely on packaging as much as do the inexpensive ones in informing the consumer as to what to expect inside.

14. Discuss the difference between a push and a pull strategy. What kinds of firms would be more likely to employ each strategy? Give examples. (LO 2-2) In a push strategy the communication and selling emphasis targets the channel of distribution members. Thus, programs are designed to persuade the trade to stock, merchandise, and promote manufacturers’ products. The goal of the strategy is to push the product through the channels by 2-14 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 02—The Role of IMC in the Marketing Process

promoting them to the trade. In a pull strategy, the target audience is the end buyer and/or consumer. The goal is to create demand among consumers and have them demand the product from middlemen. Once retailers see the demand, they will request the product from the wholesaler or manufacturer directly. Companies may employ either a push or pull strategy. Proctor & Gamble—a perennial leader in advertising to consumers—learned years ago that it must get the products on the shelves to be sold. Thus, the company shifted much of its consumer targeted advertising to the trade to ensure that it was stocked—thus, pursuing both a pull and push strategy. Others have used a pull strategy—for example, the Philadelphia Magazine ran an advertising campaign urging consumers to visit a newsstand to demand their magazine be carried. Companies pursuing a push strategy tend to rely more on their relationships with the trade, using IMC tools such as advertising, sales promotions, etc. that reach the middlemen. It is not at all uncommon for companies to incent sales employees to push their brands at the retail level. Decisions as to whether to emphasize a push or pull strategy depend on a number of factors including the company’s relation with the trade, the promotional budget and demand for the product. Companies with favorable channel relationships often use a promotional push strategy and work closely with channel members to encourage them to stock and promote their products. Firms with limited promotional budgets may not have the funds for advertising and promotion that are required for an effective pull strategy and may find it more feasible to target their efforts to the trade. Products with favorable demand resulting from unique benefits, superior advantages and/or popularity among consumers may use a pull strategy.

Chapter 02—The Role of IMC in the Marketing Process

15. The text describes a number of different positioning strategies. Give examples of products and/or brands that utilize each of these different strategies. (LO 2-5) The text lists a number of ways that companies can position their products. These include: a. Positioning by product attribute and benefits—in this case a company differentiates itself based on specific characteristics and/or benefits that it offers. Apple has positioned itself on its’ innovative technology and exciting products. BMW on its handling capabilities. b. Positioning by price/quality—companies like Bose, and Bang & Olefsen position themselves as very high quality brands that are worth the extra expense associated with their purchase. While not irrelevant, the companies want to communicate that price should not be the major factor considered in their purchase. Motel 6, on the other hand, positions itself as low cost, while still stressing the fact that they have not sacrificed quality in their motel rooms. c. Positioning by use or application—again using Bose as an example, the company advertises its expensive headset as the best for listening to music, and also as the best for its technological capabilities for noise reduction (for example when riding on an airplane). The company’s print campaign “Use it as a sanctuary or…. Reflects this positioning well. d. Positioning by product class—the now famous “Pork, the other white meat” is an excellent example of positioning by product class. A number of juice companies position themselves as a substitute fro eating fruit, and V8 says to “drink your vegetables.”Yogurt has positioned itself as a fruit. e. Positioning by product user—Canon positions it’s cameras as being the best for the serious picture taker. The University of Phoenix positions itself as a college for working persons—not “your typical four year school.” f.

Positioning by competitor—credit card companies like Discover position themselves as offering more services than their competitors with no fees. Others credit card companies compare their rewards programs directly to competitors’.

g. Positioning by cultural symbols—The Jolly Green Giant, the Keebler elves, and the Pillsbury Doughboy are all examples of companies that have cultural symbols. Speedy Alka-Seltzer, Ronald McDonald, and the Wells Fargo stagecoach are other examples of this form of positioning.

IMC Exercise The text discusses a number of efforts by marketers to reach diverse market segments by targeting various ethnic groups and subcultures such as teenagers. Have students find ads targeted to specific market segments and have them bring these ads to class and discuss which market segment is being targeted, the type of appeal used in the ad, and whether they feel the targeting effort will be successful.

Chapter 03—Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

CHAPTER 3 ORGANIZING FOR ADVERTISING AND PROMOTION: THE ROLE OF AD AGENCIES AND OTHER MARKETING COMMUNICATION ORGANIZATIONS Chapter Overview The purpose of this chapter is to familiarize the student with the various ways that organizations might organize for purposes of developing and executing integrated marketing communications programs. Students often have little or no idea of how the role of the various participants in the advertising and promotional program and how the IMC function is organized and coordinated. The chapter begins with a presentation of the various participants involved in the promotional planning process—advertisers, advertising agencies, media organizations, marketing communication specialist organizations, and collateral service organizations. This is followed by a discussion of the various organizational systems and the advantages and disadvantages of each. An in-depth discussion of the role and functions of advertising agencies is provided, as is an explanation of how agencies are compensated and evaluated. The chapter also discusses organizations that provide specialized integrated marketing communication services including direct-response, sales promotion and interactive agencies as well as public relations firms. It is very important for students to understand that a variety of different organizations may play a role in the development of various aspects of a company’s integrated marketing communications program.

Learning Objectives 1. Describe how companies organize for advertising and integrated marketing communications functions. 2. Compare the advantages and disadvantages of different ways to organize for advertising and promotion. 3. Identify the types of advertising agencies and the roles they play. 4. Explain how to select, compensate, and evaluate advertising agencies. 5. Identify the role and functions of specialized marketing communication organizations. 6. Compare the pros and cons of using an integrated marketing services agency.

Chapter 03—Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

Chapter and Lecture Outline I.

PARTICIPANTS IN THE INTEGRATED MARKETING COMMUNICATIONS PROCESS

This chapter examines the various organizations that participate in the integrated marketing communications process, their roles and responsibilities, and their relationship to one another. Some companies choose to handle advertising, media buying and other parts of their IMC programs in-house. However, most major marketers use advertising agencies and other types of promotional specialist organizations to handle the various areas of their IMC programs as they do not have these capabilities internally. Marketers are always searching for creative ways to communicate with their customers and are looking for agencies that can offer a range of integrated marketing communication capabilities and help them compete in the rapidly changing world of advertising and promotion. The opening section provides an overview of the various participants in the integrated marketing communications process. The student should become familiar with the various players including clients, advertising agencies, media organizations, marketing communications specialist organizations, and those who provide collateral services. It is particularly important to note that with the movement toward IMC, marketing communication specialist organizations such as direct response agencies, sales promotion agencies, public relations firms, and digital/interactive agencies are playing an increasingly important role in the development and implementation of programs in their areas of expertise. However, decisions also have to be made regarding the coordination and control of the IMC program and whether this should be the responsibility of the client or turned over to the control of an outside agency. II.

ORGANIZING FOR ADVERTISING AND PROMOTION IN THE FIRM: THE CLIENT’S ROLE

How a firm organizes for advertising and promotions is a function of a number of factors including (1) the size of the organization, (2) the number of products it markets, (3) the role that advertising and promotion assume in the product mix, (4) the advertising and promotions budget, and (5) the structure of the firm. Three organizational designs are discussed: A.

The Centralized System—In this design, marketing activities are organized along functional lines. A common form is to have an advertising manager (or marketing communications manager) responsible for all advertising and promotions activities including planning and budgeting, administration and execution, and coordination with other departments and outside agencies. The Decentralized System—In this system, individual products or brands are the responsibility of the product manager or brand manager. All advertising and promotion for the brand or product will be this person’s responsibility (including responsibilities for working with all external agencies) and s/he will be in charge of all planning, implementation and control for that product or brand. The In-House Agency—Some companies develop their own internal ad agencies. The design of these agencies may vary from small advertising departments to operations as large as an external agency. In the latter case, the in-house agency will operate as a separate entity and control advertising and promotional expenditures in millions of dollars. Large companies that use inhouse agencies include Hyundai, Land Rover, Benetton and Revlon. The advantages and disadvantages associated with each of these organizational systems are shown in Figure 3-4. This exhibit can be used as an effective slide for class discussion purposes. Digital and Social Media Perspective 3-1 discusses why more companies are bringing advertising in-house.

Chapter 03—Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

Professor Notes:

McGraw-Hill Connect ®: Advertising Organization Systems Type of Activity: Click and Drag Activity Summary: In this activity, students will match the advertising organization system with the advantages and disadvantages associated with it. Activity Learning Objectives: 03-01 Describe how companies organize for advertising and integrated marketing communications functions. 03-02 Compare the advantages and disadvantages of different ways to organize for advertising and promotion. CONCEPT REVIEW: Many companies have an advertising department headed by an advertising or communications manager operating under a marketing director. An alternative used by many large multiproduct firms is a decentralized marketing (brand management) system. A third option is to form a separate agency within the firm, an in-house agency. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

III. ADVERTISING AGENCIES Many large companies employ the services of an external advertising agency. More than 10,000 U.S. and international agencies are listed in the advertising REDBOOKS (the “Red Book” can be accessed at www.redbooks.com), ranging in size from one and two person operations to those with almost a billion dollars in worldwide income. The Red Books agency database contains detailed profiles of these agencies including clients, fields of specialization as well as an advertiser database. There are four large agency holding companies including WPP Group, Omnicom Group, Publicis Groupe and the Interpublic Group. These four holding companies own multiple advertising agencies, media specialist companies, public relations firms, digital agencies and other types of marketing communication organizations. The primary holdings of five holding companies are shown in Figure 3-7 of the text. An updated version of this is made available each year by Advertising Age and is available on the adage.com website. A.

The Ad Agency’s Role—External agencies provide a variety of services to their clients, including those discussed in the previous section. Though many clients have the capabilities of performing these roles themselves, they elect to use outside agencies for the following reasons: (1) the skills offered (2) objectivity and (3) experience. 3-3

Chapter 03—Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

Types of Advertising Agencies—All agencies are not the same of course. This section discusses the various types of agencies including the following: 1. Full Service—These agencies offer their clients a full range of services including account services, marketing planning and research, media planning and buying, sales promotion, creative services, and interactive media. The various departments of a full-service agency include: •

Account services—The link between the advertising agency and its clients. Account executives serve as the liaison between the agency and client and are responsible for coordinating the agency's efforts in planning, creating and producing ads.

•

Marketing services—Many full-service agencies provide a variety of marketing services to their clients and maintain departments such as research, strategy and planning and media. In many agencies the marketing services department may include account planners who are individuals that gather information that is relevant to the client’s product or service and can be used in the development of the creative strategy as well as other aspect of the IMC campaign. The research and media department provide important services that full-service agencies need to plan and execute their client’s advertising programs.

•

Creative services—Agency personnel in this department include artists and copywriters who are responsible for the creation and execution of the clients advertising messages. Creative services may also include print and broadcast production departments which are responsible for actually producing the advertising messages and putting them into final form. The traffic department coordinates all phases of production and sees that all ads are completed on time and deadlines for submitting the ads to the media are met.

•

Management and finance—Like any other business, an advertising agency must be managed and must perform basic operating and administrative functions such as accounting, finance and human resources

Attention should also be given to the two basic types or agency organization structures used by agencies. Under the departmental system each of the agency functions is set up as a separate department and is called upon to perform its specialty for all of the agency’s clients. Many agencies use the group system in which individuals from each department work together as teams to service a particular account. Many clients prefer the group system because agency employees become very familiar with their business and it ensures continuity in servicing the account. 2. Other Types of Agencies and Services 1. Creative boutiques—These types of agencies specialize in and provide only advertising creative services. They have creative personnel such as writers or artists on staff but do not have media, research or account planning capabilities. Many creative boutiques are formed by members of the creative departments of full-service agencies who leave the firm and take with them clients who want to retain their creative talents. IMC Perspective 3-4 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 03—Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

3-1 provides some interesting insights into one agency where they are creatively led, but strategically driven. 2. Media Specialist Companies—These are independent companies that specialize in media planning and buying. Many companies use independent media buying services to plan and purchase media and an advertising agency to handle their creative work. Many of the major agencies have formed independent media services companies that handle the media planning and buying for their clients. Media specialist companies have become very important since many clients are consolidating their media buying to save money and improve media efficiency. Professor Notes

McGraw-Hill Connect ®: Agency Functions Type of Activity: Click and Drag Activity Summary: In this activity, students will match the advertising agency personnel with the relevant job descriptors. Activity Learning Objectives: 03-03 Identify the types of advertising agencies and the roles they play. CONCEPT REVIEW: A full-service advertising agency offers its clients a full range of marketing, communications, and promotions services, including planning, creating, and producing the advertising, performing research, and selecting media. A full-service agency may also offer nonadvertising services such as strategic market planning, sales promotions, direct marketing, interactive capabilities, package design, and public relations and publicity. A full-service agency is made up of departments that provide the activities needed to perform the various advertising functions and serve the client, such as Account Services, Marketing Services, and Creative Services. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

Chapter 03—Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

IV.

AGENCY COMPENSATION

Agency agencies may be compensated in a variety of ways including: A.

Commissions from Media—The agency is compensated based on the time or space it purchases for its client. The commission has traditionally been 15% (16 2/3% for outdoor), but now is often negotiated downward. The commission system has been the target of criticism for a number of years as critics argue that it ties agency compensation to media costs and encourages agencies to rely too much on expensive, commissionable media such as network television and avoid noncommissionable media. Many advertisers have moved to a negotiated commission system that takes the form of reduced percentage rates, variable commission rates and minimum and maximum compensation rates. The most recent survey commissioned by the Association of National Advertisers, found that only 6 percent of clients pay a commission to their agencies. However, most clients do use the 15% commission as a benchmark to evaluate their current agency compensation agreement.

Fee, Cost and Incentive-based Systems—In situations where billings are low, and/or the client does not wish to pay a direct commission; an agreement may be reached in which the agency is compensated in the way of a fee, cost-plus or incentive-based compensation system. 1. Fee arrangements are of two types: A fixed-fee method is when the agency charges a basic monthly fee for all of its services and credits to the client any media commissions earned. Under a fee-commission combination the media commissions received by the agency are credited against the fee. If commissions are less than the agreed-on fee, client must make up the difference. 2. Cost-plus agreement—Under this compensation method the client agrees to pay the agency a fee based on costs of its work plus some agreed-on profit margin. This system requires the agency to keep detailed records of costs incurred in working on a client’s account. 3. Incentive-based compensation—While there are many variations on this system, the basic idea is that the agency’s compensation level will depend upon how well it meets predetermined performance goals for its clients such as sales or market share. Incentive-based compensation. Incentive-based compensation systems are becoming more prevalent as marketers strive to make their agencies more accountable and reduce costs.

Professor Notes

Chapter 03—Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

Percentage Charges—When agencies purchase services from other outside agencies they typically add a percentage in the form of a markup charge as their compensation. These markups usually range from 17.65 to 20 percent.

The Future of Agency Compensation—Companies have continued to make significant changes in their agency compensation systems. The recent ANA survey showed that nearly half of advertisers are using some type of performance-based system Companies with large advertising budgets are even more likely to use incentive-based systems. Figure 3-8 shows some of the criteria used for incentive-based compensation systems. More companies are changing their compensation systems as they move away from traditional mass media advertising and turn to a wider array of marketing communication tools.

Professor Notes

McGraw-Hill Connect ®: AdCreates Client Portfolio Type of Activity: Case Analysis Activity Summary: AdCreate is a full-service advertising agency with several high-profile marketing firms as clients. Given their vast client list and the varied services they provide to different clients, they are compensated differently by different clients. This activity will have the students select the best answer for each question related to compensation. Activity Learning Objective: 03-04 Explain how to select, compensate, and evaluate advertising agencies.

CONCEPT REVIEW: The type and amount of services an ad agency performs vary from one client to another. As a result, agencies use a variety of methods to get paid for their services. Agencies are typically compensated in three ways: commissions, some type of fee arrangement, or percentage charges. Difficulty: Hard Bloom’s: Analyze AASCD: Analytical Thinking

EVALUATING AGENCIES

Given the substantial amounts of money being spent on advertising by many companies, demands for accountability are increasing. The agency evaluation process generally involves two types of assessments—financial audits and qualitative audits. The financial audit focuses on how the agency conducts its business including verification of costs and expenses, the number of personnel hours charged 3-7 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 03—Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

to an account and payments to media and outside suppliers. The qualitative audit involves the agency’s efforts in planning, developing and implementing the client’s advertising programs and the results achieved. An increasing trend among larger firms is to formalize this process. A. Gaining and Losing Clients—Agencies are like their clients in the sense that they must solicit business, and often gain and lose business. The text offers a variety of reasons as to why agencies gain and lose clients, as well as some of the activities they perform in seeking new business. Current issues of Advertising Age or AdWeek will be useful in providing the instructor with examples of recent account changes and some of the reasons the clients decided to change agencies. 1. Reasons why agencies lose clients • Poor performance or service • Poor communication • Unrealistic demands by the client • Personality conflicts • Personnel changes • Changes in size of the client or agency • Conflicts of interest • Changes in the client’s corporate and/or marketing strategy • Declining sales • Conflicting compensation philosophies • Changes in policies • Disagreements over marketing and/or creative strategy • Lack of integrated marketing capabilities 2. How agencies gain clients • Referrals • Solicitations • Presentations • Public relations • Image and reputation Professor Notes

Chapter 03—Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

VI.

SPECIALIZED SERVICES

In addition to advertising agencies, other outside organizations may provide marketers with specialized services that are important in developing and executing integrated marketing communication programs. A.

Direct Marketing Agencies—One of the fastest growing areas in IMC is direct marketing, where companies communicate with their customers through telemarketing, direct mail and other forms of direct-response advertising. Direct response agencies provide their clients a variety of services including data base development and management, direct mail, research, media services, and creative and production capabilities.

Sales Promotion Agencies—There are many companies specializing in the provision of sales promotions such as contests, games, sweepstakes, and refund and rebate offers. Services provided by large sales promotion agencies include promotional planning, creative, research, tie-in coordination, fulfillment, premium design, and contest/sweepstakes management. Some time might also be spent discussing how promotional agencies are becoming important participants in the development of integrated marketing communications strategy for various companies. Public Relations Firms—Many large companies use both advertising agencies and public relations (PR) firms. Public relations firms develop and implement programs to manage an organization’s publicity, image, and affairs with consumers and other relevant publics including employers, suppliers, stockholders, government, labor and the general public. The role of PR firms is examined in more detail in Chapter 17.

Digital/Interactive Agencies—With the rapid growth of the Internet and other forms of interactive media, a new type of specialized marketing communication organization has evolved—the digital agency. While many traditional agencies like have developed interactive capabilities or the major holding companies which they are part of have acquired interactive agencies. Many marketers are turning to interactive agencies to develop web sites, banner ads for the Internet, and other forms of interactive communications. The growth of social media and the increase in the number of marketers using them is giving rise to companies that specialize in developing applications and campaigns for platforms such as Facebook, Twitter, Instagram, and Snapchat.

Professor Notes

Chapter 03—Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

VII.

COLLATERAL SERVICES

The final group of participants in the promotional process is those organizations that provide collateral services such as marketing research, package design, consulting, photography, event sponsorship planning and production, and broadcast production services. One of the more widely used collateral service organizations is marketing research firms that conduct both qualitative research such as focus groups and quantitative studies such as market surveys. VIII.

INTEGRATED MARKETING COMMUNICATION SERVICES

A significant trend in the advertising industry is to combine all of the above services under one roof. These one-stop service agencies bring together service providers so that the client needs only to use their firm to receive all of the marketing support s/he requires. Specific advantages and disadvantages of these arrangements have been cited: A.

Pros and Cons of Integrated Services—It has been argued that IMC is nothing new, particularly in smaller companies and communication agencies that have coordinating promotion tools for years. The text discusses the advantages and disadvantages of the one-stop shop. 1. Advantages of integrated services • Greater control of the promotional process allows for more synergy among each of the communication program elements • More convenient for clients to coordinate all promotional efforts with one agency • Agencies with IMC capabilities can create a single image for the client 2. Disadvantages of integrated services • Synergy and economies of scale are often not achieved by a single agency handling all communication areas • Internal conflicts often arise within various departments within a large agency over areas such as advertising, public relations or sales promotion • Limits client’s ability to take advantage of specialists in various IMC areas

Responsibility for IMC: Agency versus Client—A final area covered in this section is a discussion of whether the client or advertising agency should have the primary responsibility for planning and coordinating the IMC process. Most marketers believe it is their responsibility to set strategy for and coordinated integrated campaigns while agency executives see this as their domain. The major barrier is a lack of people in agencies with the broad perspective and skills needed to make IMC work effectively. Internal turf battles, agency egos, and fear of budget reductions are also cited as major barriers to successful integrated marketing campaigns. A study by the Corporate and Executive Board’s Advertising and Marketing Roundtable found that for many companies, the traditional static model of a single ad agency or fixed roster of agencies working on a brand is being replaced by an open-source model whereby marketers hire multiple partners to leverage their talents and expertise in various areas. However, there is still the issue of who will coordinate the efforts the various specialist organizations as lead agencies prefer to handle many of these services themselves rather than overseeing the work of others.

Chapter 03—Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

Teaching Suggestions As noted earlier, the student is usually unfamiliar with how companies organize for advertising and promotion, and the role that various organizations play in this process. While most students are somewhat familiar with advertising agencies, they are less likely to know anything about direct response and sales promotion agencies, public relations firms and interactive agencies. You might note that there are some excellent career opportunities available in these areas. Students are often interested in working for an advertising agency. This chapter will help to familiarize them with other major participants in the IMC process and the important role they play. You might encourage students to visit the web sites of a promotion agency such as Aspen Marketing Services (www.aspenms.com ) or an interactive agency such as Razorfish (http://razorfish-jobs.itsmycareer.com) or Digitas (http://www.digitaslbi.com/global/), all of which have very informative sites. Because of the rapidly changing advertising environment, it is important for the instructor to keep up to date with events that are taking place. Good sources of information on advertising are publications and their companion websites such as Advertising Age (www.adage.com) and AdWeek (www.adweek.com). Another excellent source of information on promotion is the Brand Activation Association (formerly the Promotion Marketing Association) which is the world’s leading non-profit promotion marketing trade association. The BAA which is now part of the Association National Advertisers (ANA), has an excellent website that can be found at www.baalink.org. Your lecture can be supplemented by articles from the sources listed above. We have also found strong student interest in identifying current ad campaigns have been created by various agencies. Most major agencies have excellent websites which contain client rosters, examples of their advertising, information about their advertising philosophy, approaches to branding and content related to other areas IMC areas.

Answers to Discussion Questions 1. Discuss how disruptions being created by the digital revolution are impacting advertising agencies. What changes do advertising agencies need to make to respond to the impact of digital technology? (LO 3-3, 3-5) The disruptions being created by the digital revolution are squeezing agencies from all sides. Media buying is becoming automated and done by software, particularly for digital and social media, and big data are driving the planning and evaluation of the advertising strategies and tactics used by marketers. Companies that provide digital advertising platforms such as Google and Facebook are becoming very powerful players in the marketing communication ecosystem as are data/customer relationship marketing companies such as Epsilon, Axciom, and Experian Marketing. Information technology service companies such as IBM, Accenture, McKinsey, and Deloitte are also providing advertising and media-related services for marketers. In addition to their advertising agencies, marketers are using a multitude of vendors and technology providers. One report found that marketers are using as many as 30 different tools to help them plan, manage, and evaluate their IMC campaign and the data associated with them. As the Internet and social media become increasingly important marketing tools, more companies will be turning to digital agencies to help them develop successful interactive marketing programs. The growth of social media and mobile marketing is also giving rise to companies that specialize in developing applications and campaigns for Facebook, Twitter, Instagram, Snapchat, and other social platforms. For example, there are a number of companies that help marketers build, monitor, manage, and measure their social media efforts across a variety of social and mobile platforms. These companies work with marketers to develop various ways to engage consumers, including various types of promotions as well as through user-generated photo, essay, and video contests. 3-11 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 03—Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

Advertising agencies must adapt to these changes and continue to develop more digital marketing capabilities such as website development, search engine optimization, mobile marketing, social media, and analytics. Most agencies have expanded their capabilities by adding digital personnel and departments while some have acquired digital agencies. 2. What are the challenges facing traditional, full-service advertising agencies given the changes occurring in the area of integrated marketing communications? It has been argued that the traditional model of a full-service, lead agency is becoming obsolete. Do you agree or disagree with this position? (LO 3-3, 3-5, 3-6) Traditional advertising agencies have been developing more IMC capabilities because their clients are shifting more and more of their promotional dollars away from mass media advertising to other areas of marketing communication such as direct marketing, public relations, sales promotion, the Internet and event marketing and sponsorships. By expanding their capabilities, traditional agencies can offer a full range of IMC services and provide a total communications solution to their clients. By expanding their IMC capabilities and services, traditional agencies can also make money from other areas of their clients’ promotional spending such as direct marketing, interactive, sales promotion, and public relations. The greatest change that traditional agencies have to make to improve their IMC capabilities is to develop or acquire expertise in these other areas. Traditionally agencies have been experts in areas related to advertising including creative and media. To expand their IMC capabilities, agencies have to offer a broader range of services and develop expertise in areas such as direct marketing, event marketing, sales promotion, digital and social media, and public relations. Many agencies have been acquiring these capabilities by purchasing companies such as interactive agencies, public relations and direct marketing firms, or promotional agencies. Others have been working to develop these IMC skills internally through their hiring and training processes. Many companies are moving away from the model of using a full-service lead agency and prefer to use more of an open-source model whereby they use a number of specialist partners to leverage their talents and expertise as needed. However, many marketers still prefer to use a full-service agency that understands their needs, customers and the markets in which they compete. Using a full-service agency also make it easier to manage the IMC program rather than having to work with a number of different agency partners. 3. Who are the various participants in the integrated marketing communications process? Briefly discuss the roles and responsibilities of each and how they are changing given the changes occurring in the marketing landscape. (LO 3-1) Advertisers or clients are the key participants. It is their product or service that is being offered and that must be marketed. The advertiser is responsible for all marketing aspects, and will ultimately have the final say regarding approval of the proposed integrated marketing communications program. It is the advertiser/client who ultimately must provide the budget and pay the bills as well. The advertising agency is an external organization specializing in the planning, creation, and production of the marketing communication messages. They may also provide additional services designed to facilitate the integrated marketing effort such as media planning and buying, research, strategic marketing planning, directing marketing, and digital/interactive marketing. Media organizations provide the advertiser with a channel for their communications. Media may include traditional forms such as print, broadcast, outdoor, as well as new digital media. Media organizations attempt to provide the advertiser with the proper environment for the message. Marketing communication specialist organizations provide services in specific areas of marketing communications. They include direct response agencies, sales promotion agencies, public relations firms and digital/interactive agencies. Collateral services participants are those who provide a wide 3-12 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 03—Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

range of support services including marketing research, package design firms, consultants, photographers, event sponsorship firms, and the like. Their function will vary in accordance with the needs of the integrated marketing communications program. 4. Discuss the various challenges faced by companies that use the brand management system when organizing for advertising and promotion. What are some of the things that marketers can do to address these problems and ensure that their brand managers are keeping abreast of external changes occurring in the market? (LO 3-2) Advantages of a decentralized or brand management system include the following: (1) the product or brand receives more concentrated managerial attention; (2) problems and opportunities may be responded to more quickly; (3) the product or brand has an advocate; and (4) the system offers increased flexibility. Under a decentralized system, the product manager has the primary responsibility for the planning, implementation and control of marketing programs for a specific product. S/he will also be responsible for sales projections, budgeting and profit performances. An important part of the product manager’s responsibility is to work with the advertising agency and other marketing communication organizations in developing promotional plans and programs for the brand. Product managers may have input into the advertising campaign including the creative strategy, media plan and evaluation of effectiveness. There are, however, drawbacks to the decentralized approach as brand managers may often lack experience and expertise as well as an understanding of the various IMC tools and how they can be used effectively. This system has also come under attack recently by those who argue that brand managers spend too much time on internal issues such as planning and budgeting and do not devote enough time to external matters or to creativity and problem solving. It has been suggested that companies do away with the formal annual planning and budgeting process which consumes much of the time of brand managers in favor of more frequently updated and spontaneous plans that can be adapted as market conditions change. Companies will also have to allocate more resources to training brand managers on the rapidly developing world of digital and social media so they can better understand the capabilities of these tools and how they can be used to communicate with consumers. 5. Discuss the pros and cons of using an in-house advertising agency. What are some of the reasons why companies might change from using an in-house agency and hire an outside agency? (LO 3-2) Some of the reasons why firms use in-house agencies include: (1) cost savings; (2) control; and (3) increased ability to coordinate marketing and promotional activities. Negative aspects include: (1) internal employees may have less experience and inferior skills than their external counterparts; (2) they may be less objective about the product and its capabilities; and, (3) they may be less flexible with respect to what they are willing and able to do with the product and/or brands programs. Companies often use an in-house agency when they have sufficient and capable staff to conduct the advertising and promotional activities themselves; they have a very large advertising and promotional budget and wish to save the costs of fees and commissions; and/or when they believe that the ability to coordinate and control the promotional activities is more feasible with this design. As discussed in the chapter, Hyundai Motor Co. recently moved all of their advertising to an agency which is owned by the company. Target is another example of a company that does its advertising in-house. The company likes to have control over its advertising as the role its plays in developing a strong brand image and position for the retailer. They also feel they have the creative capabilities to design and implement creative and effective advertising messages. However, in some cases Target will have some of its creative work done outside by a creative specialist or boutique. Companies change from using an in-house agency and hire an outside agency for various reasons. Many marketers feel that the use of an outside agency provides greater objectivity with respect to the 3-13 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 03—Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

advertising. When an in-house agency is used, management may get too close to the advertising process and product and lose its objectivity when evaluating the ads. Outside agencies can provide a more objective perspective on the market and business that is not subject to internal biases and politics. Companies often move from in-house to outside agencies as they become larger and their advertising and other marketing communication needs become greater. Rather than continuing to expand the in-house agency, many companies will move to using an outside agency that has the various services and expertise needed by the company. It should be noted that perhaps the major reason why outside agencies are used is that they provide the client with the services of highly skilled individuals who are specialists in the advertising area. Outside agencies also offer more flexibility to an advertiser as they can always switch agencies and hire a new one if they are dissatisfied with the work being done. It is much more difficult to terminate an in-house agency and hire new personnel to replace them. 6. Discuss how technology and the emerging role of digital and social media are impacting the role of brand managers. What types of skills are needed to be a successful brand manager today? What can companies do to train brand managers so they can keep up with the changes occurring in digital and social media? (LO 3-2) Middle-aged brand managers who are not digital natives may be particularly challenged to understand the role of social media and the important role they play in the lives of younger consumers. The increasing use of social media such as Twitter, Facebook, YouTube, Pinterest, and the myriad of blogs is changing the way brands communicate with their customers. Many brand managers spend much of their time on internal issues such as planning and budgeting and do not have ample time to devote to managing the social identity of their brands. Companies can address these problems by developing training programs for brand managers to help them better understand the role of various social media and how they can be used as part of the IMC program for the brands they manage. Many digital media companies such as Facebook, Twitter, and Google also provide online courses and tutorials that managers can take to enhance their knowledge and understanding of digital and social media. 7. IMC Perspective 3-1 discusses the outstanding creative work done by the Droga5 agency. Find an example of an award-winning campaign Droga5 has created for companies/brands such as Google, Under Armour or Newcastle beer. Discuss why this campaign has been recognized for its creative excellence. (LO 3-3) Droga5 also has done outstanding creative work for a number of companies including the “I Will What I Want” campaign that won the Grand Prix Award at the 2015 Cannes International advertising festival. Part of the campaign included supermodel Gisele Bundchen and featured a website that pulled in real-time social media insults about her to emphasize that she used her strength and will to block out noise from even her nastiest critics. The agency has also developed the “Rule Yourself” campaign that features NBA star Stephen Curry, golfer Jordan Spieth, and ballerina Misty Copeland striving to be their best. The critically acclaimed work Droga5 has done for Under Armour has helped the company expand beyond football and into other sports and connect with women. Students should be encouraged to visit the agency’s website to find examples of campaigns Droga5 has done for other clients such as Google/Android, Coke Zero, JP Chase and companies/brands.

8. Discuss the challenges advertising agencies face in negotiating compensation structures with their clients when the procurement department becomes involved in the process. How might an agency respond to clients who demand to see their labor costs overhead and profit margins as part of the negotiation process? (LO 3-4)

Chapter 03—Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

As more marketers adopt an integrated marketing communication perspective and move away from traditional mass media, changes in compensation systems are taking place. These changes are taking place to encourage agencies to look beyond expensive commissionable media such as television and magazines and to make use of other IMC tools such as events, the Internet, and direct marketing. advertising in developing IMC programs. Many companies are also demanding more accountability from their agencies and are moving away from the traditional commission system and using incentive-based systems where agency compensation is tied to performance. The performance measures may include objective measures such as sales and/or market share as more subjective measures such as evaluations of the agency’s creative work. Companies feel that if agencies really want to be true partners, they will be willing to share in the sales performance of the product or service with them. Demands for accountability are also resulting in more scrutinizing of agency’s labor and other costs incurred in serving the account. Agencies are being viewed like other suppliers who are asked to continually lower their costs as clients are unwilling to compensate agencies for expenses that cannot be directly related to the performance of the advertising program. 9. Discuss the various criteria that might be used by an automotive marketer such as Ford or Honda in evaluating its advertising agencies versus a consumer packaged-goods marketer such as Procter & Gamble. Which of these criteria do you think would receive the most weight and why? (LO 3-4) The agency evaluation process usually involves two types of assessments, one which is more financial and operations focused and the other which is more creative and qualitative in nature. The financial audit focuses on how the agency conducts its business in working for the client and is designed to verify costs and expenses such as the number of personnel hours charged to and accounts, and payments to media and various other outside suppliers. The qualitative audit focuses on the agency’s efforts in planning, developing and implementing the advertising and promotional program and the results achieved. Major automotive advertisers such as Ford or Honda are likely to have a formal and systematic review process given the size of their advertising budgets and the important role advertising plays in the marketing of automobiles. Factors likely to be considered include the quality of the work done by the agency, particularly with respect to creative strategy and execution for advertising and other areas of the IMC program handled by the agency. The companies are also likely to focus on result achieved including sales and/or market share gains and losses. However, these companies recognize that it is often difficult to relate outcome measures such as sales directly to advertising and other forms of promotion so they might consider other metrics such as awareness, recognition and various image related measures and how they have changed as a result of the advertising and promotion work done by the agency. The criteria used by packaged good marketers such as P&G to evaluate the work of their agencies will be similar, as both financial/operational as well as qualitative factors will be used. Consumer packaged goods still rely heavily on traditional media advertising, particularly print and television, as components in their IMC programs so it is likely they will put a strong emphasis on the quality of the creative work done by the agency. However, since CPG firms also spend a large part of their marketing budgets on sales promotion, they are likely to consider how creative ideas can be integrated with other IMC tools, particularly consumer promotions. Many CPG firms allocating more of their advertising budgets to digital media so they may also evaluate the agencies based on their digital capabilities as well. 10. Discuss the role of specialized marketing communication organizations such as sales promotion, public relations, and digital agencies in the IMC process. Why are marketers likely to use these specialists rather than a full-service agency? (LO 3-3, 3-5)

Chapter 03—Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

These organizations provide services in their areas of expertise. A direct-response agency develops and implements direct-marketing programs, while sales promotion agencies develop promotional programs such as contests and sweepstakes, premium offers, or sampling programs. Digital/interactive agencies are being retained to develop websites for the Internet and help marketers as they move deeper into the realm of interactive media. Public relations firms are used to generate and manage publicity for a company and its products and services as well as to focus on its relationships and communications with its relevant publics. Probably the main reason outside agencies are used is that they provide the client with the services of highly skilled individuals who are specialists in their chosen fields. An advertising agency staff may include artists, writers, media analysts, researchers, and others with specific skills, knowledge, and experience who can help market the client’s products or services. Many agencies specialize in a particular type of business and use their knowledge of the industry to assist their clients with strategic marketing as well as branding. An outside agency can also provide an objective viewpoint of the market and its business that is not subject to internal company policies, biases, or other limitations. The agency can draw on the broad range of experience it has gained while working on a diverse set of marketing problems for various clients. 11. Discuss the reasons why advertising agencies lose accounts. Find an example of a company that changed advertising agencies and identify the factors that led them to switch to another agency. (LO 3-4) The relationship between a client and an agency is influenced by a variety of factors. An advertiser may decide to switch agencies for a number of reasons. Some of the most common reasons why clients switch agencies are discussed in the Gaining and Losing Clients section of the text. These include perspectives on compensation policies, the demands clients place on agencies, the level of service the agency provides, the personalities of agency and client personnel, the performance of the client’s product or service, the perceived quality of the agency work in various areas (including account planning and management, creative, media, use of non-traditional media), and changes in the competitive situation. Changes in top management of a client may also affect the agency client relationship. New management may prefer a particular agency or certain approach to advertising and promotion which can affect the client’s relationship with the agency. These reasons can apply to long-term clients as well. When marketers are having problems such as stagnant or declining sales or losses in market share they will often look to advertising. Often the problems are blamed on advertising agencies. In the competitive world of advertising, agencies are always looking for new business and major advertisers know they can attract a great deal of interest and attention when they put their accounts up for review. Students should be encouraged to find an example of a company that recently changed advertising agencies and identify the specific factors that led them to do so. Publications such as Advertising Age, AdWeek and BrandWeek often have stories about companies that change agencies and can be used to find specific examples to analyze. 12. Discuss the pros and cons for a marketer having one company handle all of its integrated marketing communication needs versus using specialized marketing communication firms to handle the various components of the program. (LO 3-5, 3-6) Some marketers prefer to have all of their IMC activities performed by one agency rather than using multiple agencies that specialize in various areas such as direct marketing, sales promotion, interactive marketing, and public relations. These companies feel that by having all of the IMC functions performed by one agency makes it easier to develop and implement a consistent and uniform program where everyone is working with the same information and toward the same goals and objectives. They also feel that giving one agency control of entire IMC program achieves greater synergy among each of the communication elements. It also makes it easier for the client when all of

Chapter 03—Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

the promotional elements such as advertising, direct mail, event marketing, sales promotion, interactive marketing and public relations are handled by one large agency. However, some companies prefer to use companies that specialize in specific areas of integrated marketing communications such as sales promotion, public relations, direct marketing and interactive marketing. These agencies are important because they are specialists in planning, developing and implementing these various IMC functions and can provide a great deal of expertise to these areas. For example, an interactive agency is an organization that specializes in the development and strategic use of various interactive marketing tools such as websites for the Internet, banner ads, social media sites, and other forms of digital media. Many marketers are using digital agencies because they are specialists in field of interactive media and have capabilities beyond what might be found in a full-service advertising agency. Companies that are making the Internet and social media a major part of their IMC programs may use a digital agency that has strategy, creative and technology capabilities and can help these companies integrate the Internet into various aspects of their business such as brand building, communications, transactions, and customer service. Companies may choose to use these specialized agencies rather than having one agency handle all of its IMC needs as they feel that they offer more expertise in a particular marketing communications area. These specialized agencies are often smaller and companies may feel that their account is getting more attention or is being handled by more talented individuals. The specialized agencies may also cost less since they may be smaller and thus have less overhead and other costs to cover.

Additional Discussion Questions (not in text) 13. Why might a company choose to use a creative boutique rather than a larger, full-service agency? Find an example of a company that uses a creative boutique and discuss why the decision to use a smaller agency may be appropriate for this firm. (LO 3-3) Creative boutiques are agencies that provide only creative services and have developed in response to some companies’ desires to use only the creative talent of agency. There are a number of reasons why marketers use creative boutiques. These smaller agencies often turn out excellent creative work and do not have the bureaucracy and politics of larger agencies. Many companies also feel that by working with a smaller creative boutique they can get more attention and better access to creative talent than they would at a larger agency. Many creative boutiques are formed when creative people leave large agencies and form their own agencies. Often they take with them a client with whom they have worked closely and developed a strong relationship. Another reason why a company might use a creative boutique is that there are companies available to handle other parts of the advertising and promotional program. Independent media buying companies can be used to develop and implement the media strategy and plan while other types of companies can provide specialized services in other areas such as direct response, sales promotion, and interactive agencies as well as PR firms. Students should be encouraged to identify a company that uses a creative boutique and evaluate why they do so rather than using an outside agency. Articles often appear in publications such as Advertising Age or Adweek that discuss agencies used by various companies. Alternatively, students might identify a creative boutique and look at the client list on the agency’s web site. 14. Discuss the changing role of account representatives in advertising agencies. Discuss how the role of account representative is changing and the developments that underlie these changes. Do you think account representatives will become obsolete in the future? Why or why not? (LO 3-3)

Chapter 03—Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

Account representatives or executives are individuals who work in an advertising agency and serve as the liaison between the agency and the client. They are responsible for understanding the client’s marketing strategy as well as its advertising and promotion needs and interpreting and explaining them to agency personnel such as the creative department. Traditionally, their positions have involved working with the client to formulate the advertising plan, coordinating the agency’s services, and representing the client’s point-of-view to those in the agency. The role of account representatives is changing as they are now required to have a broader range of skills that they can use in interacting with the client. Agencies want account representatives who are good strategic thinkers and have a broad-based marketing and business perspective that extends beyond media advertising. As other integrated marketing communications tools such as direct, digital/interactive and non-traditional media become more widely used, they are expected to have an understanding of their value and how they can be used as part of an IMC programs. Many agencies are facing increasing pressure from their clients to keep costs under control and to justify the number of individuals assigned to work on their account. Thus, the number of account representatives assigned to work for a client is being reduced and those who handle the account are being asked to do more. It is unlikely that account representatives will become obsolete as they still play an important role in serving as the link between the agency and its clients. However, the skill set required to be an account representative is changing and the position is likely to become more demanding as marketers continue to move away from traditional media advertising and utilize a variety of IMC tools. Thus, agencies are developing training programs for their account executives to better educate them in a variety of areas and provide them with the skills needed to interact with clients who are becoming increasingly demanding of them. 15. Discuss the responsibilities and duties of an advertising or marketing communications manager in a company that uses a centralized organizational system versus a company that uses a decentralized system. (LO 3-2) The specific duties of the advertising or marketing communications manager will vary depending upon the size, organization and makeup of the firm. In a centralized system the manager may have responsibilities for all promotional functions except sales. These responsibilities may include planning and budgeting, administration and execution of the promotional program, coordination with other departments and outside agencies, and program evaluation. An advertising or marketing communication manager is usually needed even if an outside agency is used, as the agency may not perform all of the marketing tasks required. There is also still a need for someone to plan and coordinate the IMC program internally as well as to serve as the liaison between the agency and the firm. In addition, the ad manager will be responsible for evaluating the external agency’s performance. Under a decentralized system, a product or brand manager has responsibility for total management of the brand which includes planning, budgeting, sales and profit performance. The brand manager’s responsibilities will be similar to those of the advertising or marketing manager in a centralized system as s/he will work closely with the outside advertising agency and other marketing communication specialists such as promotion or interactive agencies to develop budgets, define strategies, and oversee the implementation of the marketing program.

Chapter 4—Perspectives on Consumer Behavior

CHAPTER 4 PERSPECTIVES ON CONSUMER BEHAVIOR Chapter Overview The purpose of this chapter is to examine the field of consumer behavior and to demonstrate how knowledge and understanding of the consumer can be used in developing promotional strategies and programs. This chapter utilizes the basic consumer decision making process model as a framework for examining consumer behavior. The chapter takes the student through the various stages of this model and discusses what occurs at each and how advertising and other forms of promotion can be used to influence consumer decision making. The influence of various psychological concepts or influences such as motivation, perception, attitudes and integration processes are examined at the appropriate stages of the decision process model. Attention is also given to the three major variations in the consumer decision making process: routine response behavior, limited problem solving and extended problem solving. Consideration is given to how advertising and promotional strategies may differ depending on the type of decision making process consumers are likely to be using.

Learning Objectives 1. Discuss why an understanding of consumer behavior is valuable in developing advertising and promotional programs. 2. Describe the steps in the consumer decision-making process. 3. Explain the influence on consumer behavior of psychological processes like perception and motivation. 4. Discuss behavioral learning theory and cognitive learning theory. 5. Explain the influence of external factors like culture and demographic variables. 6. Identify new ways to study consumer behavior.

Chapter and Lecture Outline I.

AN OVERVIEW OF CONSUMER BEHAVIOR

A brief introduction to the field of consumer behavior and an indication of the increased importance that this domain of study has assumed in marketing would be a good starting point. The instructor should discuss the fact that to operationalize the marketing concept it is critical that the marketer have an understanding of some of the consumer decision making processes. Likewise, to effectively design effective advertising and promotions programs, these processes must be understood and considered. It is important to point out that the development of successful marketing communication programs begins with understanding why consumers behave as they do. Those who develop advertising and other promotional strategies begin by identifying relevant markets and then analyzing the relationship between target consumers and the product/service or brand.

Chapter 4—Perspectives on Consumer Behavior

Consumer Behavior can be defined as the process and activities that people engage in when searching for, selecting, purchasing, using, evaluating and disposing of products and services so as to satisfy their needs and desires. The decision process model should be introduced and a brief description given of the five stages: • Problem recognition • Information Search • Alternative Evaluation • Purchase Decision • Post purchase Evaluation You should let the students know that this model will be used as a framework for analyzing the consumer decision making process. You will be going through the various stages of the model, discussing what occurs at each and how advertising and promotion can be used to influence consumer decision making.

Professor Notes

II.

THE CONSUMER DECISION-MAKING PROCESS

The consumer purchase decision process is generally viewed as consisting of sequential steps or stages through which the buyer passes in purchasing a product or service. Figure 4-1 of the text shows the various steps in this process as well as the relevant internal psychological processes that occur at each stage such as motivation, perception, attitude formation, integration and learning. A.

Problem recognition—The first step in the consumer decision-making process is that of problem recognition, which is caused by a difference between the consumer’s ideal state and actual state. There are various causes of sources of problem recognition. These include: 1. Out of stock 2. Dissatisfaction 3. New needs/wants 4. Related products/purchases 5. Marketer-induced problem recognition 6. New products B. Examining Consumer Motivations—The way a consumer perceives a need and becomes motivated to solve a consumption problem will influence the remainder of the decision-making process. To better understand the reasons underlying consumer purchases, marketers develop considerable attention to examining motives or factors that compel or drive a consumer to take a particular action. 1. Hierarchy of needs—One of the most basic and popular approaches to understanding consumer motivation is the classic theory of human motivation popularized by Maslow. His hierarchy of needs postulates five basic levels of human needs: • physiological • safety • social/love and belonging

Chapter 4—Perspectives on Consumer Behavior

• esteem • self-actualization The implications of Maslow’s hierarchy for developing advertisements that appeal to different types of needs should be discussed. 2. Psychoanalytic theory—One of the initial approaches to the study of consumer behaviors in marketing used Freud’s Psychoanalytic Theory as its basis. This approach viewed consumers as having complex, subconscious motivations for purchasing. 3. Motivation research in marketing—While very popular in the late 1950s, this area of study— known as motivation research—received much less attention through the 1960s and 1970s. The text brings up several associations related to products and brands. Very recent applications of motivation research are discussed. 4. Problems and Contributions—Because of problems with reliability and validity, and the fact that consumers were often considered as unaware and unable to control their motivations, this area has received substantial criticism. Nevertheless, as noted in the text, the 1990’s has seen a return of this theory in the formulation of advertising programs and strategies as demonstrated in this chapter. C.

Information Search—The second step in the consumer decision making process is information search. Internal search involves a scan of information stored in memory to recall past experiences or knowledge regarding purchase alternatives. External search involves go to outside sources to acquire information such as personal sources, marketer controlled sources, public sources, or through personal experiences such as examining or handling a product. Perception—Perception is the process by which an individual receives selects, organizes, and interprets information to create a meaningful picture of the world. There are a number of processes involved in perception which determine how marketing information will be received: • Sensation—the immediate and direct response of the senses to a stimulus such as an advertisement • Selecting information—determining whether incoming information will be attended to and how much attention it will be given • Interpreting the information—the process by incoming information is interpreted and assigned meaning • Selective perception—a filtering or screening may occur at various stages of the perceptual process such as exposure, attention, comprehension and retention • Subliminal perception—refers to the ability of an individual to perceive a stimulus that is below the level of conscious awareness. The possibility that marketers could use subliminal advertising to influence consumers at a subconscious level has very strong ethical implications and can be discussed using IMC Perspective 4-1. Alternative Evaluation—After acquiring information during the information search stage the consumer moves to alternative evaluation. At this stage the consumer compares the various brands and services he or she has identified as being capable of solving the consumption problem and satisfying the needs or motives that initiated the decision process. 1. The evoked set is a subset of all the brands of which the consumer is aware and actively considering in the decision process. A goal of marketers is to ensure that their brands are included in the evoked set of consumers.

Chapter 4—Perspectives on Consumer Behavior

2. Evaluative criteria and consequences—Evaluative criteria are the dimensions or attributes of a product or service that are used to compare different alternatives. Consequences are the specific events or outcomes that consumers experience when a product or service is purchased and/or consumed. Functional consequences are tangible and can be experienced directly by consumers. Psychosocial consequences are more intangible, subjective and personal. F. Attitudes—Attitudes refer to a summary construct that represents an individual’s overall feelings or evaluation of an object such as a brand, a company, another person, a retail store, or even an advertisement. Attitudes are one of the most heavily studied concepts in consumer behavior. Marketer’s keen interest in attitudes is based on the assumption that they are related to purchase behavior. Advertising and promotion are used to create favorable attitudes toward new products/services, reinforce or maintain existing favorable attitudes, and/or change negative attitudes. 1. Multiattribute attitude models have been used by marketers to study consumer attitudes. These models view an object such as a product as possessing a number of attributes that provide the basis on which consumers form their attitudes. According to this model consumers have beliefs about specific brand attributes and attach different levels of importance to these attributes. 2. Attitude change strategies—The multiattribute model focuses on the underlying structure or basis of an attitude and provides insight into ways marketers can influence or change consumers’ attitudes such as: • increasing or changing the strength or belief rating of a brand on an important attribute • • •

changing consumers’ perceptions of the importance or value of an attribute adding new attributes to the attitude formation process changing perceptions of belief ratings for a competing brand

G. Integration Processes and Decision Rules—An important aspect of the alternative evaluation stage is the way consumers integrate or combine information to evaluate alternatives and arrive at a purchase decision. Consumers may use formal integration rules which require examination and comparison of alternatives on specific attributes. These include both compensatory and noncompensatory integration strategies. Consumers may also use informal integration rules which are often referred to as heuristics. Promotional planners need to understand consumers’ integration processes and the types of decision rules they might use in a situation. Advertising messages can be constructed to be consistent with these decision rules or to suggest how consumers might go about making a decision. It is also important for marketers to recognize that some purchase decisions are the result of a constructive process that occurs at the time of purchase.

Chapter 4—Perspectives on Consumer Behavior

Purchase Decision—As an outcome of the alternative evaluation stage the consumer may develop a purchase intention or predisposition to buy a certain brand. Once a purchase intention has been made and an intention formed, the consumer must still implement it and make the actual purchase. Many purchase decisions are made on the basis of brand loyalty which is a preference for a particular brand that results in its repeated purchase. Many purchase decisions for nondurable, low involvement items take place in the store and decision and purchase occur almost simultaneously. For these types of decisions top-of-mind awareness of a brand is important as is the influence of packing, shelf displays, point-of-purchase materials, and various sales promotion tools.

Post-purchase Evaluation—The consumer decision process does not end once the product or service has been purchased. After using a product or service the consumer compares the level of performance with expectations. Satisfaction occurs when the consumer’s expectations are either met or exceeded, while dissatisfaction results when performance is below expectations. Another possible outcome of purchase is cognitive dissonance which refers to a feeling of psychological tension or post-purchase doubt a consumer may experience after making a difficult purchase choice. Consumers often look to advertising for supportive information regarding the choice they have made.

Variations in Consumer Decision Making—Consumers do not always engage in all five steps of the purchase decision process nor proceed in the sequence presented. There are three major variations of the consumer decision making process: •

Routine response behavior—Many purchase decisions for low-priced, frequently purchased products are based on a habitual or routine choice process consisting of little more than recognizing the problem, engaging in brief internal search and making the purchase. Marketers of products characterized by routine response behavior must get and/or maintain their brands in the consumers’ evoked set and encourage brand loyalty. Those not in the evoked set must encourage trial and brand switching.

•

Limited problem solving—Often a consumer has a limited amount of experience in purchasing a product or service but in somewhat aware or knowledgeable of the brands available and/or the criteria to use in making a purchase decision. When consumers purchase a product through limited problem solving, marketers should make information available to consumers that will help them make their decision.

•

Extended problem solving—The most complex and detailed form of decision making occurs when consumers have little, if any, knowledge regarding the criteria to use in making a purchase decision or the various brands available. As with limited problem solving, marketers of products characterized by extensive problem solving must provide consumers with detailed information that helps them in making their purchase decision.

Professor Notes

Chapter 4—Perspectives on Consumer Behavior

McGraw-Hill Connect ®: Consumer Decision-Making Process Type of Activity: Timeline Click and Drag Activity Summary: In this activity, students will identify the correct sequence of the various stages in the consumer decisionmaking process. Activity Learning Objective: 04-02 Describe the steps in the consumer decision-making process.

CONCEPT REVIEW: Marketers' success in influencing consumers’ purchase behavior depends in large part on how well they understand consumer behavior and the consumer decision-making process. The decision process is viewed as consisting of stages through which the buyer passes in purchasing a product or service. The decision process involves various internal psychological processes. Understanding the different stages in the consumer decision-making process, and the corresponding psychological processes, will help marketers plan promotions that can influence buyer behavior. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

McGraw-Hill Connect ®: Evaluating Brands of LCD HDTVs Type of Activity: Case Analysis Activity Summary: Sarah is planning to purchase a new LCD HDTV for the living room in her new one-bedroom downtown apartment. This activity will have the students select the best answer for each question related to their understanding of consumer behavior. Activity Learning Objective: 04-03 Explain the influence on consumer behavior of psychological processes like perception and motivation.

Chapter 4—Perspectives on Consumer Behavior

CONCEPT REVIEW: “Attitude Formation” is the internal psychological process that corresponds to the “Alternative Evaluation” stage of the consumer decision-making process. In this stage consumers compare brands in their evoked set, and in doing so, form attitudes towards each of those brands. Researchers and marketers have been using multiattribute attitude models to study consumer attitudes. A multiattribute attitude model views an attitude object (for example, a product or service brand) as a bundle of attributes that provide the basis on which consumers form their attitudes. Difficulty: Hard Bloom’s: Analyze AASCD: Analytical Thinking

III.

THE CONSUMER LEARNING PROCESS

Up to this point of the chapter, the focus on consumer behavior has been from a cognitive orientation. The decision process model looks at the consumer as a problem solver and information processor who engages in a variety of mental activities in evaluating and choosing among alternatives. There are, however, alternative perspectives regarding how consumers acquire the knowledge and experience they use in making purchase decisions. To examine some of these perspectives we examine various approaches to the consumer learning process and their implications for advertising and promotion. Consumer learning is the process by which individuals acquire the purchase and consumption knowledge and experience they apply to future related behavior. A.

Behavioral Learning Theory—Behavioral learning theory emphasizes the role of external or environmental stimuli in causing behavior while minimizing the significance of internal psychological processes. There are two major behavioral learning approaches to learning: 1. Classical conditioning—This approach assumes that learning is essentially an associative process whereby the relationship between an unconditioned stimulus and conditioned stimulus develops through repetition and contiguity. Classical conditioning has many applications in advertising as products and services are become associated with perceptions, images, and emotions that evoke favorable reactions from consumers. 2. Operant conditioning—This approach, which is sometimes called instrumental conditioning, requires the individual to operate or act on some aspect of the environment for learning to occur. Learning occurs as a result of the outcomes or consequences associated with a particular response. Reinforcement refers to a reward or favorable consequences associated with a behavior and are an important element of instrumental conditioning. Many advertisements emphasize the benefits or rewards a consumer will receive from using a product or service or encourage a consumer to use a brand to avoid unpleasant consequences. There are a number of operant conditioning concepts that are particularly relevant to marketers such as schedules of reinforcement and shaping. Shaping is particularly relevant to the introduction of new products through the use of sales promotion tools and techniques.

Chapter 4—Perspectives on Consumer Behavior

Cognitive Learning—Cognitive learning theory has as its basis a problem-solving, information processing, reasoning approach to human behavior. In contrast to behavioral learning theory perspectives, cognitive orientations emphasize internal processing or thinking. Many consumer researchers disagree with the simplified explanations of behavior offered by behavioral learning theories and are more interested in examining the complex mental processes that might underlie consumer decision making. Thus the cognitive approach to studying learning and consumer decision making has dominated the field of consumer behavior. The various processes examined during the discussion of the consumer decision making process are all relevant to a cognitive learning approach to consumer behavior.

Professor Notes

IV.

ENVIRONMENTAL INFLUENCES ON CONSUMER BEHAVIOR

Consumers do not make purchase decisions in isolation as there are various external factors that may influence their purchase decisions. These include: A.

Culture—Culture refers to the complexity of learned meanings, values norms, and customs shared by members of a society. The importance of understanding the impact of culture on consumer behavior has become increasingly important as marketers expand their international marketing efforts.

Subcultures—Subcultures refer to smaller groups or segments in a society that possess similar beliefs, values, norms and patterns of behavior that set them apart form the larger cultural mainstream. Subcultures may be based on age, geography, race, religion, racial, lifestyles, and ethnicity. 1. Social Class—Social class refers to relatively homogenous divisions in a society into which people sharing similar lifestyles, values, norms, interests, and behaviors can be grouped. Social class structures in the United States are generally based on occupational status, educational attainment and source of income. Social class is important to marketers because consumers within various social strata often exhibit similar values, lifestyles and buying behaviors thus providing a natural basis for market segmentation.

Reference Groups—A reference group is a group whose perspective or values are being used by an individual as the basis for his/her judgments, opinions and actions. Marketers utilize reference group influences in developing advertisements by associating, or sometimes disassociating, products, services or certain behaviors with certain types of groups. 1. Family Influences—Many purchased decisions are made by families rather than by individuals. Marketers must understand the various roles in the family decision-making process such as initiator, information provider, influencer, decision maker, purchaser and user or consumer. They must also determine who in the family is responsible for the various roles in 4-8

Chapter 4—Perspectives on Consumer Behavior

the decision-making process so messages can be targeted to them. Messages must also be designed so as to appeal to the appropriate family member(s). D.

Situational Determinants—Another type of external factor that promotional planners must consider is that of situational determinants on consumer behavior. Three types of situational determinants may have an effect—the specific usage situation, the purchase situation, and the communications situation.

Professor Notes

McGraw-Hill Connect ®: Environmental Influences on Consumer Behavior Type of Activity: Click and Drag Activity Summary: In this activity, students will read a scenario about two European fashion store chains, SaGa and RaZa, that are planning to enter new markets. They will then match the various external (or environmental) influences on consumer behavior to the relevant situations in SaGa’s promotional decisions, then match these external influences to examples found in RaZa’s decisions. Activity Learning Objective: 04-05 Explain the influence of external factors like culture and demographic variables.

CONCEPT REVIEW: The consumer does not make purchase decisions in isolation. A number of external factors have been identified that may influence consumer decision-making, such as culture, subcultures, social class, reference groups, and situational determinants. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

ALTERNATIVE APPROACHES TO CONSUMER BEHAVIOR

In the past decade or so, a growing number of consumer researchers have examined this process from a different perspective, often referred to as alternative, interpretive, postmodern, or post positivist. Regardless of the name, alternative ways of attempting to understand consumer behavior assume a crossdisciplinary approach. Those who conduct research from this perspective believe that consumers’ 4-9 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

Chapter 4—Perspectives on Consumer Behavior

decision-making processes do not occur in isolation. Rather, they view consumer decision making as influenced by cultural, linguistic, and historical factors. In examining the significance of communications, they have adopted three perspectives: socio-cultural, structural, and semiotic. Many consumer researchers believe that dross-disciplinary research is better suited for the study of consumers because it takes into account their complexity and multidimensionality. A. New Methodologies - The studies of economic, neurosciences, and cultural anthropology have also had an impact on our understanding of consumer behaviors. New methodologies have led to new insights into consumer’s decision making processes. When considered with psychological research, these alternative approaches help us better understand the impact of communications. B. New Insights - Marketers now have a better understanding of how advertising campaigns become popular and help shape our culture. Some consumer researchers believe that cross-disciplinary research is better suited for the study of consumers because it takes into account their complexity and multidimensionality. When considered along with psychological research, these alternative approaches help us better understand the impact of communications. Professor Notes

Teaching Suggestions Because of the consumer emphasis dictated by the marketing concept, consumer behavior has increased in importance, and has found its way into virtually every aspect of marketing. Of course, advertising and promotion are no exception. As a result, it is very important for the student to understand that advertising and promotion strategies are designed for the purpose of influencing customer behavior. Thus, it is important for promotional planners to have some understanding of consumer behavior including the way consumers relate to products and services, the goals and motives they seek to achieve and satisfy, and the process by which they make purchase decisions. You should emphasize that the success marketers have in influencing the purchase behavior of their target customers depends in large part on how well they understand their purchase patterns and behavior. This is one of the longer chapters in the text as it covers an extensive amount of material. Some students may have covered some of this material in a basic marketing or consumer behavior class. However, this chapter will still be valuable to them since it discusses how this material is used in the development of advertising and promotional programs. You may wish to divide the topics into two lectures to reduce the possibility of information overload.

Answers to Discussion Questions

1. Neuroscience has been attacked by many as an invasion of privacy. Describe how marketers are using neuroscience research and discuss the pros and cons of this ethical argument. (LO 4-4) Using technologies originally developed for the medical sciences, marketers are now studying physiological responses to advertising. By scanning the brain and observing chemical activity or 4-10 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

Chapter 4—Perspectives on Consumer Behavior

changes in the magnetic fields of the brain, these researchers are observing how consumers respond to ads or even make purchase decisions. These methodologies have been used to view consumers’ responses to brand names, advertisements, and even spokespersons. In addition, the studies show promise for determining store layouts, and assessing consumers’ opinions of innovations. Given that these responses are involuntary responses, it is argued that the responses are more credible as they are uncontrollable. Thus, while one might respond to a survey with a socially desirable response, or one that reflects a testing effect, involuntary responses are not subject to these biases. The use of neuroscience—a brain scan imaging technique that maps physiological reactions within the mind—has had the majority of its applications in the medical field. Now, marketers have discovered that there are research applications in consumer behavior as well. By mapping viewers’ physiological reactions to commercials and brands, scientists can help marketers better understand consumers’ behaviors and assist them in the development of more effective marketing strategies. For marketers, the use of neuroscience allows them to more effectively design ads, recognize the impact that brands have on consumers. Advertisers claim that this will allow them to create more effective advertising, break through the clutter of bland commercials, and ultimately have a positive effect on users’ businesses as well as benefiting consumers by giving them what they want—not what advertisers think they want. Boring and tedious advertising, for example, will be reduced or eliminated, based on more effective research than the traditional methods previously employed. Traditional methods, neuroscience using marketers argue, are obsolete and do not directly benefit the advertiser or the consumer. Just like everything else, they say, “you can’t stop progress”. Opponents of the use of neurosciences have a different perspective. Calling the technique “Orwellian”, they contend that probing our minds is an unfair invasion of privacy. While some argue that the technique does not work, and that the results are being blown out of proportion, others are concerned that they work too well. If so, there is a potential that advertising could become too effective, and that consumers could be manipulated –a similar argument to those provided by opponents of subliminal advertising usage. At particular risk, they say, are unsuspecting children, though increased consumption of alcohol, cigarettes, and gambling may also result. They see the research as contributing to the social ills of societies, through the manipulation of effective marketing strategies.

2. The chapter discusses marketers' use of multiattribute attitude models. Explain what a multiattribute model is and how a marketer might use it in an attempt to reach the consumer. (LO 4-3)

A multiattribute attitude model views an attitude toward an object, such as a product or brand, as possessing a number of attributes that provide the basis on which consumers form their attitudes. According to this model, consumers have beliefs about specific brand attributes and attach different levels of importance to these attributes.

AB = ∑ Bi x Ei i=1 where AB = attitude toward a brand Bi = beliefs about the brand’s performance on attribute i

Chapter 4—Perspectives on Consumer Behavior

Ei = importance attached to attribute i n = number of attributes considered For example, a consumer may have beliefs (Bi) about various brands of toothpaste on certain attributes. One brand may be perceived as having fluoride and thus preventing cavities, tasting good, and helping control tartar buildup. Another brand may not be perceived as having these attributes, but consumers may believe it performs well on other attributes such as freshening breath and whitening teeth. To predict attitudes, one must know how much importance consumers attach to each of these attributes (Ei). For example, parents purchasing toothpaste for their children may prefer a brand that performs well on cavity prevention, a preference that leads to a more favorable attitude toward the first brand. Teenagers and young adults may prefer a brand that freshens breath. Marketers can change attitudes by focusing on the beliefs and/or the importance of these beliefs.

3. Explain what is meant by cognitive dissonance. Why is this concept important to marketers? (LO 4-3)

Cognitive dissonance is a feeling of psychological tension or postpurchase doubt that a consumer experiences after making a difficult purchase choice. Dissonance is more likely to occur in important decisions where the consumer must choose among close alternatives (especially if the unchosen alternative has unique or desirable features that the selected alternative does not have). Consumers experiencing cognitive dissonance may use a number of strategies to attempt to reduce it. They may seek out reassurance and opinions from others to confirm the wisdom of their purchase decision, lower their attitudes or opinions of the unchosen alternative, deny or distort any information that does not support the choice they made, or look for information that does support their choice. An important source of supportive information is advertising as consumers tend to be more attentive to advertising for the brand they have chosen. Thus, it may be important for companies to advertise to reinforce consumer decisions to purchase their brands. 4. In attempting to segment the market, marketers often will segment on the basis of subcultures. Citing the chapter, explain the advantages and potential pitfalls of this strategy. (LO 4-5) Cultural norms and values offer direction and guidance to members of a society in all aspects of their lives, including their consumption behavior. It is becoming increasingly important to study the impact of cultures and subcultures on consumer behavior as marketers expand their international marketing efforts. Each country has certain cultural traditions, customs, and values that marketers must understand as they develop marketing programs. Each culture may consist of a number of subcultures (Millennials, Generations, etc.) Marketers must also be aware of changes that may be occurring in a particular subculture and the implications of these changes for their advertising and promotional strategies and programs. The American culture continually goes through many changes that have direct implications for advertising. Marketing researchers monitor these changes and their impact on the ways companies market their products and services. The three largest racial/ethnic subcultures in the U.S. are African Americans, Hispanics, and various Asian groups. These racial/ethnic subcultures are important to marketers because of their size,

Chapter 4—Perspectives on Consumer Behavior

growth, purchasing power, and distinct purchasing patterns. Marketers develop specific marketing programs for various products and services for these target markets. 5. Figure 4–1 presents a basic model of consumer decision making. Describe the model, and explain what happens at each step of the process. (LO 4-3) a. The first stage in the consumer decision-making process is problem recognition, which occurs when the consumer perceives a need and becomes motivated to solve the problem. The problem recognition stage initiates the subsequent decision processes. b. The second stage in the consumer decision-making process is information search. Once consumers perceive a problem or need that can be satisfied by the purchase of a product or service, they begin to search for information needed to make a purchase decision. c. After acquiring information during the information search stage of the decision process, the consumer moves to alternative evaluation. In this stage, the consumer compares the various brands or products and services he or she has identified as being capable of solving the consumption problem and satisfying the needs or motives that initiated the decision process. This typically results in an evoked set of brands to consider. d. As an outcome of the alternative evaluation stage, the consumer may engage in the purchase decision or predisposition to buy a certain brand. Purchase intentions are generally based on a matching of purchase motives with attributes or characteristics of brands under consideration. Their formation involves many of the personal subprocesses discussed in this chapter, including motivation, perception, attitude formation, and integration. e. the consumer decision process does not end with the purchase. After using the product or service, the consumer compares the level of performance with expectations and is either satisfied or dissatisfied, storing this information for the future. 6. Consumers experience different forms of problem recognition. Explain each type of problem recognition and give an example of a purchase of this type. (LO 4-2)

As noted in the text, problem recognition occurs when the consumers’ actual and ideal states are different. There are a variety of reasons this may occur: Out of stock—perhaps the simplest form of problem recognition occurs when one is out of a needed product—for example, being out of salt or sugar; Dissatisfaction—the product or service no longer meets consumer’s expectations. For example, the product or service provider doesn’t perform to the degree wanted, prices increase, leading to lesser satisfaction, etc. New needs or wants—sometimes changes in one’s lifestyle—finding a new job, having a baby, etc. may lead to the creation of new needs or wants (buying a new suit, diapers, etc.) Related products/purchases - purchasing a new computer will require purchasing additional items. For example, software, a laptop carrying bag, etc. Companies have become quite adept at crossselling additional add-on purchases.

Chapter 4—Perspectives on Consumer Behavior

Marketer induced problem recognition- By changing styles or models, adding upgrades, etc., marketers can make one feel like they need to make a purchase. Apple is quite good at doing this as they keep modifying their products to make one want the “latest and greatest.” New products- The introduction of a new product—for example, a new technology—will often lead to problem recognition. Products that do things better, faster or less expensively often lead to demand by consumers. 7. The chapter discusses a variety of research methodologies to examine consumers’ behaviors. Discuss some of these, focusing on the advantages and disadvantages of each. (LO 4-1)

A variety of research methodologies have been employed to understand consumer behaviors. As noted in the chapter, these can be grouped as lab and field methods. Lab methods provide for control but lack generalizability, while field methods sacrifice control to be able to generalize. Depending on the objective of the research study, the researcher will focus more attention on one of these methods, but may often include a variety of types of research. For example, lab methods like brain wave research, EEG, eye tracking, etc. will provide the researcher with a good understanding of the impact specific stimuli may have on the consumer. Focus groups, in-depth interviewing and other similar types of lab methods will provide insights that may not have been previously considered, as well as details and factors that are discovered as a result of these methods of collecting information. Survey research, on the other hand, will provide more detail into the number of persons who may feel a particular way, hold a specific attitude, etc. While the researcher sacrifices some control, s/he gains more quantitative estimates as to how many consumers feel a certain way. Observational field techniques can also provide more naturalistic settings in which to collect data outside of a lab, without providing numerical estimates, but rather providing a more realistic perspective.

8. How might one’s social class influence his or her consumer behaviors? Give examples of products and/or services that might be influenced by social class standing. (LO 4-5) Different social classes have distinct purchasing behaviors. Besides the fact that income (as part of the social class index) allows for the purchase of different products and services, social classes develop different buying characteristics as a result of social interactions. Studies have shown that lower social classes tend to take family vacations by automobile, often visiting their friends and or families and staying with them rather than in a hotel. The kinds of products/services purchased also differs, with luxury items (obviously) being purchased more by upper classes, as is eating out, the brands bought, etc. The area where homes are purchased, the and colleges and universities attended are often different. Even the sports in which social classes view and or participate may differ, with upper classes preferring golf and tennis, while those in lower classes preferring bowling and pro football. 9. Explain the differences between functional and psychosocial consequences. Give examples of advertisements that focus on both types. (LO 4-3)

Chapter 4—Perspectives on Consumer Behavior

Functional consequences can be thought of as those that will occur when something fails or does not perform properly. For example, if one purchases a product that does not work well (a computer printer that breaks frequently) the negative outcomes are easily noticeable and lead to problems well beyond negative thoughts. For example, Zerex anti-freeze has long used advertisements and commercials that depict autos not starting, overheating, etc. when their product is not used. Psychosocial consequences, while not necessarily harmful in a physical sense, create mental attitudes and or feelings. For example, colognes and perfumes create a sense of attractiveness, and security from smelling bad. I may choose the wrong shirt to wear, and while it does not lead to functional consequences (unless it is cold out!) if I don’t look good in it, or it doesn’t match, it may lead to an emotional impact or consequence. Perfumes and colognes are good examples of products that appeal to psychosocial consequences. Functional attributes may be stress through tires (longer lasting, no blowouts), computer products (speed and reliability), etc. Some products may use both (cars, Michelin tires demonstrating reliability, improved gas mileage, and safety, etc.).

10. Marketers recognize that subcultures have an influence on consumer behaviors. Give examples of how various subcultures may impact one’s buying decision. (LO 4-5) Subcultures are smaller groups of people within a culture sharing similar beliefs, values, norms, and patterns of behavior that set them apart from other groups. In chapter 2 and this chapter we have discussed millennials, Hispanics, and demographic subcultures (among others). In the U.S. there are the Latino subculture, the various geographic subcultures, age subcultures like Generation X and Generation Y, etc. These various groups may exhibit many of the same characteristics which impact their purchase behaviors. Generation X and Y may be different in their lifestyles and purchase behaviors. Millennials have been shown to be more thrifty, digitally involved, and enamored with social media. Those living in the South are often different than those in the Midwest, in respect to lifestyles, values, etc. Advertising agencies have sometimes found it necessary to have field offices in various regions to ensure that their ads and commercials are “subculturally correct”—i.e., not out of touch with the geographic subculture. As far back as 1981 Joel Garreau wrote a book on the “Nine Nations of North America” contending that the U.S. is not one country, but a combination of a variety of subcultures. The nine nations had differentiating aspects that—while still Americans—led them to behave differently. Subcultural differences may lead to different consumer behaviors. From the foods we eat, to the activities we engage in, to values and attitudes and voting behaviors (blue and red nations) astute marketers recognize these differences.

Additional Discussion Questions (not in text) 11. Why is understanding consumer behavior of such importance to marketers? Give examples of how marketers apply their understanding of consumer behavior to their marketing strategies. (LO 4-1)

Chapter 4—Perspectives on Consumer Behavior

When marketers moved from a sales orientation to a marketing orientation, it became necessary to have a more in-depth understanding of the consumer. Rather that developing products and then trying to push them onto consumers, marketers shifted their focus more to understanding consumers’ needs and wants and developing products and services to satisfy them. As the field of consumer behavior has expanded, marketer’s have increased their efforts by including different forms of psychology (social, physiological, etc.) into their studies as well as sociology, cultural anthropology and geography, among others. Simply put, the more we can understand consumers, the better we can successfully develop products and services to better meet their needs and wants. An excellent example of this lies in the fact that many of today’s consumers are “money rich and time poor.” That means that they have disposable income, but less time as a result of their busy lifestyles, changing family structures, etc. By understanding this, marketers have been able to better develop products and services that meet the new needs of consumers, and a profit to them. (LO 4-5) 12. Recently there has been a great deal of attention paid to environmental issues resulting in a number of companies embarking on “green” campaigns. Discuss some of the reasons as to why companies are developing such campaigns. Do you think these campaigns will change consumers’ attitudes toward the environment and/or these companies? (LO 4-5) It seems these days that everyone is trying to convince the consumer that they are green. From the oil companies to beverage companies, green is in. There is even a green cable TV network devoted to showing interested parties how to be green. Of course a large part of the green movement comes from the realization that the world must begin to take care of the environment. Global warning is no longer a potential, it is reality. This, of course, will cause many consumers to consider their actions and their options. For many, green has become a cause, not just a convenience. More people now recycle. More think about the impact their consuming behaviors have on the market (see the bottled water example in the chapter), and many more try to conserve. Given the choice between a product that is good or bad for the environment, many more are taking this into consideration in their purchase decisions. Companies have joined the green crusade as well—some seeing it as a marketing opportunity, others a necessity, and still others because they are genuinely concerned. Companies now realize it is not good to be perceived as unfriendly to the environment, while others see an opportunity to position themselves as such to gain a competitive edge. The degree to which they are actually “green” varies as well. Clearly, the appearance of being green will have an impact on consumers’ attitudes. For those who want the companies to be environmentally conscious, such actions will reinforce their positive attitudes toward these companies. At the same time, not being concerned will reflect negatively on those companies. While having green attitudes does not always translate into buying green, one can only expect that it will certainly have an impact, particularly given a choice of options. 13. The text discusses the use of cultural anthropology to understand consumer behaviors. Why is it necessary for marketers to use alternative approaches to consumer behavior? (LO 4-6) Once marketers recognized the necessity of understanding consumers’ behaviors and the fact that not all decisions are based on rational economic bases, they turned to psychology to gain insights. The early days of research in consumer behavior, therefore, was dominated by psychological research. As

Chapter 4—Perspectives on Consumer Behavior

consumer behavior matured, those in the discipline recognized the fact that external factors such as social class, family, cultural and subcultural factors also influenced the purchase decision process. Research from different areas of study such as sociology and anthropology provided valuable insights. The groundbreaking research of a French medical anthropologist, G. Clotaire Rapaille, who employed a research methodology known as archetype research to assist Chrysler (in the design of the PT Cruiser) and other clients demonstrated the contribution value and applicability of these other areas of research. Cultural anthropology, which involves the observation of people in their natural environments, has also been proven to be useful for understanding consumer behaviors (see the AXE example in the text). While much of the research conducted in psychology requires a controlled environment for conducting experiments and/or observing consumer behaviors, ethnography—a methodology employed by cultural anthropologists—watches the behaviors of individuals and groups as they “act normal” in their day to day environments. As a result, some of the testing effects and criticisms of artificial environments are eliminated. Further, researchers know that situational and environmental factors may play an important role on consumer decision making, and this area of research attempts to take into account these factors. As consumer behavior studies continue to advance, new disciplines, theories and methodologies will offer valuable insights into the reasons why consumers purchase, how they do so, and the impact of their purchases. Cultural anthropology is just one more contributor to this process.

IMC Exercise Have the class go to YouTube and find commercials that reflect various concepts of consumer behavior discussed in the text such as psychological theories, and/or those that depict stages of consumer decision making. They should explain how the ads/commercials they have selected relate to a specific consumer behavior concept or theory and/or how the ad is designed to appeal to the consumer.

Chapter 05—The Communication Process

CHAPTER 5 THE COMMUNICATION PROCESS Chapter Overview The purpose of this chapter is to examine the communication process by introducing the student to the fundamentals of communication and examining various models and perspectives of how consumers respond to advertising messages. A basic model of communication is presented which introduces the controllable elements of the communications process—source, message, channel and receiver. Source, message and channel factors are discussed in Chapter 6 and the remainder of this chapter is devoted to examining the target audience or receiver and the process by which consumers respond to advertising and other promotional messages. The growing importance of word-of-mouth influence is discussed and how it has led to the increased use of viral marketing techniques is covered in the chapter. The response process is analyzed in terms of traditional response hierarchy models as well as alternative response models. Attention is given to comparing alternative response models such as the standard learning versus low involvement models. The Social Consumer Decision Journey is used as a framework to discuss how the environment in which consumers evaluate brands and make purchase decisions has changed as digital and social media become more pervasive. The chapter also examines the cognitive response approach and elaboration likelihood model to show how more detailed analyses can be made of receivers’ cognitive processing of marketing communications.

Learning Objectives 1. Describe the communication process and its role in IMC. 2. Describe the basic model of the communication process. 3. Discuss the role of word-of mouth influence and viral marketing. 4. Analyze receivers' responses to marketing communications and their implications for promotional planning and strategy. 5. Describe the influence of social media on the consumer decision process. 6. Discuss consumers' cognitive processing of marketing communications.

Chapter and Lecture Outline I.

INTRODUCTION AND THE NATURE OF COMMUNICATIONS

A commonality shared by all elements of the promotional mix is that their function is to communicate. Thus, it is important that advertising and promotional planners have an understanding of the communication process. This chapter reviews the fundamentals of communication and examines various perspectives regarding how consumers respond to promotional messages. Communication has been variously defined as the “passing of information,” the “exchange of ideas,” or the “process of establishing a commonness or oneness of thought between a sender and a receiver.” For communication to occur there must be some common thinking or ground between the two parties and a passing of information. The communications process is often very complex with success depending on many factors such as the nature of the message, audience interpretation and the environment in which it is received along with the receiver’s perception of the source and medium. The challenge of developing effective marketing communications becomes particularly evident when companies are developing

Chapter 05—The Communication Process

advertising and promotional messages for foreign markets or for certain ethnic markets. Global Perspective 5-1 discusses some interesting examples of communication problems that have been encountered by marketers who are promoting their products and services in international markets. You may want to add some of your own examples to those discussed here. Professor Notes

II.

A BASIC MODEL OF COMMUNICATION

Over the years a basic model of communications has evolved that represents the various elements of the communications process. This model is shown as Figure 5-1 in the text. The elements of the model include: A.

Source/Encoding—The sender or source of a communication is the person or organization that has information to share with another person or group. It should be noted that the source could be an individual (e.g., salesperson or hired spokesperson) or a nonpersonal entity such as the corporation or organization itself. The receivers’ perception of the source influences the manner in which the communication is received, interpreted and responded to. Encoding is the process of putting together thoughts, ideas and information into a symbolic form to communicate a message. The sender’s goal is to encode the message in such a manner so as to ensure that it will be understood by the receiver.

Message—The encoding process leads to the development of a message that contains the information or meaning the source or sender hopes to convey. Messages can take a variety of forms and may include symbolic forms or signs. The message must be put into a transmittable form that is appropriate for the channel of communication being used. Advertising messages range from simply written words or copy that will be read or heard as a radio message to the expensive production of elaborate television commercials with a great deal of visual impact and imagery.

Channel—The channel is the method or medium by which the communication travels from source or sender to receiver. At the broadest level, channels of communication exist as two types: •

•

Nonpersonal channels are those that carry a message without involving interpersonal contact between sender and receiver. These channels are often referred to as the mass media as messages transmitted through them are sent to many individuals at one time. The two major categories of nonpersonal channels are print and broadcast media. Personal channels involve direct interpersonal contact with target individuals or groups. For example, a salesperson serves as a personal channel of communication when delivering a sales presentation. The text discusses buzz marketing whereby companies work to generate favorable word-of-mouth communications for their company and/or brands. It is important to note that word-of-mouth (WOM) can be a very powerful form of communication and has been used by markets for many years. However, many companies such as Procter & Gamble have developed more organized programs (such as Vocalpoint) to generate buzz for their brands, as is discussed in the chapter.

Chapter 05—The Communication Process

•

Marketers have become much more sophisticated, organized and systematic in the ways they go about encouraging speak favorably about their company, brand, organization or issue and to recommend it to their social network. Viral marketing refers to the act of propagating marketing-relevant messages through the help and cooperation of individual consumers. Many marketers, along with their advertising, PR, and/or digital agencies use a variety of tools and techniques to generate viral buzz about their brands, many of which involve the use of online communities and social media such as Facebook, Twitter, Google+, and YouTube. Seeding is an important aspect of viral marketing and involves identifying and choosing an initial group of consumers who be used to start the diffusion or spreading of a message. Viral marketing techniques should be integrated with the IMC program as research by the Keller Fay Group has shown that nearly 90 percent of conversations about products, services, and brands take place off-line and face-to-face interactions account for the vast majority of word-of-mouth communications. The role of advertising in WOM is very important, as Keller Fay has found that a quarter of all consumer conversations about a brand involve discussions about advertising. Concern has been expressed over the use of buzz and viral marketing techniques as they become more prevalent. The Word of Mouth Marketing Association was formed in 2004 to promote and improve the use of word-of-mouth marketing and protect consumers and the industry by providing ethical guidelines for its use.

Receiver/Decoding—The receiver is the person(s) with whom the sender shares thoughts or information. Receivers are generally viewed as the consumers in the target audience targeted by the firm’s marketing and promotional program. Decoding is the process of transforming and interpreting the sender’s message back into thought and is heavily influenced by the receiver’s frame of reference or field of experience. Effective communication is more likely when common ground or shared meaning or understanding exists or has been established between the sender and receiver. Digital and Social Media Perspective 5-1 discusses how many digital media is creating a new type of ageism in the marketing communications industry as many companies, as well as agencies, prefer to hire younger works whom they view as more digital savvy than older people.

Noise—Throughout the communications process the message is subject to noise, which refers to factors that can distort or interfere with adequate reception or comprehension. Noise can occur during the encoding, transmission, or decoding of a message. Noise can also occur because of a lack of common ground or understanding between the sender and receiver. Over the past decade a new type of noise has become prevalent in the television-viewing environment as many viewers now multitask on their laptops, tablets and smartphones while watching TV.

Response/Feedback—Response refers to the reaction the receiver has after seeing, hearing and/or reading the message. These responses can range from non-observable actions such as storing information in memory to taking immediate actions such as ordering a product seen in a direct response ad. Feedback is the part of the receiver’s response that is communicated back to the sender and takes a variety of forms. Feedback provides the sender with a way of monitoring how the message is being decoded and received by the target audience.

Professor Notes

Chapter 05—The Communication Process

III.

ANALYZING THE RECEIVER

To communicate effectively, marketers must have an understanding of who their target audience is and how they need to be communicated with to influence their decision-making process. The relevant audience must be identified as well as the process consumers go through in responding to a promotional message. Understanding the target audience and their response process serves as an important foundation for evaluating decisions regarding the controllable communication variables (source, message, and channel) that are covered in Chapter 6. A.

Identifying the Target Audience—The marketing communications process begins with the identification of the audience that will be the focus of the firm’s advertising and promotional efforts. The target audience can be viewed as consisting of: • Individuals—The target audience for some products and services can be viewed as consisting of individuals for whom communications must be specifically tailored. Life insurance, financial services, and real estate are often promoted through individualized sales presentations. • Group Audiences—A second level of audience aggregation is the group. Organizational purchasing often involves buying centers or committees and requires communication with multiple parties. Decision making in the consumer market can include a group when various family members become involved in the purchase process. • Market Segments—Marketers look for customers who have similar needs and wants and thus represent market segments that can be reached via the same basic communication strategy. Very small, well-defined groups of customers are often referred to as market niches and can usually be reached through highly targeted media such as direct mail. • Mass Audience—The situation facing most marketers is that of communicating with large numbers of consumers or mass audiences through one-way communication via the mass media.

Professor Notes

IV.

THE RESPONSE PROCESS

An important aspect of developing effective communication involves having an understanding of the response process the receiver may go through and how the promotional efforts of the marketer might influence this process. This section begins by covering four traditional response hierarchy models and then discussing alternative models of the response process. A.

Traditional Response Hierarchy Models—Figure 5-5 in the text shows four of the best-known response hierarchy models. These models are discussed giving attention to their origin and implications and include: • The AIDA Model Attention→ interest→ desire→action 5-4

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• • •

The Hierarchy-of-Effects Model awareness→knowledge→liking→preference→conviction→purchase The Innovation-Adoption Model Awareness→ interest→ evaluation→ trial→ adoption The Information-Processing Model Presentation→ attention→ comprehension→ yielding→ retention→ behavior

McGraw-Hill Connect ®: Traditional Response Hierarchy Models Type of Activity: Click and Drag Activity Summary: PlanRight is a financial services company planning to launch its own app. The company has hired a promotions firm to help make strategic promotional decisions. The firm decides to recruit a group of consumers in PlanRight's target market and expose them to a series of IMC elements. Students will match the various stages in two traditional response hierarchy models—the AIDA model and the Hierarchy of Effects Model—with the responses of target consumers to the IMC mix. Activity Learning Objective: 05-03 Discuss the role of word-of-mouth influence and viral marketing.

CONCEPT REVIEW: Consumers may pass through various stages of response, from a state of not being aware of a company or product to actual purchase behavior. Traditional response hierarchy models follow a hierarchy of moving from the cognitive stage, to the affective stage and then to the behavioral stage. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking 1.

Implications of the traditional hierarchy models—The hierarchy models are useful to promotional planners from several perspectives. They delineate the series of steps or stages potential purchasers often must be taken through to move them from a state of no or little awareness to the point where they are ready to purchase. The hierarchy models can also be useful as “intermediate” measures of communication effectiveness. Knowing where potential buyers are with respect to the various stages of the hierarchy helps the marketers know the specific communication task that must be performed. The text discusses how marketers of high-tech products are developing profiles of digital adopters who are among the first to use various digital products and services. Evaluating traditional response hierarchy models—All four of these models view the response process as consisting of movement through a sequence of stages and assume a similar ordering whereby cognitive development precedes affective reaction, which in turn precedes behavior. While this is a logical progression that may be accurate in many situations, the response sequence may not always operate this way. Thus, attention needs to be given to alternative orderings of the response hierarchy.

Chapter 05—The Communication Process

Alternative Response Hierarchy Models—Research and theorizing over the past two decades has led to a questioning of the cognitive → affective → conative sequence of the response process and has resulted in the development of alternative orderings of these stages. Michael Ray’s “three-orders” model of information processing, which is shown in Figure 5-7 of the text, identifies three alternative orderings of these stages based on perceived product differentiation and product involvement. These include the: 1. Standard learning hierarchy—In many purchase situations consumers go through the response process in the manner depicted by the traditional communications models or a “learn → feel → do” sequence or hierarchy. Under this hierarchy, the receiver is viewed as an active participant in the communications process who actively seeks or gathers information through “active learning.” 2. Dissonance/attribution hierarchy—In some situations consumers may behave first then develop attitudes or feelings as a result of their behavior and learn or process information that supports their attitudes and behavior. The dissonance or attributional hierarchy consists of a “do → feel → learn” sequence. This hierarchy may occur when consumers are trying to reduce postpurchase dissonance or anxiety that results from doubt or concern over a purchase. This dissonance reduction process involves “selective learning” whereby the receiver seeks information that supports the choice made and avoids information that does not bolster the wisdom of the decision. 3. Low-involvement hierarchy—The low involvement hierarchy is thought to characterize situations of low consumer involvement in the purchase process. The response hierarchy under low involvement consists of a “learn → do → feel” sequence and the receiver is viewed as engaging in “passive learning” and “random information catching” rather than active information seeking. The Social Consumer Decision Journey model shown in Figure 5-8 has four basic stages: consider, evaluate, buy, and enjoy-advocate-bond. This framework recognizes that consumers connect with large numbers of brands through digital and social media channels, which are a unique component of the consumer decision journey as they are the only form of marketing that can touch and influence consumers at each and every stage. Marketers often allocate much of their IMC budget to influencing consumers at the consider and buy stages. However, consideration should also be given to influencing them during the evaluate and enjoy-advocate-bond stages, as the most important incentive to buy may be another person’s advocacy or recommendation. It is important for marketers to focus on the portion of their IMC budget allocated to paid or “working” media as well as owned media that a brand controls (websites, Facebook, and Twitter pages) and earned media generated through various forms of social media. A major study by the Advertising Research Foundation (ARF) examined how digital and social media are used in the purchase decision process and how consumers turn to them to help manage this process. One of the conclusions of this study was that consumers are “always on” as they are constantly considering and evaluating the various providers of products and services. Another important conclusion from this study, as well as research conducted by McKinsey & Company’s Global Digital Marketing Strategy practice group, is that consumers do not make purchase decisions in the linear manner depicted by the various traditional hierarchy of effects and purchase funnel models. Researchers at McKinsey have proposed a “consumer decision journey” as a framework for understanding how consumers interact with companies and brands during the purchase decision process.

Professor Notes

Chapter 05—The Communication Process

McGraw-Hill Connect ®: The FCB Planning Model and Zukatti Motorcycles Type of Activity: Decision Generator Activity Summary: Zukatti is an Italian brand of motorcycles that is getting ready to launch an ad campaign for its latest models. The brand is well known for its Italian design and superior performance. This activity will have the students select the best answer for each question related to their marketing strategy. Activity Learning Objective: 05-03 Discuss the role of word-of-mouth influence and viral marketing.

CONCEPT REVIEW: The FCB Planning Model is based on traditional response theories and their variants as well as research on high and low involvement. There is an added dimension of thinking versus feeling processing at each involvement level. Also known as the FCB Grid, this model delineates four primary advertising planning strategies—informative, affective, habit formation and satisfaction—along with the most appropriate variant of the alternative response hierarchies. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

VII.

COGNITIVE PROCESSING OF COMMUNICATIONS

For many years, the hierarchical response models were primary focus of approaches to studying receivers’ responses to marketing communications. However, the inability of these approaches to explain what might be causing or determining these reactions to the message has led to an interest in understanding the nature of cognitive processing of advertising and other persuasive communications. Cognitive processing concerns how external information (such as an advertising message) is transformed into meanings or patterns of thought and how these meanings are combined to form judgments. Several approaches and models have been developed to examine the nature of consumers’ cognitive processing of advertising messages. A. The Cognitive Response Approach—A commonly used method for examining consumers cognitive processing of advertising messages is through the assessment of their cognitive responses or thoughts that occur to them while reading, viewing, and/or hearing the communication. The focus of this approach, which is commonly used by academic researchers as well as practitioners, is to determine the types of thought evoked by an advertising message and how these responses relate to traditional “outcome” measures such as attitude toward the ad, brand attitudes and purchase intention. The model shown in Figure 5-9 depicts the three basic categories of cognitive responses identified by researchers and their relationship to attitude and intention constructs. These include:

Chapter 05—The Communication Process

1. Product message thoughts—counterarguments and support arguments 2. Source-oriented thoughts—source derogations and source bolsters 3. Ad execution thoughts—thoughts individuals have toward the ad itself. These thoughts can be either positive or negative and are important because they are related to attitude toward the ad, which represents the receivers’ feelings of favorability, or unfavorability toward the ad. A→ ad is an important construct as the consumers’ affective reactions to a message are an important determinant of advertising effectiveness. B.

The Elaboration Likelihood Model—The Elaboration Likelihood Model (ELM) developed by Cacioppo and Petty has become a very popular way of analyzing differences in the way consumers process and respond to persuasive messages. The ELM is presented in Figure 5-10 of the text. According to the ELM, there are two basic processes or routes to persuasion, which are based on motivation and ability to process the message. Under the central route to persuasion, the receiver is viewed as a very active and involved participant in the communications process whose ability and motivation to attend, comprehend and evaluate a message are very high. Under the peripheral route to persuasion, the receiver is viewed as lacking motivation or ability to process information and is not likely to engage in detailed cognitive processing. The receiver may use “peripheral cues” such as focusing on the message source or executional elements of the ad rather than message content. The Peak antifreeze ad featuring female race car driver Danica Patrick is a good example of a message that contains several peripheral cues such as an attractive celebrity and appealing visual imagery that is consistent with the brand positioning.

Professor Notes

McGraw-Hill Connect ®: The Stay Smart Campaign for Holiday Inn Express Type of Activity: Video Case Activity Summary: Fallon Advertising's Stay Smart campaign for Holiday Inn Express started with understanding who the target consumer was, and making the right creative and media choices as part of the advertising strategy. The video gives you a summary of the advertising process and the strategic choices that Fallon made for the brand. Students will watch a short video to see if they can identify what makes the workers do what they do. Activity Learning Objective: 05-04 Analyze receivers' responses to marketing communications and their implications for promotional planning and strategy.

CONCEPT REVIEW: The Elaboration Likelihood Model, developed by Richard Petty and John Cacioppo, explains the process by which persuasive communications lead to persuasion by influencing attitudes. According to this model, the attitudes influence process depends on the amount and nature of elaboration or message processing.

Chapter 05—The Communication Process

Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

V. SUMMARIZING THE RESPONSE PROCESS AND THE EFFECTS OF ADVERTISING Professors Demetrios Vakratsas and Tim Ambler reviewed more than 250 journal articles and books to better understand how advertising works and affects the consumer. They concluded that there is little support for the concept of a hierarchy of effects in the sense of a temporal sequence. They note that in trying to understand the response process and the way it works there are three critical intermediate effects between advertising and purchase including cognition, affect and experience. They also conclude that individual responses to advertising are mediated or filtered by factors such as motivation and ability to process information, which can radically alter or change the individual’s response to advertising. They suggest that the effects of advertising should be evaluated using these three dimensions with some intermediate variables being more important than others. This suggests that marketers should focus on knowledge, liking and trial or usage as critical variables that advertising may affect. Attention should be given to how advertising and other forms of promotion may affect these variables in various product market situations. While a number of issues regarding hierarchy of effects models have been noted, they are still of value to advertising practice and research as they provide insight into whether advertising strategies need to focus on impacting cognition, affect and/or behavior. It has also been noted that consideration should be given to how all of the various IMC tools, not just advertising, influence the response hierarchy. The chapter concludes with a discussion over the debate over the value of hierarchical response models of advertising effects. While a number of issues and concerns over the use of hierarchy of effects models have been noted, many feel that they are still of value to advertising practice and research. They provide insight into whether advertising strategies need to focus on influencing cognition, affect, and/or behavior. It is important to note that marketing communications programs include more than just media advertising and consideration needs to be given to how other components of the IMC program such as sales promotion activities, publicity, online, and direct marketing activities, and event sponsorships can move consumer through the response hierarchy.

Professor Notes

Chapter 05—The Communication Process

Teaching Suggestions This chapter is designed to introduce the student to the fundamentals of communication and is the first of two chapters devoted to this topic. The opening vignette to the chapter discusses the viral campaign “Like a Girl” used by Proctor and Gamble for its Always brand of feminine hygiene products. This campaign set out to redefine the confidence of young girls and change the meaning of the “like a girl” phrase from an insult, which many women internalize to mean weakness and vanity, into a term of empowerment This is the most theoretical chapter in the text. However, we feel this material is very important as it presents the basic elements of communication and provides a detailed examination of the process by which consumers respond to marketing communications. The material also provides the student with a foundation that is important for subsequent chapters of the text. For example, the discussion of controllable elements of the communications process in Chapter 6 (source, message and channel factors) builds on this chapter. We feel it is very important to stress to the student that communication is the common goal of all promotional mix elements. They must have a solid foundation in this area if they are to evaluate other areas of advertising and promotion such as creative strategy, media strategy and alternatives and effectiveness measurement. We have found that it is helpful to emphasize to students that decisions regarding the controllable elements of the communication program, such as selecting a source, developing a message strategy and appeal, and selecting advertising media, cannot be made unless the promotional planner has some insight into how members of the target audience will respond to these factors. Students need to have some understanding of the traditional hierarchical models including their implications and limitations. It is also important to point out the limitations of the traditional cognitive →affective → conative sequence assumed by these models and to cover the alternative response hierarchies. After reviewing the alternative models of the response process, it should be apparent to the student that the traditional standard learning hierarchy may not be appropriate in many communication situations. From a promotional planning perspective, it is important that the marketer be able to examine the communications situation and determine what type of response hierarchy is most likely to occur. Of particular importance is the low-involvement hierarchy as a great deal of attention has been given to the involvement issue. It is important to show how the concept of alternative response hierarchies, involvement and rational versus emotional processing can be combined for advertising strategy purposes. The article by Vakratsas and Ambler “How Advertising Works: What Do We Really Know?” (Journal of Marketing, January 1999) provides an excellent summary of response hierarchy models. This article might be assigned to a graduate level class or be useful in preparing a lecture on the response process. Interesting articles regarding the hierarchy of effects might also be reviewed. These include an article by William M. Weilbacher, “Point of View: Does Advertising Cause a “Hierarchy of Effects” (Journal of Advertising Research, November/December 2001, pp. 19-26) and a reply by Thomas E. Barry, “In Defense of the Hierarchy of Effects: A Rejoinder to Weilbacher” (Journal of Advertising Research, (May/June 2002, pp. 44-47). Note that the discussion of the Social Consumer Decision Journey in this edition can be used to discuss how social media influences the consumer decision process. Instructors may find it helpful to read the article by Todd Powers et. al that summarizes the results from the ARF study (“Digital and Social Media in the Purchase Decision Process,” Journal of Advertising Research, December 2012, pp. 470-489) as well as the article by David Court and his associates (“The Consumer Decision Journey” McKinsey Quarterly, June 2009).

Chapter 05—The Communication Process

Answers to Discussion Questions 1. The chapter opener discusses the award-winning #LikeAGirl campaign developed by the Leo Burnett agency for Procter & Gamble's Always brand. Why do you think this campaign was so successful and resulted in such a strong viral response among consumers? (LO 5-1, 5-2) The #LikeAGirl campaign developed for P&G’s Always brand was successful for a number of reasons. Research conducted for the campaign showed that more than half of women surveyed indicated that they experienced a decline in confidence at puberty, which is the time when young girls first come into contact with Always, as well as competing brands. So empowering girls during this critical time of their lives when confidence is low provides an opportunity to reinforce the relevance of Always and help position it as a brand that understands the social issues and challenges girls face at puberty. A number of companies/brands have doing purpose-driven campaign in recent years that have focused way women are portrayed in society. These include Nike’s popular “Let Me Play” campaign which focused on how playing sports positively influences the self-confidence of young girls along with their happiness, health and social habits. Dove’s “Campaign for Real Beauty,” which challenged stereotypical norms regarding female standards of beauty, is another example of a successful purpose-driven campaign. The #LikeAGirl campaign struck a responsive chord with many women who are motivated to share its confidence-inspiring content. The goal was to empower women by showing that “Like a Girl” should be a meaningful and powerful statement all women should embrace. A study conducted in late 2014 by the group Research Now found that among girls ages 16 to 24, 76 percent no longer said they saw the phrase "like a girl" as an insult after watching the video. The study also found that two out of three men who saw it said they would stop or think twice before using the phrase in a negative way. P&G views "Like a Girl" as more than just a successful viral marketing campaign, but rather as the beginning of a social experiment to change the way young girls view themselves and the meaning of the phrase from an insult to the ultimate compliment. The campaign has clearly achieved this goal and helped increase awareness, brand equity and purchase intentions for the Always brand.

2. Global Perspective 5-1 discuss the problems marketers encounter when developing advertising messages in different languages and for different cultures. Discuss some of the ways marketers can deal with this problem and avoid mistranslations. (LO 5-1) Communication is a major barrier confronting marketers who market their products in foreign countries as they often encounter problems in areas such as language as well as the interpretation of visual signs and symbols. Global Perspective 5-1 provides some examples of communication problems companies have encountered in marketing their products abroad. To avoid these problems firms hire companies that specialize in translation and other aspects of communication for foreign markets. They may also use a technique called back translation where a translated ad is retranslated into the original language by a different interpreter to catch errors and ensure the message will be interpreted properly by consumers in foreign markets. Marketers can also pretest their marketing communications and conduct marketing research to ensure that brand names, advertising slogans, signs, symbols and other forms of marketing communications are not misinterpreted by consumers in foreign countries. It is also very important for marketers to be very sensitive to the way their marketing messages might be interpreted by various ethnic groups or consumers in different countries and take steps to avoid the use of any images or language that might be offensive to them.

Chapter 05—The Communication Process

3. What is meant by encoding? Discuss how encoding differs for various types of advertising messages such as radio and television commercials, print ads, and digital/online ads. (LO 5-2) Encoding refers to the process by which the sender of a communication puts thoughts, ideas, or information into a symbolic form using words, symbols, pictures and the like. The encoding of a television commercial involves the use of visual images, sound, motion, color, and words, which provide advertisers with the opportunity to develop very creative messages. The encoding of a radio commercial is limited to the use of sound, which usually comes in the form of words read by an announcer and/or music. However, some astute advertisers may use a process called image transfer whereby the images from a TV commercial are planted in a radio spot by using similar, or even the same, audio portion. The idea is that when consumers hear the radio message, they will make the connection to the TV commercial thus reinforcing the video images. This process is discussed in Chapter 11. Encoding of a print ad is done using visual images such as pictures as well as written information in the form of advertising copy. Many print ads for fashion brands such as clothing and cosmetics as well as luxury brand contain very few words and rely primarily upon the visual image to deliver their message. However, ads for products such as automobiles or consumer electronics may use a larger amount of copy to explain the product as well as its features and benefits. Because message recipients control the processing rate for print messages, it is possible to communicate more information to them since they can take as long as they need or want to read the copy portion of the ad. 4. Explain the concept of viral marketing and how it relates to word-of-mouth communication. Find an example of a company that used viral marketing successfully and one that encountered problems when using this technique. (LO 5-3) Viral marketing refers to the act of propagating marketing relevant messages through the help and cooperation of individual consumers. It is sometimes referred to as buzz marketing whereby marketers try to make their brands and/or marketing messages part of popular culture and consumers themselves are lured into disseminating information through word-of-mouth. In many cases, marketers may even hire individual opinion leaders and trendsetters, such as DJs, waiters and waitresses, bartenders and other influential people to talk about their companies and/or brands and create excitement and interest in them. Many of the buzz marketing techniques used by marketers have now gone viral as marketers are using social media such as Facebook, Twitter, and YouTube to encourage consumers to share messages about their brands with friends and associates. There are several reasons why marketers are using buzz marketing techniques. First, they recognize that consumers are becoming very skeptical of media advertising and it becoming more difficult to penetrate this skepticism and capture their attention with overt advertising messages. By using buzz marketing techniques, consumers are often not even aware of the persuasive intent behind the messages. Word-of-mouth information also tends to be more reliable and trustworthy than information or recommendations received through more formal marketing channels that help make buzz marketing very effective. Buzz marketing may also be more cost effective as it does not require expensive media buys or the creation of advertising messages. However, consumers are becoming somewhat skeptical of these techniques if they recognize that companies are behind them and they are artificially trying to generate buzz to promote their brands. Students should be encouraged find examples of companies that have used viral marketing successfully as well as those that have encountered problems in using it. Viral marketing can backfire, particularly when consumers recognize marketers are trying to generate buzz for their brands and view the effort as contrived or manipulative.

Chapter 05—The Communication Process

5. The chapter discusses the Fiesta Movement social media campaign used by Ford to launch its new Fiesta subcompact car in the U.S. market. Discuss the pros and cons of this program and assess the amount of risk Ford took in allowing the agents to use social media to communicate with their followers about the Fiesta? Do you agree with Ford's decision to use the Fiesta Movement: A Social Remix as part of its IMC program for the redesigned 2014 Fiesta? Why or why not? (LO 5-3) The Fiesta Movement social media campaign used for the launch of the Fiesta was a very innovative program designed to build interest and buzz about the new car well before it even arrived in the U.S. market. There are many positive aspects of this program including the way it utilized social media to build awareness and interest in the new Fiesta. Ford and its agency, Team Detroit, selected the 100 Fiesta “agents” based on their social vibrancy and the number of social network followers or friends they had along with their entrepreneurial spirit and creative vision. By doing so, they were able to recruit social media trendsetters who are very active across a number of platforms and would upload videos, pictures and other content showing themselves engaged with the new Fiesta on various sites such as YouTube, Facebook, Twitter and Flickr. Chapter 2 of the Fiesta Movement had a goal of showing more features of the new care and providing a much deeper local connection. Both phases of the Fiesta Movement generated a tremendous amount of impressions across various social media platforms and build a high level of awareness for the vehicle before the actual launch campaign. Ford estimated that the Fiesta Movement campaign cost about $10 million and resulted in 65 percent of the target audience being aware of the vehicle, which is extremely high. Generating a similar awareness level through traditional media would have cost nearly 10 times as much. It is hard to find fault with the Fiesta Movement campaign since it was so successful. However, students should recognize that Ford was taking a risk since no restrictions were put on the agents and what they could say or communicate about the car. However, Ford was very confident in the quality of the Fiesta and also knew that the agents were excited about being part of the program and were not very likely to post negative stories or images about the Fiesta. While one might argue that the monies spent on the Fiesta Movement could have been used for more traditional media advertising, it is unlikely that these ads would have been received as well as the videos posted by the Fiesta agents nor would they have had the impact. The Fiesta Movement laid the foundation for a very successful product launch and helped position Ford as a more innovative brand in the eyes of many younger consumers, which is important to the long-term success of the company. This is a very interesting question to pose to students as one might question whether Ford can replicate the success of the original Fiesta Movement with its second iteration of the social media based campaign. One can argue that consumers will view the Social Remix program as just another attempt by a marketer to influence them and question the credibility and authenticity of the Fiesta agents. One might argue that innovative marketing programs such as the Fiesta Movement often can only be used effectively one time as they lose their novelty and credibility when marketers try to repeat them. However, there are reasons why the second Fiesta Movement program was be successful. First, it was used to help launch the redesigned and overhauled 2014 Fiesta so there was a legitimate reason for Ford to want to draw attention to the updated version of the popular vehicle. Also, Ford was the first automaker to truly introduce vehicles through social media and was not just trying to replicate the original Fiesta Movement campaign, but rather take it to an entirely new level by utilizing user-generated content for all of the TV, print and digital advertising used for the 2014 Fiesta launch. Ford once again gave the agents a new Fiesta, then stepped back and let them do what they do best: Entertain their followers. As a result, the voice of the new Fiesta came straight from the people, as it was Ford’s first completely user-generated campaign. It should be noted that Fiesta sales in the U.S. for 2013 set a record as the company sold over 70,000 units of the subcompact vehicle. While some of the record sales might be attributed to the fact that Ford redesigned the vehicle, it does 5-13 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 05—The Communication Process

appear that the Fiesta Movement: A Social Remix program was a success. The social media campaign was once again effective as it helped generate buzz and interest in the Fiesta and influenced young millennials to put the Fiesta into their consideration set when shopping for a new car.

6. Digital and Social Media Perspective 5-1 discusses the age bias that exists in advertising and digital agencies against older people who may not be as digitally savvy as the younger generation. Do you think it is acceptable for agencies to favor younger people in the hiring process? How might an older person address the age bias problem? (LO 5-1, 5-3) As noted in Digital and Social Media Perspective 5-1, there are a number of reasons why agencies are focusing their hiring on younger workers. One reason is that they are cheaper to hire as the weak economy has made it difficult for young people to find jobs and they are often willing to work for less, particularly, in advertising and digital agencies as they view these jobs as a way to break into the industry. However, digital agencies often prefer young people because they are digital natives who have grown up with the Internet and social media and have thoroughly immersed themselves in the digital world. They are much more in touch with the various digital platforms that have become very important to marketers as they strive to engage consumers and require less time and effort to train. Older employees may argue that they understand digital media as they have taken it upon themselves to learn about social media and other digital platforms. However, they often do not have the innate understanding of digital and social media as the young people who use them on a regular basis. The ageism problem in advertising has come about for other reasons. Marketers are very interested in younger consumers as this age group spends more on a variety of products including automobiles, electronics, appliances and other items are more willing to switch brands and try new products and services. The 18-49 demographic market is highly coveted for this reason. Also, by targeting younger people with their advertising messages and media buys, marketers can also reach older consumers who aspire to be young. However, the opposite is rarely the case, as younger consumers do not want to be old before their time. Students should be asked to take a position as to whether young professionals can create advertisements that connect with older consumers. Since most students taking this course will be in their late teens or early 20s, it should be interesting to hear their perspective as to whether their generation understands the over 50 crowd. It is often said that older people do not understand or relate to Generations X or Y. This question turns the tables and asks whether the younger generation has the empathy and understanding needed to develop effective advertising for older consumers. The young creative staff in an agency is likely to want to create ads that are reflective of their own life phase. They will want to create ads that are hip, cools, impressive to their peers and award winning. This is more fulfilling than created ads for older consumers with whom they have little in common. Older people looking to work in advertising and digital agencies as well as other areas of marketing must determine what digital skills they are lacking and take steps to address the deficiency. There are a number of online courses and tutorials that are available from major companies such as Facebook, Google and Twitter that can be taken to improve one’s knowledge and understanding of these platforms. Middle aged and older employees might also emphasize the experience and expertise they offer to advertising and digital agencies that goes beyond digital media. Skills such as managing other employees, leadership, project management, planning and budgeting are still very important to agencies and can be a way for them to market themselves. However, the reality is that the digital and advertising agencies are likely to favor young people and this is unlikely to change until the new generation of workers becomes older themselves.

Chapter 05—The Communication Process

7. What is meant by the element of noise in marketing communications process? Discuss how mobile devices such as laptops, tablets and smartphones are contributing to the noise problem for television advertising? What are some ways advertisers can deal with the noise distractions created by these devices? (LO 5-1, 5-2) Noise is defined as the extraneous factors that create unplanned distortion or interference in the communications process. Over the past decade, a new type of noise has become prevalent in the television-viewing environment, which is the distraction of technology such as laptops, tablets, and mobile phones/smartphones. As shown in Figure 5-3, many people now multitask while watching television. They may be online surfing the Internet, using apps, participating in social media, or texting. Because advertisers are not in direct contact with the customers, they must use other means to determine how their messages have been received. While the ultimate form of feedback occurs through sales, it is often hard to show a direct relationship between advertising and purchase behavior. Therefore, marketers use other methods to obtain feedback, among them customer inquiries, store visits, coupon redemptions, and reply cards. Research-based feedback analyzes readership and recall of ads, message comprehension, attitude change, and other forms of response. With this information, the advertiser can determine reasons for success or failure in the communication process and make adjustments. Also, rather than competing against the noise from social media, many marketers are embracing it and adding content in their TV spots encouraging viewers to visit their owned media sites such as Facebook, Twitter, Snapchat, and YouTube as well as their websites. Since TV viewers are often already online via their laptops, tablets and smartphones, it is quite easy to do so. 8. Discuss how the implications of the social consumer decision journey framework might differ for a marketer of a high-involvement product such as a tablet computer versus a company marketing a low-involvement product such as a soft drink or paper towels? (LO 5-5) For a company selling a high-involvement product such as a tablet computer, the consumer is likely to go through a standard learning or learn → feel → do response hierarchy. The ARF study found that the purchase journey of consumers varies by product or service category as high risk/involvement products have longer cycles than lower-risk/involvement products. Offline advertising may still be very important in driving consideration, evaluation and brand selection throughout the consumer decision journey. Advertisements for high involvement products are usually very detailed and informative and provide the consumer with a great deal of information that can be used for decisionmaking purposes. Informational displays at point-of-purchase or presentations by salespersons in the store can also be valuable and effective sources of information. Marketers of high involvement products may also want to encourage consumers to visit their web sites where more detailed information about the product can be presented and consumers can select information that is of particular relevance or interest to them. They may also be likely to visit product review sites where they can compare brands and see how others evaluate them. Marketers might encourage consumers to visit these sites and post favorable reviews of their products or share their experiences with others through social media such as Twitter or Facebook. For a company selling a low-involvement product such as a soft drink or paper towel, the consumer is likely to go through a learn→do →feel response hierarchy whereby some minimal level of awareness or passive learning may precede purchase and attitudes are formed after using the product. As discussed in Digital and Social Media Perspective 5-2, many packaged goods products are lowrisk/reward types of products that are characterized by shorter purchase cycles and lower levels of involvement in the decision-making process. Thus, marketers may spend a larger amount of their IMC budget on traditional media such as TV and print to build and maintain brand awareness as well as on consumer and trade promotions that provide an extra incentive to buy. An advertiser of a low 5-15 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 05—The Communication Process

involvement product must recognize that consumers are less likely to give attention to actual message content and may focus more on non-message elements such as music, characters, slogans or jingles. Advertisers may want to use catchy slogans or jingles that will stick in consumers’ minds and become salient when they are in the actual purchase situation. The use of short messages and heavy repetition schedules will also be important. Sales promotion techniques such as sampling and coupons may also be used to encourage first time trial. Point-of-purchase displays and advertising might also be used to encourage trial of the brand. If the product performs well, the consumer should form a favorable attitude the probability of repurchasing it will increase. However, marketers may be able to use digital media a way to extend the reach and frequency of their off-line advertising and as a way to deliver promotional offers to consumers. 9. Discuss some of the reasons consumer packaged goods (CPG) marketers are allocating more of their IMC budgets to digital and social media versus traditional media such as television and print. Do you think marketers run any risks in allocating more of their budgets to digital and social versus traditional media? (LO 5-3) A number of industry experts predict that digital spending by CPG firms will continue to increase for a number of reasons. Many companies believe that the return on investment for monies spent on digital advertising media may be just as good as television or print. One reason for this is the conventional wisdom that digital is cheaper than traditional media since there is a vast supply of inventory and digital display space is relatively inexpensive, particularly ads purchased programmatically through real-time biding on ad exchanges. P&G is now purchasing 70 percent of its digital advertising through programmatic buying. Many CPG marketers are either cutting, or trying to control, the size and growth in their ad spending and feel that digital ads are a more efficient way to reach specific market segments. Another reason is that companies such as Nielson and ComScore have developed measurement systems for digital display advertising and online video viewing using some of the same metrics television which CPG marketers and their agencies are accustomed to using. Advanced analytics are now available for digital media that allow CPG marketers, many of whom are highly data-driven, to identify target audiences based on their purchase or other behavior. CPG marketers are also allocating more of their marketing budgets to digital media since they are conduits for sales promotion tactics, particularly price promotions. In addition, marketers recognize that consumers are spending more time online, particularly on mobile devices, and thus digital is the best medium to reach them. 10. Discuss the value to marketers of using a cognitive response approach to analyze consumers' reactions to and processing of their advertising messages. Choose a print ad or television commercial and discuss the types of cognitive responses that it might generate using the model shown in Figure 5-9. (LO 5-6) Students should be encouraged to find a print ad or commercial and evaluate it using the cognitive response model shown in Figure 5-9. Many television commercials can be found on YouTube and/or on websites for various companies and/or brands. They might show the ad to their friends or fellow students and have them write down what thoughts they were having as they looked at the ad. They might then try to analyze these cognitive responses by categorizing them as product/message related thoughts (counterarguments or support arguments), ad execution-related thoughts, or source-oriented thoughts (bolsters or derogations). You might have a few students show the examples of ads they have chosen and present their analysis of the cognitive responses given in reaction to these ads. They might also discuss why these responses were generated. For example, source bolsters might be given to a trustworthy or likeable spokesperson while source derogations might occur if the source is not liked or is unattractive. Message-related thoughts might be generated if there is a lot of information

Chapter 05—The Communication Process

presented in the ad or the position advocated is not agreed upon by the message recipient. Ads that use a great deal of imagery might generate more execution-related thoughts. 11. Explain what is meant by a central versus peripheral route to persuasion and the factors that determine when each might be used by consumers in response to an advertisement or other form of marketing communication. (LO 5-6) Under the central route to persuasion, the message recipient is viewed as a very active and involved participant in the communications process whose ability and motivation to process a message are very high. The recipient will pay close attention to message content and will carefully scrutinize the communication for the cogency or quality of the message claims. Under the peripheral route to persuasion, the message recipient is viewed as lacking the motivation or ability to process the message and is not likely to engage in any detailed level of cognitive processing. Rather than thinking about or evaluating the information content of the message, the receiver will rely on “peripheral cues” such as an attractive source or other executional factors. There are a number of factors that determine when each might be used by consumer in response to an advertisement. These include the involvement level of the consumer, which will be a function of the nature of the product being purchased, the importance of the product/service being purchased to the individual, the needs of the individual, and the motivation and ability of the consumer to process the message.

Additional Discussion Questions (not in text) 12. Discuss the various elements of the communications process. Find an example of an advertising campaign being used by a company and analyze this campaign in terms of these elements of the communications process. (LO 5-1) The various elements of the communications process include the sender or source, the message, the channel, the receiver, noise and feedback. The sender or source of a communication is the person or organization that has information to share with another person or group. The source may be an individual such as a salesperson or spokesperson who appears in a company’s advertisements or a nonpersonal entity such as a company or organization itself. The message is the information or meaning the source hopes to convey and may be verbal or nonverbal, oral, written or symbolic. The channel is the method by which the communication travels from the source or sender to the receiver. At the broadest level, there are two types of channels, personal and nonpersonal. Personal channels generally involve direct interpersonal contact with the receiver while nonpersonal channels carry a message without interpersonal contact between the sender and receiver. Nonpersonal channels are generally referred to as the mass media. The receiver is the person(s) with whom the sender shares thoughts or information. Generally, receivers are the customers in the target market or audience who read, hear, and/or see the marketer’s message. Noise refers to extraneous factors in the communications process that can distort or interfere with the communication of a message. Errors or problems in that occur in the encoding of the message, distortions in the transmission of the message, and distractions at the point of reception are possible sources of noise. Feedback refers to the part of the receiver’s response that is communicated back to the sender and may take a variety of forms such as response hierarchy measures including awareness, knowledge, attitudes, purchase intentions, preferences and behavior. The form of feedback of ultimate interest to marketers is, of course, sales. Students should be encouraged to find an example of a current advertising campaign and to analyze it with respect to various elements of the communications process. They might evaluate the source 5-17 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 05—The Communication Process

being used as a spokesperson in the campaign, the type of message being used, the various channels or media where the ads appear, the target audience for the campaign, and the type of feedback that might be used to monitor the effectiveness of the campaign. 13. Those responsible for most of the advertising and promotion decisions for consumer products are brand managers (client side) and account executives (agency side). These individuals are usually well paid, well-educated marketing professionals living in urban areas. Consider the typical consumer for a brand such as Budweiser beer or Mountain Dew soft drinks. What problems could these differences present in developing an IMC program for these brands? How might these problems be overcome? (LO 5-1) The brand managers and account executives are likely to be very different from the heavy users of brands such as Budweiser or Mountain Dew. The marketing and advertising executives will, as noted, be highly educated with a college degree and perhaps a graduate degree such as an MBA while the users of these brands are more likely to be blue-collar types who have a high school education and perhaps some college. The marketing and advertising executives will probably have higher paying jobs and have different life styles, values, and interests than the consumers who are heavy users of these brands. These differences may make it difficult for the marketing and advertising personnel to develop advertising and promotional messages that appeal to these consumers and communicate effectively with them. These problems can be overcome by conducting marketing research on the users of these brands to gain insight and understanding into factors such as their lifestyles, values, interests, opinions and the like. Advertising and promotional messages can also be pretested to ensure that the re understood by these consumers and interpreted in the manner intended. 14. Discuss how one of the consumer response models presented in Figure 5-5 could be used by a company such could be used by a company such as Apple in planning for the introduction of a new product such as the iPad Pro. (LO 5-4) The innovation-adoption model would be very applicable to a company such as Apple in introducing the iPad Pro, which is the company’s newest tablet PC. As Apple planned its IMC program to introduce this new product the company first had to create awareness among potential adopters, then make them interested in the new product and get them to evaluate it, encourage trial and hopefully achieve adoption whereby customers would purchase the iPad Pro. The innovation-adoption model provides a framework that a company can use in planning the IMC program for a new product. The introduction of the iPad Pro generated a tremendous amount of publicity as the new device was featured in cover stories in magazines such as Time, Newsweek and many other publications and also received a great deal of attention on national and local television news programs. Media advertising was also used to create awareness of and interest in the iPad Pro and to promote its various features. Advertising can also be helpful in driving consumers to the website for the iPad Pro where they have access to more detailed information and can learn more about the product. Demonstration programs at events or in retail stores, including the growing number of Apple stores, can also be used to communicate more detailed information about the iPad Pro and encourage trial. At the trial stage, consumers can experience the iPad Pro by performing various tasks with it, using some of the apps, and evaluating its performance. If the outcomes of the trial experience are favorable, it is likely the consumer will purchase the product.

Chapter 05—The Communication Process

Chapter 6—Source, Message, and Channel Factors

CHAPTER 6 SOURCE, MESSAGE, AND CHANNEL FACTORS Chapter Overview This chapter is a continuation of the discussion of communications theory and focuses on the controllable variables that are a part of this process including source, message and channel factors. The chapter builds on the material in Chapter 5, as decisions regarding each of these communication variables should take into account how they affect various stages or steps of the response process of the receiver. The persuasion matrix is presented at the beginning of the chapter to provide a framework for analyzing how decisions regarding individual communication variables might influence steps in the response hierarchy. The primary goal of this chapter is to provide an in-depth examination of source, message and channel factors and the various considerations involved in making advertising and promotional decisions for each of these communication components.

Learning Objectives 1. Discuss the variables in the communication system and how they influence consumers’ processing of promotional messages. 2. Identify decision factors involved in selecting a source for a promotional message. 3. Compare the different types of message structures and appeals. 4. Explain how different types of channels influence the marketing communications process.

Chapter and Lecture Outline I.

INTRODUCTION AND PROMOTIONAL PLANNING THROUGH THE PERSUASION MATRIX

This chapter analyzes the major controllable variables in the communications process—source, message and channel or medium. Characteristics of the source are examined along with how they affect cognitive processing. Attention is also focused on the message itself, including how structure and type of appeal influence communication effectiveness, and on issues related to the channel or medium by which the message is communicated. Source, message and channel factors were introduced in the previous chapter as controllable elements in the communications model and it was noted that decisions regarding each of these components must take into account how they interact with the response process. A useful approach for combining the communication components and the stages of the response process is the persuasion matrix (see Figure 6-1). In the persuasion matrix, there are two sets of variables of interest including independent variables representing the controllable elements of the promotional program and dependent variables representing the response hierarchy or steps a receiver goes through in being persuaded. A major consideration facing the promotional planner is how decisions regarding each independent variable will influence the various stages of the response process. The text provides several examples of how the persuasion matrix can be used to evaluate how decisions regarding various controllable communication elements will affect the response process.

Chapter 6—Source, Message, and Channel Factors

Professor Notes

II.

SOURCE FACTORS

The source of a marketing communication can be viewed as a multifaceted concept as many types of sources can be included in a promotional situation. We will use the term source to mean the person who is involved in the communication of a promotional message in either a direct or an indirect manner. A direct source is a spokesperson that delivers a promotional message, demonstrates a product or service, and/or endorses a product or service. Spokespeople used in advertisements or a company’s sales representatives are examples of direct sources. An indirect source does not actually deliver a message but rather is used to draw attention to or enhance the appearance of a promotional message. Decorative models are a good example of an indirect source. Most of the theory and research associated with the study of source factors deal with the characteristics of individuals as communicators of a persuasive message and how they influence communication effectiveness. This is the approach used to examine source characteristics. The characteristics of the source often have a significant impact on the effect of their sales and advertising message. A useful framework for examining source characteristics is the classification scheme developed by Herbert Kelman, shown in Figure 6-2. This scheme recognizes three basic categories of source attributes with each involving a different process by which the source influences attitudinal or behavioral change in the message recipient. A.

Source Credibility—refers to the extent to which the source is perceived as having knowledge, skill or experience relevant to the communication topic and can be trusted to give an unbiased opinion or present objective information on the issue. Information from a credible source can influence beliefs, opinions, attitudes, and/or behavior through a process known as internalization whereby the receiver desires to have an objectively correct or “right” position on an issue. 1. There are two important dimensions to credibility—expertise and trustworthiness. Examples are provided regarding the application of expertise and trustworthiness to promotional situations. Global Perspective 6-1 discusses how some celebrities do not endorse products or appear in commercials in the US so they can protect their credibility. However, many of them such as Leonardo DiCaprio, Kevin Costner, Brad Pitt and others do endorse companies and brands in foreign countries such as Japan. 2. Using corporate leaders as spokespeople—Many companies believe the use of their president or CEO is the ultimate expression of the company’s commitment to quality and customer service. Some examples are given in the text such as Virgin founder and CEO Richard Branson, Boston Beer Company’s Jim Koch, and Papa John’s founder John Schnatter. It should be noted that the owners and/or presidents of smaller companies often appear in commercials as a spokesperson as well.

Chapter 6—Source, Message, and Channel Factors

3. Limitations of credible sources—Marketers generally seek to use credible sources to deliver their promotional messages. However, in some situations a high-credibility source may be less effective than a moderate- or low-credibility source such as when the receiver has a favorable initial attitude or opinion. In this situation, the use of a highly credible source may lead the receiver to attribute his or her opinion to the source rather than the message being communicated. However when a moderate- or low-credibility source is used, the receiver cannot really attribute his or her attitude or opinion to the source. The sleeper effect phenomenon is another reason why a low-credibility source may be just as effective as a source high in credibility. B.

Source Attractiveness—A commonly used source characteristic in advertising and personal selling is that of attractiveness. Attractiveness also has several sub-components including similarity, familiarity and likability. The process through which attractiveness leads to persuasion is identification whereby the receiver seeks some type of relationship with the source by adopting a similar position. Examples are provided of the application of source attractiveness in the selection of sales representatives, as well as in advertising through the use of celebrities and decorative models. 1. Applying similarity—Marketers recognize that people are more likely to be influenced by a message coming from someone with whom they feel a sense of similarity. Similarity is used in various ways in marketing communications: selecting salespeople, using former athletes to promote beer, and in slice-of-life commercials. 2. Applying likability: Using celebrities—advertisers have long recognized the value of using celebrities such as television and movie stars, athletes, musicians or other popular figures to endorse their products and services. Celebrities are used because they have “stopping power” and draw attention to advertising messages. Another reason is the expectation that the respect, popularity, and/or admiration the celebrity enjoys will influence consumers’ feelings and, of course, their purchase behavior toward the brand the celebrity is endorsing. However, a number of factors must be considered in using celebrities as a spokesperson or endorser such as: a. Overshadowing the product—While a celebrity may draw attention to an ad, consumers may focus on the celebrity rather than the product or service and the advertising message. b. Overexposure—Consumers generally recognize that celebrities endorse a product or service because they are paid to do so. When a celebrity endorses a number of products s/he may become over exposed and lose credibility. c. Target audiences’ receptivity—Attention should be given to the target audience and whether the celebrity is appropriate for the consumers in this market. For example, younger consumers may be more impressed by celebrities than older people.

Chapter 6—Source, Message, and Channel Factors

d. Risk to the advertiser—Marketers must consider whether there is any risk involved in having their company or products associated with a celebrity. Several well-known entertainers and athletes who were being used as advertising spokespersons have been involved in activities that were potentially embarrassing to the companies whose products they were endorsing such as pro basketball star Kobe Bryant (McDonald’s, Coca-Cola, Spalding, and Nutella) and more recently cyclist Lance Armstrong, golfer Tiger Woods, and tennis player Maria Sharapova. e. Return on investment—Perhaps the most important factor a company must consider regarding the use of a celebrity endorser is the return on investment (ROI) from using them. Marketers use celebrities to increase awareness of, and attention, to their company and/or brands as well as their advertising. However, all of these factors must result in higher sales in order for to get a positive ROI from an endorsement deal. 3. Understanding the meaning of celebrity endorsers—Advertisers should use celebrities who are connected in some way to the product or services they are endorsing. This means that marketers must understand the image and meaning celebrities project to consumers. Grant McCracken has developed a very insightful perspective on celebrity endorsement based on meaning transfer. His model, which is shown in Figure 6-3 of the text, suggests that a celebrity’s effectiveness as an endorser depends on the culturally acquired meaning he or she brings to the endorsement process. Celebrities draw these meanings from the roles they assume in their entertainment or athletic careers. The model suggests that celebrity endorsers bring their meanings into the advertisement and transfer them to the products they are endorsing. These meanings are then in turn transferred to the consumer when they purchase a product or service. The implications of the meaning transfer model should be discussed. Current examples of celebrities whose image is capitalized on by marketers who use them in their ads should be noted. Actress Zooey Deschanel, known for her role as the cute, quirky, and offbeat but loveable roommate on the TV sitcom New Girl, has been a spokesperson for companies/brands such as Apple, Rimmel, and Pantene shampoo, which capitalize on her attractiveness. The text also discusses how actresses/comedienne Tian Fey has developed cultural meaning through her the various roles and characters she has plaid on Saturday Night Live as well in numerous movies. American Express uses her cultural meaning in the advertising campaign for the Amex EveryDay Credit Card. III.

CHOOSING A CELEBRITY ENDORSER Marketers must consider a number of factors when choosing a celebrity to serve as an advertising spokesperson for the company or a particular brand. Some advertising and marketing executives relay on their own intuition and feelings when choosing a celebrity endorser. However, many companies and ad agencies use research data such as Q scores and other metrics that measure a celebrity’s level of familiarity and appeal among the target audience.

Applying Likability Decorative Models—a common technique used by advertisers to draw attention to an ad and enhance its effectiveness by using a physically attractive model. Often these models are used in a passive or “decorative” manner rather than as active communicators. A number of factors must be considered in using decorative models, such as whether they are appropriate or relevant to the product or service being advertised and whether they will draw attention to the ad 6-4

Chapter 6—Source, Message, and Channel Factors

but not the product or advertising message. An interesting study is noted which found that some women actually experience negative feelings when comparing themselves with beautiful modes used in ads and the images of physical perfection they represent. This might make for an interesting class discussion as to whether a marketer may not want to use a highly attractive model in its advertising. Dove’s “Campaign for Real Beauty” is an excellent example of how some companies are using everyday women in their ads rather than supermodels. B.

Source Power—A source has power when he or she can actually administer rewards and punishment to the receiver. Perceived power depends on several factors such as perceived control, concern and scrutiny. Power influences persuasion through the compliance process whereby the receiver accepts the persuasive influence of the source and yields to the advocated position to obtain favorable reactions or avoid punishment. It is important to note that persuasion induced through the use of a communicator who relies on power may be superficial and last only as long as the receiver perceives that the source can administer rewards or punishment. The use of source power is difficult to apply in a nonpersonal influence situation such as that found in advertising. Source power has greater application to situations involving interpersonal influence such as in personal selling.

McGraw-Hill Connect ®: Source Characteristics and the WPU Campaign Type of Activity: Click and Drag Activity Summary: In this activity, students will match the three sources being considered to the respective source characteristics, the process of influence involved and possible outcomes of using that source. Activity Learning Objective: 06-02 Identify decision factors involved in selecting a source for a promotional message. CONCEPT REVIEW: A source is a person involved in communicating a marketing message, either directly or indirectly. Companies are very careful when selecting individuals to deliver their selling messages. Many firms spend huge sums of money for a specific person to endorse their product or company. They also spend millions of dollars recruiting, selecting, and training salespersons to represent the company and deliver sales presentations. They recognize that the characteristics of the source affect the sales and advertising message. Sources vary in their characteristics and the process through which they influence consumers. Understanding these characteristics and processes helps marketers invest in sources that will maximize message influence. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

Chapter 6—Source, Message, and Channel Factors

IV. MESSAGE FACTORS The manner in which marketing communications are presented is very important in determining their effectiveness. Consideration must be given not only to message content, but also to how the information will be structured for presentation and the type of appeal that will be used. A.

Message Structure—An important consideration in the development of a promotional message is the manner or framework used for structuring or communicating the information. An important aspect of message strategy is knowing the best way to communicate message points or elements. A number of message structure considerations are discussed in the text including: 1. Order of presentation—Should important message points or arguments be placed at the beginning of the message, in the middle or at the end? A primacy effect suggests that the information placed at the beginning of the message is most effective while a recency effect suggests that the arguments at the end are most effective. 2. Conclusion drawing—Should a message draw an explicit conclusion for the audience or allow them to form their own conclusions? Research has shown that, in general, messages with explicit conclusions are more easily understood and effective. However, some studies show that the effectiveness of conclusion drawing may depend on the target audience, the type of issue or topic and nature of the situation. 3. Message sidedness—Should a marketing communication use a one-sided message, whereby only positive attributes or benefits of a product or service are mentioned, or a two-sided message where both strong and weak points or attributes are presented. The text discusses how Domino’s Pizza effectively used a two-sided message whereby the company acknowledged problems with the taste and quality of its product as part of its “Pizza Turnaround” strategy (Exhibit 6-13). 4. Refutation—This is a special type of two-sided message whereby both sides of an issue are presented and arguments are offered to refute the opposing viewpoint or negative information. (see the SeaWorld ad in Exhibit 6-14). 5. Verbal versus visual messages—Both the verbal and nonverbal or visual portions of an advertisement influence the way an advertising message is processed. Verbal or copy aspects of the message are important in conveying rational or factual messages while nonverbal or visual elements of an ad are important for developing emotional and image based associations.

Message Appeals—Another important aspect of message strategy concerns the manner or style used to communicate the promotional message. One of the most important creative strategy decisions involves the choice of an appropriate appeal. Some promotional messages uses rational appeals and are designed to communicate information regarding a product or service and appeal to the logical aspects of the consumer decision-making process. Other messages appeal to feelings in attempt to evoke some type of emotional reaction. Three types of appeals are discussed in the text:

Chapter 6—Source, Message, and Channel Factors

1. Comparative Advertising—Comparative advertising refers to the practice of either directly or indirectly naming one or more competitors in an ad and usually making a comparison on one or more specific product or service attributes. This form of advertising became a legitimate and popular practice after the Federal Trade Commission began advocating its use in 1972 and the networks lifted their ban on comparative advertising. A number of factors must be considered in using comparative advertising such as consumers’ response to the ad, perceptions of credibility, characteristics of the target audience and the company’s position in the market. Comparative messages are often used by new brands to position themselves against established brands or by smaller market share brands to compare themselves against market leaders. Market leaders, on the other hand, are often hesitant to use comparison ads as they feel they have little to gain by showing competitor’s products in their ads. Comparative advertising has become common in the mobile phone industry as the four major providers (Verizon, AT&T, T-Mobile, and Sprint) often run ads comparing themselves against one another on key attributes such as network coverage, signal quality, and price. 2. Fear appeals—are used to create anxiety in the audience and arouse individuals to take action. Fear can stress negative consequences that may occur if behavior is not altered such as ads that warn people not to smoke, use drugs, or drink and drive. Fear can also be used through the threat of social disapproval or rejection that an individual might suffer if s/he does not use a particular product or service (such as deodorant, mouthwash or dandruff shampoo). 3. How fear operates—Fear appeals can have facilitating effects by attracting attention and interest to a message and motivating the receiver to act to resolve the problem presented in the ad. However, high levels of fear can have inhibiting effects whereby the receiver may emotionally block out the message by tuning it out, selectively perceiving it or counterarguing against it. The nonmonotonic relationship between fear and persuasion is shown in Figure 6-5 and should be discussed. Attention is also given to an alternative approach to the curvilinear explanation of fear—the protection motivation model. 4. Humor appeals—are among the most popular and best remembered of all advertising messages. Advertisers use humor for a number of reasons including attracting and holding consumers’ attention, putting them in a favorable mood, creating affect that may transfer to the product or service being advertised, and reduce counterarguing by serving as a distractor. Problems with humorous appeals include the possibility of drawing attention to the ad but at the expense of message content. Effective humor is also difficult to create and execute. Many advertisers prefer to use hard-sell rational appeals rather than spending their ad budgets to entertain consumers. Professor Notes

Chapter 6—Source, Message, and Channel Factors

McGraw-Hill Connect ®: Message Options for Natur-O-Rush Type of Activity: Click and Drag Activity Summary: Natur-O-Rush is a new energy drink with all-natural ingredients that is entering a market filled with multiple caffeine-based energy drink brands. The brand manager for Natur-O-Rush, Jessica Reynolds, is working with an ad agency to determine the communications for the launch campaign. Students will match the five creative options presented by the ad agency to the message factor that they correspond to, and things to consider (or related phenomena) for each of those message factors. Activity Learning Objective: 06-03 Compare the different types of message structures and appeals. CONCEPT REVIEW: The way marketing messages are presented is very important in determining their effectiveness. Marketers must consider not only the content of their persuasive messages but also how this information will be structured for presentation (message structure) and what type of message appeal will be used (message appeals). Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

IV.

CHANNEL FACTORS

The final controllable variable of the communications process is the channel, or medium, used to deliver the message to the target audience. Some general considerations regarding channel factors are presented here. A.

Personal versus Nonpersonal Channels—Effective communication also depends on the channel or medium used to deliver the message to the target audience. While there are a variety of methods available for communicating a promotional message, they can be classified into two broad categories—personal and nonpersonal channels. Differences between these two types of influence channels are discussed.

Chapter 6—Source, Message, and Channel Factors

Effects of Alternative Mass Media—Most promotional efforts such as advertising involve nonpersonal communication through the mass media. The mass media that advertisers use to transmit their messages differ in many ways including the number and type of consumers they reach, their costs, their information processing requirements, and qualitative characteristics. These factors will be covered in detail in the media chapters. However, at this point it is important to cover basic differences among alternative mass media including areas such as: 1. Differences in information processing—There are very basic differences among alternative mass media in terms of the manner and rate at which information is transmitted and can be processed by the message recipient. Information from the print media is self-paced while information from the broadcast media of radio and television is externally paced. There are important implications for advertising via each type of medium.

Effects of Context and Environment—Reactions to and interpretation of an advertising message can be a function of not only message content but also the context or environment in which the ad appears. A qualitative media effect refers to the positive or negative influence the medium may contribute to the message. For example, an ad seen in a high prestige publication such as Travel & Leisure or The New Yorker may be perceived differently than one in a low prestige magazine or paper such as the Star or National Enquirer. Media reception environments are created by the nature of the television program in which a commercial appears. Consumers may be in a more receptive mood when watching an upbeat situation comedy versus a news program or documentary.

Clutter—Another aspect of the media environment that is important to advertisers is the problem of clutter, which refers to all the non-program material that appears in the broadcast environment including commercials, promotional messages for shows, public service announcements and the like. Clutter has become a major concern to advertisers as there are too many messages competing for viewers and listeners’ attention. Studies have shown that the amount of clutter on the four major networks during prime time is running at around 14 minutes per hour, which is down from around 17 minutes a few years ago. However, the amount of clutter is higher on cable channels, with an average of around 15 and a half minutes, with some networks averaging more than 18 minutes.

Professor Notes

Chapter 6—Source, Message, and Channel Factors

McGraw-Hill Connect ®: Channel Factors for Bee and Gees Product Portfolio Type of Activity: Case Analysis Activity Summary: Bee & Gee is a multi-product, multi-brand, packaged goods company with a significant presence in the personal care and grooming category. Within each product category, it has numerous brands that sometimes compete with each other in the same geographical markets. In the shampoo category, Bee & Gee has four different brands, each targeted towards a different consumer segment, but available in the same geographic markets. This activity will have the students select the best answer for each question related to their marketing channel choices. Activity Learning Objective: 06-04 Explain how different types of channels influence the marketing communications process.

CONCEPT REVIEW: A channel, or medium, is used to deliver the message to the target audience. A variety of channel factors affects the extent to which the message influences receivers' behavior. Channel factors to consider include personal versus non-personal nature of the channel, qualitative differences across channel types, the context and environment of a channel, and clutter in the channel. Difficulty: Medium Bloom’s: Analyze AASCD: Analytical Thinking

Chapter 6—Source, Message, and Channel Factors

Teaching Suggestions The material in this chapter is generally very well received by students as most of them have opinions regarding whom they consider a good or bad advertising spokesperson or the type of message appeals they like or dislike. This chapter is designed to build on the material in Chapter 5 by discussing how decisions regarding source, message and channel factors affect the various stages of the response process. We have found that the persuasion matrix is a very effective way of showing how decisions regarding controllable communication elements interact with the various steps in the response process. It may be useful to pick a few current examples of advertising campaigns using various spokespersons such as entertainers or athletes and different types of message appeals (fear, humor, comparisons) and analyze them using the persuasion matrix. This chapter has a detailed discussion of issues regarding the use of celebrities in advertising, which is a very popular issue among students. You might engage students in a discussion of why marketers pay such large sums of monies to celebrities including athletes, entertainers and TV/movie stars to appear in their commercials. You might also encourage students to consider the risks involving the use of celebrities. For example, the chapter opener discusses the success Under Armour has had with some of its endorsers such as Cam Newton, Stephen Curry, and Bryce Harper. The coverage of message structure and appeals also lends itself to interesting discussions regarding the use of various types of messages such as fear and humorous appeals. You might want to visit the website for the Montana Meth project (http://www.methproject.org/) which has examples of many different television and print ads that utilize many of the different message structure and appeals used in the chapter. It is important to note that message appeals are discussed in more detail in Chapters 8 and 9, which cover creative strategy and execution while media strategy and specific characteristics of the media are discussed in Chapters 10 through 14. These communication elements are introduced in this chapter to provide the student with an understanding of how decisions regarding these factors fit in with the overall communications process. This will provide the student a strong foundation for evaluating media and creative decisions when this material is covered in subsequent chapters.

Answers to Discussion Questions 1. The chapter opener discusses how Under Armour has been very successful in its use of athletes as endorsers for the company/brand. Evaluate the strategy used by Under Armour in selecting and signing athletes to endorsement deals. Why do you think the company has been able to compete so effectively against larger companies such as Nike and Adidas in signing athletes as endorsers? (LO 6-2) Under Armour went public in 2005 and the stock price nearly doubled the first day it was traded. Since going public, the company has averaged more than 25 percent annual growth, reached $4 billion in revenue in 2016, and expects to hit $7 billion by 2018. The keys to Under Armour’s success have included quality products, strong branding and positioning, and an incredible roster of athletes as endorsers, a number of whom it signed for much less money than its major competitors such as Nike and Adidas. Even with its incredible growth, Under Armour is still only about an eighth the size of Nike, which had sales over of over $30 billion in 2016, and less than a quarter the size of Adidas, whose global revenue was nearly $20 billion. Nike spends nearly $1 billion a year on endorsement deals while Adidas recently announced that it planned to sign 500 athletes in North America alone to deals. While Under Armour may not be able to spend as lavishly as its larger competitors for endorsers, most industry experts argue the company is spending its money more wisely. Under Armour’s endorsers now include three of the best players and biggest stars in professional football, basketball, and baseball: Carolina Panthers quarterback Cam Newton, Golden State Warriors point guard 6-11 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 6—Source, Message, and Channel Factors

Stephen Curry, and Washington Nationals outfielder Bryce Harper. Under Armour endorsers also include swimmer Michael Phelps, the most decorated Olympian of all time, golfer Jordan Spieth, and New England Patriots quarterback Tom Brady. The company also has a number of female endorsers including skier Lindsey Vonn, a four-time Olympic gold medalist, ballerina Misty Copeland and supermodel Gisele Bundchen. Under Armour recognizes that having the right athletes and other celebrities endorsing its products is a key success factor in the athletic shoe and apparel market. They not only help build the brand but also are catalysts for sales. For example, Under Armour signed Curry to an endorsement deal in 2013 and he has won the NBA’s Most Valuable Player award two times since as well as led the Golden State Warriors to NBA championships in 2015 and 2017. Golfer Jordan Spieth was a relatively unknown player when Under Armour signed him, but within two years was the number 1 ranked player in the world with two major championships. Kevin Plank notes that the company’s success Stephen Curry, Jordan Spieth, and Misty Copeland has taught it a valuable lesson regarding the need to think bigger, as all three have transcended their sports and become known by just their first names. In 2015, Under Armour overtook Adidas, which also owns Reebok, to become the second most popular sportswear manufacturer in the United States and it has set its sights on international markets such as Europe and Asia. 2. Discuss how marketers can use the persuasion matrix shown in Figure 6-1 to plan their integrated marketing communication programs. Choose a TV commercial or print ad and use the persuasion matrix to evaluate how it might influence consumers’ response processes. (LO 61) The persuasion matrix helps promotional planners see how each controllable element in the communications process (source, message, channel, and receiver) interacts with the consumers’ response process. Marketers must consider how decisions regarding these controllable elements of communication will affect the various stages in the response process. For example, the use of a highly attractive model may attract attention to the ad but have a negative impact on comprehension if the information presented by the model is not processed. This assignment gives the student an excellent opportunity to analyze an advertisement in terms of various communication components and how they interact with the steps of the response process. The students’ analysis of the ad they choose should address factors such as the type of source used, the message structure or appeal, the media vehicle where the ad was seen (e.g., the magazine or newspaper or specific television program) and the target audience they think it was directed towards. They can then analyze these individual variables in terms of their impact on the various steps of the response process as shown in the persuasion matrix (Figure 6-1) such as message presentation, attention, comprehension, yielding, retention and behavior. 3. Discuss the three primary source attributes noted by Herbert Kelman and the different processes by which they can influence attitude and/or behavior change. Find an example of an advertisement or other type of promotional message that utilizes each attribute. (LO 6-2) The three primary source attributes noted by Kelman are credibility, attractiveness and power. Credibility influences attitudes and/or behavior through a process known as internalization whereby the receiver adopts the opinion of the credible communication because s/he feels it is accurate and integrates it into his or her belief system. The two basic components of source credibility are expertise and trustworthiness. Expertise refers to the extent to which the source is perceived as having knowledge, skill or experience relevant to the communication topic. Many ads use expert sources such as doctors and dentists to endorse products. Athletes also are examples of expert sources when they are endorsing a product or service related to their sport. For example, racecar drivers often endorse automotive products while golfers and tennis players endorse equipment related to their 6-12 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 6—Source, Message, and Channel Factors

respective sports. Trustworthiness refers to the honesty, integrity and believability of the source and the extent to which he or she can be trusted to give an unbiased opinion or present objective information on the issue. Expertise is used in many ways in marketing communications. Trustworthiness is also very important and advertisers usually attempt to find spokespersons with a trustworthy image and who are not endorsing too many products. Advertisers can also use techniques such as hidden-cameras or unsolicited testimonial as a way of increasing the receivers’ perceptions of trustworthiness of the source. Students should be asked to find an example of advertisements that use an expert source and one who is used based on his/her level of trustworthiness. The source characteristic of attractiveness operates through the process of identification whereby the receiver is motivated to seek some type of relationship with the source and thus adopts similar beliefs, attitudes, preferences or even behavior. The components of source attractiveness include similarity, familiarity and liking. Similarity is based on the sharing of interests, lifestyles, opinions, needs, goals and the like. Similarity is used in advertising by choosing spokespersons or individuals to appear in the ads who are similar on these dimensions to receivers in the target audience. The use of slice-oflife executional appeals are also a way of attempting to create empathy between the person in the commercial and the viewer. Another very common way of using attractiveness in advertising is through the use of celebrities from the sports and entertainment fields. In addition to their ability to attract attention to an ad, another reason for using celebrities is the liking consumers may have for them and the assumption that the respect, popularity, and/or admiration the celebrity enjoys will favorably influence consumers’ attitudes and, hopefully, their purchase behavior. Student should have no trouble finding examples of ads that use the source characteristic of attractiveness such as those featuring celebrities including entertainers, actor/actresses, and athletes Power is a source characteristic when the source can actually administer rewards and punishments to the receiver and operates through a process known as compliance whereby the receiver accepts the persuasive influence of the source and acquiesces to his or her position in hopes of obtaining some type of reward or avoiding punishment. As a result of his/her power, the source may be able to induce another person to respond to the request or the position s/he is advocating. Power is a source characteristic that is difficult to apply in a nonpersonal influence situation such as advertising since a communicator in an ad generally cannot apply any sanctions to the receiver or determine whether compliance actually occurs. Thus, students may find it difficult to find an example of advertising that relies on power as a source characteristic. 4. Find examples of an advertising message or campaign that uses the company CEO, president or founder as the spokesperson. Do you think this individual is an effective spokesperson for the company? Why or why not? (LO 6-2) There are several reasons why CEOs are used as an advertising spokesperson. First, they have very pleasant personalities and come across as authentic and genuine in the commercials for their companies. CEOs who are dull, boring, or fail to positively differentiate a company or brand are not very effective as consumers are looking for the CEO to be interesting, relevant, and truly understand consumer desires. The success of both Schnatter and Koch may also be due to the way they are used in the advertising for their companies. Both companies have adopted the CEO as “front man” strategy and use their CEOs in most of their ads rather than just using them occasionally which helps make the public more familiar with them. Consumers also may like the execution of the ads in which these corporate leaders appear. For example, Boston Beer runs commercials for its Samuel Adams brand that feature Jim Koch’s commentary and tour of the beer brewing process, which resonates well with viewers. Schnatter has been appearing alongside of NFL star quarterback Peyton Manning who comes across very well in commercials, which may add to his popularity as an endorser. Some companies feel that the use of a corporate leader as an advertising spokesperson is a way of expressing the company’s commitment to the customer with respect to areas such as quality and 6-13 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 6—Source, Message, and Channel Factors

customer service. The use of an owner or CEO of a company is seen as a way of giving a company a favorable image or identify among consumers. In some cases, a corporate leader may be very well known and respected and his or her popularity and/or favorable reputation may help enhance the image of the company. There are a number of potential problems associated with the use of a corporate leader as an advertising spokesperson. Many business leaders are not very good in front of a camera and do not make effective advertising spokespeople. They may not exude credibility or possess the type of image needed to be a good spokesperson for their company. Thus, the company may be spending money on advertising that is ineffective, or may even be perceived very negatively by consumers. Another problem with using a business leader as a spokesperson is that the image of the company may be tied too closely to that person and may create problems if this individual leaves the company or encounters some negative publicity. Students should be encouraged to find an example of a current advertising campaign that uses the company CEO, president or founder as a spokesperson and evaluate whether s/he is effective. This strategy is very common in local marketers where retailers and automotive dealers often have their owners or CEOs appear in commercials. 5. IMC Perspective 6-1 discusses the series of problems Nike has had with some of its endorsers because of controversies that have arisen in their personal lives. Discuss how the problems surrounding these endorsers might impact the image and reputation of Nike. How long do you think Nike should stand by endorsers when they run into personal problems? (LO 6-2) Nike has had its share of problems with controversies involving its endorsers in recent years such as Kobe Bryant, Lance Armstrong, Tiger Woods, and Maria Sharapova. Some marketing experts note that the problems Nike has encountered with endorsers is not surprising given that it has so many athletes under contract around the globe, including the superstars in most sports. While the controversies involving these individuals are problematic, it is unlikely that they will have a significant impact on the company since Nike uses a myriad of athletes as endorsers and its image is not tied to just one of them. While problems with endorsers may not do too much damage to larger companies that have a stable of athletes endorsing its products, the effects can be very damaging to smaller companies whose brand is closely tied to, and often defined by, an athlete endorser. In an age where athletes and other celebrities have a myriad of platforms on which to speak such as Facebook and Twitter and the media are dedicating more resources than ever toward uncovering their transgressions, what can companies do to protect themselves? Aside from language in the contract barring such behavior, the simplest answer is—very little. No matter how much money a company pays endorsers, it cannot monitor them around the clock. Instead, companies must be very selective in selecting endorsers and in how much they pay them. The question of how long Nike should stand by endorsers when they run into personal problems is difficult to answer. The company has a policy of standing by its athlete endorsers for a long time— except in the most extreme cases—and the brand is strong enough to withstand these setbacks. For example, Nike continued to use Lance Armstrong for many years until he admitted to using performance enhancing drugs. Another example is professional golfer Tiger Woods who has had a number of personal problems that began in 2009 following a car accident in 2009 following an argument with his wife, which led to intense media scrutiny and revelations of infidelity that resulted in a divorce. In 2017, Woods was arrested for driving under the influence of drugs that he was taking to relieve pain from several back surgeries. Thus far, Nike has continued to support Woods, although he is no longer the face of its golf division. Decisions regarding when to terminate a relationship with an endorser often depend on the nature of the controversy involving the athlete. One such extreme case occurred in early 2016 when Nike terminated its relationship with Filipino boxing champion Manny Pacquiao one day after he made 6-14 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 6—Source, Message, and Channel Factors

extremely derogatory statements about people in gay relationships during a media interview while he was running for political office in the Philippines. Pacquaio had won world championships in eight weight classes and was revered in the Philippines, as well as many other countries, for both his athletic success and his personal story, having risen from poverty to international stardom and political office. Nike announced that it found his comments abhorrent since the company opposes discrimination of any kind and has a history of supporting and standing up for the rights of the LGBT community. 6. Find a celebrity who is currently appearing in an advertising campaign for a particular company or brand and use McCracken’s meaning transfer model (shown in Figure 6-4) to analyze the use of this individual as a spokesperson. (LO 6-2) McCracken’s meaning transfer model provides a very interesting perspective on celebrity endorsements. According to this model, a celebrity’s effectiveness as an endorser depends on the culturally acquired meaning s/he brings to the endorsement process. Celebrities acquire these meanings from the roles they assume in their careers as entertainers, athletes, politicians and other areas. They then bring these meanings into the advertisements in which they appear and transfer them to the product or service they are endorsing. Students should be asked to find a celebrity who is currently endorsing a product, service or company and analyze his or her endorsement effectiveness in terms of McCracken’s model. They should discuss how the celebrity acquired his or her meaning and whether it transfers well to the company or brand they are endorsing. For example, actor Paul Hogan was a spokesperson for the Subaru Outback SUV when it was introduced to the U.S. market in the late ’90s. Hogan acquired his cultural meaning primarily from the role he played in the Crocodile Dundee movies as a rugged, tough guy from the Australian Outback (Stage 1 of the model). He was an excellent choice as a spokesperson for the Outback as Subaru wanted to position the new vehicle as a vehicle that combines rough-terrain driving capability with the ride and comfort of a passenger car and the use of Hogan helps create this image. Subaru’s use of Hogan provides a clever play off of the Outback name as well as an opportunity to transfer Hogan’s tough and rugged image to the vehicle (Stage 2 of the model). Consumers may choose the Outback since they may be looking for these attributes when they purchase a new car, particularly if they internalize the image of the vehicle as durable and rugged (Stage 3 of the model). Students should be encouraged to choose a current example of a celebrity who is a popular endorser and analyze the use of this person as an advertising spokesperson by using the meaning transfer model. 7. Discuss the rise in popularity of YouTube stars such as Smosh, The Fine Brothers and PewDiePie among young people. Do you think these YouTube personalities can replace more traditional celebrities such as athletes, actors/actresses, and entertainers as advertising spokespersons? (LO 6-2) It is not surprising that YouTube stars have become very popular among young people, given the amount of time they spent watching videos on the site. A 2017 study commissioned by AwesomenessTV, which produces video for 31 different platforms, found that on average, teens spend 34% of their video time watching YouTube, compared to 27% watching Netflix, and 14% watching live TV. Young people enjoy watching comedy videos, which explains the popularity of Smosh, The Fine Brothers, and Nighahiga. Many young people also enjoy playing video games and watching gamers such a PewDiePie in action. It is unlikely that YouTube personalities will completely replace traditional celebrities as advertising spokespersons for companies targeting young people as actors/actresses, and entertainers are still popular among this age group. However, research conducted by brand strategist Jeetender Sehdev found that YouTube celebrities score significantly higher than traditional celebrities do across a number of characteristics that influence the purchase behavior of teens. The YouTube personalities were found to be perceived as more engaging, extraordinary and relatable than mainstream 6-15 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 6—Source, Message, and Channel Factors

celebrities. He also found that teens have a more intimate authentic experience with YouTube personalities, as they do not feel that public relations professionals orchestrate their images. While the use of endorsements in advertisements is unlikely to go away, it is likely that marketers will make more use of social stars and personalities versus traditional celebrities, particularly since young people are spending more time with social media than traditional media. 8. Evaluate Domino’s decision to run an advertising campaign acknowledging the problems with the taste of its pizza as a way to promote its new recipe. Do you think this strategy was an effective way to promote its reformulated product? (LO 6-3) Domino’s decision to use advertising acknowledging the problems with the taste of its pizza is an example of the use of a two-sided advertising message whereby a marketer presents both positive and negative information about a product or service. Most marketers use a one-sided message mentioning only positive attributes or benefits associated with a product/service or a particular issue whereas a two-sided message presents both favorable and unfavorable information and arguments. The advantages of using a two-sided versus one-sided advertising message are that it may enhance perceptions of an advertiser’s credibility. One-sided messages are most often used since a company may only want to mention positive attributes, benefits or features or present only favorable arguments about its product or service. Many marketers feel it is too risky to say anything negative about their own company or brands. One-sided messages are most effective when the target audience already holds a favorable position toward the topic and will not hear opposing arguments. They may also work better with less educated audiences. For those individuals with an opposing viewpoint or a better-educated audience, a two-sided message may be seen as less biased, more credible, and thus more effective. Domino’s use of a two-sided message appears to have been a very effective strategy. The company knew there were problems with the quality and taste of its pizza, which was why they were reformulating the product. Rather than just announcing that it had changed its pizza, Domino’s and its agency felt that it could get more attention and be perceived as more honest and sincere by acknowledging the problems. The company did take somewhat of a risk as consumers could focus only on the negative part of the message rather than hearing how they were improving the taste of their pizza. This was not the case, however, as the Pizza Turnaround campaign worked very well and led to increased sales. Studies conducted on the two-sided messages showed that consumer reactions were very positive. The two-sided messages also generated a great deal of positive publicity as Dominos was praised for conceding the shortcomings of its product and taking steps to improve the taste. 9. Visit the website for the Montana Meth Project (www.montanameth.org)and choose three ads that use various levels of fear in the message. Discuss why each ad may or may not be effective. (LO 6-3) The Montana Meth project website contains may example of print and television commercials that utilize fear appeals. The level of fear used in these ads varies and student should be able to find examples of ads with low, medium and high levels of fear that can be analyzed for this assignment. Fear can affect persuasion in both a positive and negative manner. A message with a low level of fear can have facilitating effects if it attracts the attention and interest of the consumer and motivates them to consider how they might try to resolve the threat. This suggests that a mild fear appeal may be effective in changing attitudes and behavior of as it may get them to think about the negative consequences involved and think about how they might avoid them. Fear appeals can also have a negative or inhibiting effect and a message that uses too much fear may cause people to tune it out, perceive it selectively, counterargue against it or discount the likelihood of the negative consequences happening to them. One potential problem with anti-messages targeted at young people is that they

Chapter 6—Source, Message, and Channel Factors

tend to perceive themselves as invulnerable and thus they may discount any negative outcomes shown in the message as unlikely to occur to them. A number of factors should be taken into consideration in developing a fear appeal message. Young people are a market segment that may require special consideration when using a fear appeal message. This audience may be likely to discount fear appeal messages that are too strong or seen as too unrealistic. The credibility of the source used in the message may be very important and consideration given to using a source with whom this group identifies and might not easily derogate. Research on fear appeals has shown that they are more effective among nonusers of a product than users. Thus, it may be more effective to target fear appeals at those peers who are not using drugs and encourage them to take responsibility for their friends who might do so. An example of this is the designated driver program and responsible drinking campaigns used by liquor and beer companies. 10. Discuss the pros and cons of using humor as the basis for an advertising appeal. Find an example of an advertising message that uses humor and evaluate it effectiveness. (LO 6-3) Humorous ads are often the best known and best remembered of all advertising messages. Many advertisers, including FedEx, GEICO, Old Spice, Snickers, Budweiser, and Bud Light use humor appeals effectively. Humor is usually presented primarily through TV commercials and online video and to a lesser extent through radio as these media lend themselves to the execution of humorous messages. However, humor is occasionally used in print ads as well, as agency creatives can use images in combination with clever headlines and ad copy to develop humorous messages. The sermon ad for Listerine mouthwash shown in Exhibit 6–22 is a very good example of how humor is used effectively in print media. Humorous messages attract and hold consumers’ attention. They enhance effectiveness by putting consumers in a positive mood, increasing their liking of the ad itself and their feeling toward the product or service. In addition, humor can distract the receiver from counterarguing against the message. A meta-analytic test of various models of how humor works in advertising showed that its effects are primarily based on affective processes and that it can distract from the processing of cognitive information such as brand beliefs and benefits. This suggests that the peripheral processing of humorous messages is dominant and that effort devoted to processing of ad-related affective elements comes at the expense of attention to brand-related cognitions. Critics argue that funny ads draw people to the humorous situation but distract them from the brand and its attributes. Also, effective humor can be difficult to produce and some attempts are too subtle for mass audiences. In addition, there is concern that humorous ads may wear out faster than serious appeals. Wearout refers to the tendency of a television or radio commercial to lose its effectiveness when it is seen and/or heard repeatedly. Wearout may occur if consumers no longer pay attention to a commercial after several exposures or become annoyed at seeing or hearing an ad multiple times. Some experts argue that humorous ads wear out faster than other formats because once the consumer gets the joke, the ad becomes boring. However, advocates of humor argue that funny ads are effective longer as consumers will respond more favorably to a well-executed humorous ad than a serious message. One way marketers deal with this problem is by creating "pool-outs" or multiple executions around a campaign theme that can be rotated so no one ad airs repeatedly during a short time period. For example, large advertisers such as GEICO, FedEx, and Anheuser-Busch InBev generally have a number of commercials available to rotate. However, this can be a problem for smaller companies that do not have a large enough budget to produce multiple commercials. 11. Discuss the problem of advertising clutter and how it is a problem in various media such as magazines, television and radio. What are some of the ways the media can address the clutter problem? (LO 6-4) 6-17 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 6—Source, Message, and Channel Factors

An aspect of the media environment of importance to advertisers is the problems of clutter, which is the amount of advertising that appears in a medium. However, for television, clutter is often viewed as including all the nonprogram material that appears in the broadcast environment—commercials, promotional messages for shows, public service announcements (PSAs), and the like. Clutter is of increasing concern to advertisers since there are so many messages in various media competing for the consumer’s attention. Half of the average magazine’s pages contain ads, and in some publications the ratio of ads to editorial content is even higher. On average, around a quarter of a broadcast hour on TV is devoted to commercials, while most radio stations carry an average of 10 to 12 minutes of commercial time per hour. The average length of a commercial break during prime time on the major networks is just over three minutes, which means viewers are exposed to a large number of ads in a short time period, making it difficult for commercials to attract and hold the attention of viewers as well as communicate effectively. Clutter has become a major concern among television advertisers as a result of increases in nonprogram time and the trend toward shorter commercials. While the 30-second commercial replaced 60-second spots as the industry standard in the 1970s, many advertisers are now using 15second spots. The advertising industry continues to express concern over the highly cluttered viewing environment on TV; the amount of clutter increased as much as 30 percent during the 1990s and has continued to increase over the past two decades. Several factors are causing the increased clutter including lower rating for TV shows as consumers spend more time online and the fact that many marketers are reducing their spending on television advertising and shifting these monies into digital ads. Thus, TV networks are inserting more commercials into programs to offset these factors and avoid revenue declines. Clutter levels have been increasing as the four major broadcast networks and cable networks increased the amount of time allocated to commercials. Broadcast networks average just over 14 minutes of commercial time per hour while cable averages 15 and a half minutes, with some networks averaging more than 18 minutes. Thus, a viewer watching three hours of prime-time programs on the major networks would be exposed to more than 100 commercials in addition to programming promotions, and PSAs. The problem is even greater during popular shows, to which the networks add more commercials because they can charge more. In addition, of course, advertisers and their agencies perpetuate the problem by pressuring the networks to squeeze their ads into top-rated shows with the largest audiences. The clutter problem is even higher on many cable networks and during daytime programs. Recently some cable networks such as TBS and TNT have been using compression technology to speed up the transmission of programs and allow more time for commercials, which is adding to the clutter problem. Advertisers and agencies want the networks to commit to a minimum amount of program time and then manage the nonprogram portion however they see fit. If the networks wanted to add more commercials, it would come out of their promos, PSAs, or program credit time. The problem is not likely to go away, however, and advertisers will continue to search for ways to break through the clutter, such as using humor, celebrity spokespeople, or novel creative approaches. 12. What is meant by a qualitative media effect? Select a television program or a magazine and discuss the nature of the media reception environment created by the show or the publication. What type of companies or brands might be attracted to advertising on this program or in this publication? (LO 6-4) A qualitative media effect refers to the positive or negative influence a media vehicle has on an advertising message as a function of its quality, image, prestige and the reception environment it creates. Media vehicles such as magazines and television programs have qualitative effects since the 6-18 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 6—Source, Message, and Channel Factors

environment they create may have an impact on readers’ or viewers’ mood states and the way they might process and respond to an advertisement. Students should be encouraged to choose a specific magazine and analyze the media environment created by that publication or a television program. A publication such as Cosmo or Vogue will be very different from Good Housekeeping or McCall’s in terms of layout, articles, photographs, and the various products and services that are advertised. Students should be asked to describe these differences and how they might influence the way readers might respond differently to ads in these publications. For television, a popular sitcom such as The Big Bang or Modern Family provides a much different reception environment than a drama or serious news program such as 60 Minutes. Viewers of a sitcom are likely to be in a more light-hearted mood and respond more favorably to advertising than consumers watching more serious programming. Marketers recognize the value of this and often will pay higher CPM rates for ad time on sitcoms.

Additional Discussion Questions (not in text) 13. Discuss the ethics of celebrities endorsing products in foreign countries but not in the United States to protect their image. Do you think celebrities hurt their reputations by doing endorsements and/or appearing in ads? Why or why not? (LO 6-2) As discussed in Global Perspective 6-1, many American celebrities who do not appear in ads in the U.S. make huge sums of money endorsing products and serving as advertising spokespeople in foreign countries such as Japan. These celebrities will not endorse products in the U.S. because they think that it is “selling out” and may be damaging to their image. However, by appearing in ads only in foreign countries they avoid tarnishing their image at home. They take the perspective that they are not really selling out if nobody knows what they are doing so. There really is not anything unethical about celebrities endorsing products in foreign countries. However, one could argue that it is unethical for celebrities to act as though they are above endorsing products when they are indeed doing so abroad. The fact that many celebrities have nondisclosure clauses in their contracts, specifying that the ads they do cannot be shown—or sometimes even discussed—outside of the country for which they are intended suggests that they are taking steps to mislead the public in the U.S. about their commercial endeavors. It has become very difficult for celebrities keep their endorsements in foreign countries a secret and to keep people back home from seeing these commercials. The question as to whether celebrities hurt their reputations by doing endorsements is an interesting one. Some celebrities do not endorse products or appear in ads because this is viewed as a cash-in, cash-out capitalistic maneuver. Endorsing products is not viewed as a creative endeavor because the celebrity is not acting in these commercials, they are endorsing. Obviously, the public knows that celebrities are paid large sums of money to endorse products and this may undermine their image and credibility. However, celebrities may also be concerned with the impact endorsements have on their image in the entertainment community as well. An actor who appears in commercials may lose some credibility and may end up damaging his/her artistic appeal. This may be particularly critical to those who appear in movies. For example, Cher temporarily damaged her credibility as a serious actor by appearing in too many infomercials. On the other hand, one might argue that cashing in on celebrity status is pretty much expected and does not tarnish the image of those who do so. Perhaps the key issue is not whether celebrities endorse products or companies but rather how frequently they do so. Celebrities who endorse too many products may indeed become perceived more as spokespersons than quality actors or entertainers. 14. Most marketers choose an advertising spokesperson or source with high credibility. Discuss some reasons why it may be unnecessary, or even detrimental, to use a source who is high in credibility. (LO 6-2)

Chapter 6—Source, Message, and Channel Factors

There are some situations where high source credibility may not be necessary and may even be a liability. A high credibility source is likely to be most effective when message recipients are opposed to the position advocated in the message, as the credible communicator will inhibit counterarguing and source derogation. However, a high-credibility source may not be needed when the audience has a neutral position and may even be less effective than a moderately credible source when the receiver’s initial attitude is favorable. The reason for this is that when a low credibility source is used the message recipients are encouraged to review personal thoughts that are supportive of their favorable position rather than attributing their feelings to the highly credible communicator. Studies have also shown that high and low-credibility sources are equally effective when they are arguing for a position opposing their own best interest. Another reason why a low-credibility source may be as effective as a high-credibility source is the sleeper-effect phenomenon. While the immediate impact of a persuasive message may be inhibited because of its association with a low-credibility source, the association of the message with the source diminishes over time and the receiver’s attention focuses on the information in the message. Thus, the positive effects of using a high-credibility source will diminish over time as will the initial negative impact of using a low-credibility source. 15. NFL quarterbacks Peyton Manning and Tom Brady are both very popular endorsers. Compare Manning and Brady as advertising spokespersons. Why might a company chose to use one versus the other as an endorser? (LO 6-2) Peyton Manning, formerly of the Indianapolis Colts and Denver Broncos, and Tom Brady of the New England Patriots are two of the top quarterbacks in the National Football League. Both have been very successful as players, having led their team to Super Bowl victories and winning Most Valuable Player awards in the big game as well. However, Manning and Brady bring very different images to the endorsement arena and the way they are used by marketers differs as well. Manning, who is now retired, has more of a traditional, hardcore football player image and is often portrayed as the football player turned everyman in commercials for companies/brands such as Papa John’s, Sony HDTV, DirecTV, and MasterCard. Manning played college football at Tennessee and comes from a football family: his father (Archie) was a quarterback for the New Orleans Saints and his brother Eli is the star quarterback for the New York Giants. He has a very good-guy next-door type of personality and image, and advertisers often value his outgoing personality and playful sense of humor when casting him in commercials. Tom Brady brings a very different image and personality to the endorsement game. Brady is very popular as an endorser as, like Manning, he is an outstanding player and has led his team to four Super Bowl victories. Brady is also popular because of his model-like good looks and his alluring image that extends off the field. His previous girlfriends included actresses and he is married to Brazilian supermodel Gisele Bundchen. Brady has been on the cover of men’s fashion magazine GQ and in 2007, he topped Esquire magazine’s “Best Dressed Men in the World” list, beating out rapper Jay-Z. He is more quiet and reserved than Manning and has limited his number of endorsement deals to only a few brands including UGGs, Stetson cologne, Movado watches, and Glaceau Smartwater. The decision as to which of the star quarterbacks to use will depend on the specific company or brand as Manning would probably be the better choice if trying to reach the more hardcore sports fan and communicate a sports-themed message. Brady would be the better choice for a company trying to create a more unique image and capitalize on his good looks, sex appeal, and alluring image. 17. What is meant by a primacy versus recency effect? When might an advertiser want to try and achieve each type of effect? (LO 6-3) Primacy and recency effects deal with the order of argument placement in a persuasive message. Research on learning and memory generally indicates that items presented at the beginning or end of a message are remembered better than those presented in the middle. Presenting the strongest arguments at the beginning of the message assumes a primacy effect whereby information presented 6-20 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 6—Source, Message, and Channel Factors

first is most effective. Putting the strongest points at the end of the message assumes a recency effect, whereby the last arguments presented are most effective. The decision to place strong arguments at the beginning or end of a message often depends on several factors including the initial position of the target audience and the length of the message. If the audience is opposed to the advertiser’s position, it may be best to put the strongest arguments first to reduce the level of counterarguing. It may also be best to put strong arguments first if the audience has a low level of interest in the topic. However, if the audience is predisposed toward the communicator’s position or is highly interested in the product or issue, strong arguments can be saved for the end of the message. The order of presentation can be critical when a long, detailed message with many arguments is being presented. This may be the case for ads for high involvement products where a great deal of ad copy is used or for sales presentations. However, for short messages such as a 15-second commercial, the order of presentation may be less critical. Order of presentation is also of interest in placement of spot during a commercial break. Most advertisers prefer to have their commercials appear at the beginning or end of a pod rather than in the middle.

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

CHAPTER 7 ESTABLISHING OBJECTIVES AND BUDGETING FOR THE PROMOTIONAL PROGRAM Chapter Overview This chapter focuses on the process of setting objectives and budgeting for the IMC program. The major emphasis is on determining advertising objectives, as they are often the lead element in the promotional mix, particularly in consumer products marketing. This chapter stresses the value and importance of setting specific advertising objectives and the role they play in guiding decisions and evaluating performance. The chapter also focuses on the importance of knowing what to expect from advertising and the differences between sales versus communication objectives. The DAGMAR model is discussed as a viable approach to setting objectives with attention being given to the characteristics of good advertising goals and objectives. Limitations of DAGMAR are also discussed along with other problems firms encounter in setting objectives. The chapter then presents students with an understanding of the advertising and promotions budgeting process. The chapter discusses the theories underlying budgeting decisions and examines the various approaches to budgeting. The chapter concludes with an examination of budget allocation decisions.

Learning Objectives 1. Discuss the value of setting objectives for advertising and promotion. 2. Describe the relationship between promotional objectives and marketing objectives. 3. Discuss sales-oriented objectives. 4. Compare the value of sales objectives and communications objectives as goals for promotional programs. 5. Describe the process of budgeting for IMC. 6. Compare the economic and sales response perspectives on budgeting. 7. Compare different methods of setting budgets.

Chapter and Lecture Outline

INTRODUCTION

The lead-in to this chapter discusses how the changing media environment is forcing marketers to reallocate their advertising expenditures. The chapter then moves into a discussion of the value of setting objectives. It is important to communicate to the student that while setting good objectives can be complex and difficult, it is important for this to be done properly as specific goals and objectives are the foundation upon which all promotional decisions are made. Despite the importance of setting specific advertising and promotional objectives, many companies fail to do so or set them in a manner that is inappropriate or inadequate for guiding the development of the promotional program and measuring its effectiveness. Part of the problem stems from the fact that many marketers are uncertain as to what advertising and promotion can or should do and/or prefer to use sales as an objective.

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

II.

THE VALUE OF OBJECTIVES

One of the reasons many companies fail to set specific objectives for their advertising and promotional programs is that they fail to recognize the value of doing so. There are several important reasons for setting advertising and promotional objectives: A.

Communications—Specific objectives serve as communication devices and facilitate the coordination of the various groups working on the campaign on both the agency and the client side. Problems can be avoided if all parties involved have a set of written and approved objectives to guide their decisions and actions.

Planning and Decision Making—Specific objectives can be useful as a guide or criterion for decision making. Advertising and promotion planners are often faced with a number of strategic and tactical options in areas such as creative, media, budgeting and sales promotion. Choices among these options should be made on the basis of how well a strategy or tactic matches the promotional objective.

Measurement and Evaluation of Results—A very important reason for setting specific objectives is that they provide a benchmark or standard against which success or failure of the campaign can be measured. When specific objectives are set it becomes easier for management to measure what has been accomplished by the campaign.

Professor Notes

III.

DETERMINING INTEGRATED MARKETING COMMUNICATION OBJECTIVES

The determination of objectives for integrated marketing communication occurs after a thorough situation analysis has been conducted and the marketing and promotional problems and opportunities have been identified. A thorough situation analysis is critical as this becomes the foundation upon which marketing objectives are determined and the marketing plan is developed. Promotional objectives in turn evolve from the overall marketing plan and are rooted in the firm’s marketing objectives. A.

Marketing versus Communications Objectives—It is very important to emphasize to the student the differences between marketing versus communications objectives. Marketing objectives are generally stated in the firms marketing plan and are statements of what is to be accomplished by the overall marketing program within a given time period. Marketing objectives are usually defined in terms of specific, measurable outcomes such as sales volume, market share, profits, or return on investment. The achievement of marketing objectives will depend upon the proper coordination and execution of all the marketing mix elements, not just promotion.

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

Integrated marketing communications objectives are statements of what various aspects of the IMC program will accomplish. They should be based on the particular communication tasks that are required to deliver the appropriate message to the target audience. This requires the translation of general marketing goals into communication goals and specific objectives. Many promotional planners approach promotion from a communication perspective and view the objective of advertising in particular as that of communicating information or a sales message about a product or service. However, this is not always the case and leads to the debate over sales versus communication objectives. Professor Notes

IV.

SALES VERSUS COMMUNICATION OBJECTIVES

Sales-Oriented Objectives—Many marketing managers view their advertising and promotional programs from a sales perspective and argue that sales or some related measure such as market share is the only meaningful goal for advertising and thus should be the basis for setting objectives. They take the position that the basic reason a firm spends money on advertising and promotion is to sell its products or services. Thus they argue that any monies spent on advertising should produce measurable sales results. 1. Problems with sales objectives—Problems with this approach include: • problems in achieving sales could be a function of other marketing mix variables such as product design or quality, packaging, distribution, or price. • problems in achieving sales could be due to other macro factors such as the economy, competition, or consumer trends. • the carryover effect, which suggests that the effects of advertising on sales are not always immediate and occur over an extended time period. • sales objectives offer little guidance or direction to those responsible for planning, developing and executing the promotional program. 2. Where sales objectives are appropriate—While there are problems in attempting to use sales as objectives for an advertising and promotional campaign, there are situations where they may be appropriate, such as: • when the promotional efforts are direct action in nature and are designed to induce a more immediate response. For example, many sales promotion programs have sales objectives since their goal is often to generate trial or short-term sales increases. • direct response advertising which measures success of a campaign in terms of the sales response generated by an ad. • retail advertising where short-term or direct action is sought such as during sales or special promotions. •

in situations where advertising plays a dominant role in the marketing program and other factors are relatively stable.

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

B. Communications Objectives—Many marketers take the perspective that the primary role of promotional mix elements such as advertising is to communicate and effects should be based on communication objectives. Advocates of communication objectives generally use some form of the hierarchical models discussed in Chapter 5 as a basis for setting advertising objectives. The underlying logic of these models is that as consumers pass through successive stages of the response hierarchy they move closer to purchase, and advertising’s purpose is to help move them through. •

•

Communications effects pyramid—The text uses the communication effects pyramid (Figure 7-2) as a way of understanding the communication tasks to be performed by advertising and promotion. The marketer must accomplish lower level objectives such as awareness and knowledge which builds a strong foundation or base. Subsequent tasks involve moving consumers to higher levels in the pyramid so as to get them to the top where trial and regular use/repurchase occur. It is important, however, to point out that the percentage of prospective customers moved to each level will decline in most instances. Problems with communications objectives—It should be noted that not all marketing and advertising managers accept the idea of using communication objectives. Accomplishing communication objectives is seen as being of value only if this results in sales. Moreover, translating a sales goal into communication objectives can be difficult. For example, you might discuss what constitutes an adequate level of awareness, knowledge, liking or conviction. While there are problems with communication-oriented objectives, it should be pointed out that at some point a company must determine what it hopes to communicate and to whom. Communication objectives are the criterion used in the DAGMAR model which has become one of the best known and most influential approaches to the advertising planning.

Professor Notes

DAGMAR: AN APPROACH TO SETTING OBJECTIVES

DAGMAR (Defining Advertising Goals for Measured Advertising Results) is a model developed by Russell Colley for setting advertising objectives and measuring the results of a campaign against these objectives. Under DAGMAR an advertising goal involves a communications task that is specific and measurable. A communications task involves something that can be performed by and attributed to advertising. Communication tasks in DAGMAR are based on a hierarchical model similar to those discussed in Chapter 5. While hierarchical communication effects form the basis of DAGMAR, there are other specific communications tasks that advertising might be expected to perform or help accomplish. A.

Characteristics of Objectives—A major contribution of DAGMAR was Colley’s specification of what constitutes a good objective. Four requirements or characteristics of good objectives were noted: 1. Concrete, measurable tasks—The communications task or objective should be a precise statement of what appeal or message the advertiser wants to communicate to the target audience. The objective should be measurable in that the method and criteria used for determining if it has been properly communicated should be specified.

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

2. Target audience—A good objective should specify a well-defined target audience. The target audience is usually identified in the situation analysis and may be based on the variables discussed in Chapter 2. 3. Benchmark and degree of change sought—Another important part of setting objectives is having benchmark measures to determine where the target audience stands at the beginning of the campaign with respect to various communication response variables such as awareness, knowledge, attitudes, image, etc. The objectives should also specify how much change or movement is being sought such as increase in awareness levels, creation of favorable attitudes or number of consumers intending to purchase the brand, etc. 4. Specified time period—A final characteristic of good objectives is the specification of the time period during which the objective is to be accomplished. The time period should be appropriate for the communication objective as simple tasks such as increasing awareness levels can be accomplished much faster than a complex goal such as repositioning a brand. B.

Assessment of DAGMAR—There are certain problems and limitations to DAGMAR which should be discussed. These include: • Problems with the response hierarchy—Reliance on traditional hierarchical type response models is a problem in the original version of DAGMAR. However, the updated version of the model, DAGMAR MOD II, recognizes the need for a modified response hierarchy that is appropriate to the buying situation such as in high- versus low-involvement purchases. •

•

Sales objectives—Proponents of sales objectives argue that communication objectives advocated by DAGMAR are a “cop-out” and a way of ignoring the basic goal of advertising which is to generate sales. They argue that since a communication objective is of interest only if it can be shown to be related to sales, why not simply use sales as the objective? Practicality and costs—DAGMAR is criticized for being difficult to implement and practical only for big companies with large marketing and advertising research budgets who can afford to establish quantitative benchmarks and measure communication results. Inhibition of creativity—DAGMAR is also criticized on the grounds that it can inhibit creativity by imposing too much influence or structure on creatives. The creative department may become too concerned with “passing the numbers test” rather than developing great ideas that result in unique and effective advertising. Many advertising people have blamed the lack of great creative ideas and campaigns in the U.S. in recent years on an over quantification of advertising objectives.

Professor Notes

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

McGraw-Hill Connect ®: Communication Effects Pyramid Type of Activity: Click and Drag Activity Summary: In this activity, students will identify the correct sequence of the various stages in the consumer decisionmaking process. They will then read about the Sunday Motor Corporation, an Asian automaker launching a new SUV. To track the effectiveness of the IMC campaign, Sunday Motor Corporation hired AutoSmart, a research and consulting firm that specialized in the automotive industry. Students will match the research findings from AutoSmart’s reports to the corresponding stages in the Communications Effects Pyramid and the GfK Purchase Funnel. Activity Learning Objectives: 07-03 Discuss sales-oriented objectives. 07-04 Compare the value of sales objectives and communications objectives as goals for promotional programs. CONCEPT REVIEW: Advertising and promotion perform communications tasks in the same way that a pyramid is built, by first accomplishing lower level objectives and subsequently moving to higher level objectives. The initial stages are easier to accomplish than those towards the top, and hence the percentage of prospective consumers will decline as one moves up the pyramid. The communications effects pyramid can also be used to determine promotional objectives for an established brand. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

VI.

PROBLEMS IN SETTING OBJECTIVES

Most advertisers and their agencies fail to follow the basic principles and guidelines set forth in DAGMAR. They often fail to set specific objectives for their campaigns and/or do not have the proper evidence to determine the success of their promotional programs. A.

Improving Promotional Planners’ Use of Objectives—Advertisers and their agencies should strive to set specific and measurable objectives that serve as a guide to promotional planning and decision making. Part of this problem stems from a lack of understanding of the role and function of advertising. It is unlikely that most firms are going to set objectives following all of the criteria set forth in DAGMAR. However, promotional planners should set objectives that are specific and measurable and go beyond simple sales goals.

Setting Objectives for the IMC Program—Most of the attention in the promotional area has focused on advertising since it is often the lead element in the promotional mix and other promotional mix elements such as sales promotion, direct marketing, and publicity are used to support and complement the advertising program. Advertising-based views of marketing communications planning, such as DAGMAR, have dominated the field for many years. However, as more companies adopt IMC they are considering how the various promotional mix tools can be used to communicate with their customers. 7-6

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

Advocates of IMC have called for new approaches to promotional planning and IMC. For example, Professor Don Schultz of Northwestern University advocates the use of an outside in planning process to IMC that starts with the customer and builds backwards to the brand rather than inside-out planning. Professor Tom Duncan argues that IMC should use zero-based communications planning which involves determining what tasks need to be done and which marketing communications functions should be used and to what extent. This approach focuses on the task to be accomplished and searches for the best ideas and ways of accomplishing it. Duncan suggests that an effective IMC program leads with the marketing communication function that most effectively addresses the company’s problem or opportunity. It should be noted that the criteria discussed in determining advertising objectives are relevant to other promotional mix elements as well. A more thorough discussion of objectives for promotional mix elements such as sales promotion, publicity/public relations and personal selling is provided in the chapters where these topics are covered. Professor Notes

VII.

ESTABLISHING AND ALLOCATING THE PROMOTIONAL BUDGET

As noted in the text, the budgeting decision is not a trivial matter. Whether the firm is spending millions of dollars or thousands, this decision will have a direct impact on the success of the communications program. As can be seen by examining the decision sequence model presented in Chapter 1, budgeting decisions are not made in isolation. These decisions require an interactive process in which the communications objectives must be taken into consideration. Likewise, the budget directly impacts the promotional mix strategies that are to be developed. Thus, both the size of the budget, and the way that it will be allocated must be given much attention A.

Establishing the Budget 1. Theoretical issues in budget setting—Most of the models used to establish advertising budgets can be categorized as taking an advertising or sales response perspective. In this section we discuss some of them. a. Marginal analysis—Figure 7-8 in the text illustrates the concept of marginal analysis. As the figure indicates, as advertising/promotional efforts increase, sales and gross margins will also increase to a point and then level off. In using marginal analysis, the firm would continue to spend promotional dollars so long as the marginal revenues created by these expenditures exceeded the incremental costs. When the dollar expenditures exceed the returns, the budget should be scaled back. In other words, the optimal budget would be at that point where marginal revenues are equal to marginal costs, or where mr = mc. While this economic model seems logical intuitively, in fact, there are two major weaknesses that limit its applicability: (1) The assumption that sales are a direct measure of advertising and promotions efforts, and (2) the assumption that sales are determined solely by advertising and promotions.

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

b. Sales response models—Two budgeting models based on sales response are discussed in the text. The first of these—the concave-downward function—is based on the microeconomic theory of the law of diminishing returns. Essentially, the model states that as the amount of advertising expenditures increases, its incremental value decreases. The basic argument is that those most likely to buy the product are likely to do so as a result of the earliest exposures. Additional exposures are not likely to increase the probability of their purchasing, nor is it likely to have an effect on those who are undecided or unlikely to buy. Thus, the effects of advertising would rapidly diminish. The second model—the S-shaped response function—takes a very different approach. In this model, it is argued that initial outlays of promotional dollars will have very little impact on sales. As indicated in Figure 7-9, in Range B an impact will begin to be noticed, carrying through to Range C, where additional expenditures have again very little impact. This S-shaped curve suggests that there are incremental values to be accrued from additional dollar outlays, but only to a point. For example, it would be argued that a certain level of expenditures is necessary to make an impact. However, after a certain point (beginning of Range C) these dollars are unlikely to be of value. In other words, no matter how much I spend, if you don’t want the product, advertising isn’t going to make you buy. As with marginal analysis, the marketer would want to establish the budget at the point where s/he gets the optimal value for the outlay. c. Additional factors considered in budget setting—In addition to considering the theoretical aspects of budget setting, a number of other factors must be taken into consideration including: situational factors; customer factors; the competitive environment; etc. Figures 7-10 and 7-11 can be used to demonstrate this point quite effectively and are useful to provide a perspective of what advertisers and their agencies consider the most important factors to consider in setting the budget. Professor Notes

Budgeting Approaches—This section discusses the variety of approaches that marketers use in establishing their budgets. These approaches can be classified as either top-down or build-up approaches. (Figure 7-12) 1. Top-down approaches—In these methods of budgeting, the budget is established at the “top” by management, and is passed down to the managers. Top down approaches generally include the following: a. the affordable method—In this approach, the firm determines what level of advertising and promotions expenditures they feel that they can afford, and set this amount as the ad budget. b. arbitrary allocation—When budgets are set through arbitrary allocation, there is no real rhyme or reason for the amount established. Sad as this may seem, the truth is that for many firms this is the method employed. c. percentage of sales—Perhaps the most commonly employed method of setting budgets in large firms is the percentage of sales method. As noted in the text, there are a number of variations on this method, as some firms use a flat percentage of sales figure, while others may assign a percentage of the product cost to advertising with the budget based 7-8

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

on the number of units sold (see Figure 7-13). In addition, another variation stems from which year is considered the base year for sales. One approach uses past sales histories, while the second—a percentage of projected future sales—uses projected sales figures. Many firms employ both methods, with a projection used for planning, and the final budget adjusted according to actual sales. Figure 7-14 provides advertising-to-sales ratios by industry sector. d. competitive parity—In this method, budgets are set by matching the percentage advertising/sales ratios of competitors. Schonfeld and Associates publishes the percentage of sales figures by product type, and this method would be easily demonstrated in the classroom. Figure 7-14 can be used to show some percentage of sales figures, and the instructor can explain that in using a competitive parity method, companies competing in the same industries would have equal or nearly equal ratios. e. Return on Investment (ROI)—One of the most discussed topics in recent years is that of how to determine ROI. The basis of this approach is that advertising expenditures should be considered as an investment, returning sales as a result. Unfortunately, for many of the reasons cited in the text, the ability to demonstrate this relationship is very difficult. 2. Build-up approaches—A more effective method of budgeting is that offered by build-up approaches. In build-up approaches, specific objectives are established, and budgets are determined based on the costs required to attain these goals. Three such approaches are discussed in the text. a. objective and task method—Figure 7-18 demonstrates the steps required in using the objective and task approach. As can be seen, the process involves establishing objectives, determining the specific tasks associated with attaining these objectives, and determining the costs associated with these tasks. Monitoring and re-evaluation of these steps is critical to the success of this method. b. payout planning—By projecting the revenues that a product is expected to return over a period of two to three years, the marketer can develop a payout plan. Based on this expected rate of return, the marketer can assist in the determination of the advertising expenditures necessary. An example of a payout plan is presented in Figure 7-20. c. quantitative models—As noted in the text, quantitative models have not met with the success that might have been expected of them. Most of these models have employed the use of multiple regression analysis using sales as the dependent variable, which may account for much of the problem. Figure 7-21 provides the results of a study by Low and Mohr regarding the advertising budget setting process. As can be seen, the nature of the decision process and a variety of factors have been shown to come into play in this decision. Allocating the Budget—A number of factors influence marketers in their determinations as to how the budgets will be allocated. Recent years have seen a shifting of advertising dollars to other media including the Internet and nontraditional media. Figures 7-22 provides an example of media expenditures. A variety of factors must be considered in determining how advertising and promotional dollars will be allocated. 1. Client/agency policies—Corporate politics, policies, etc. may all impact the allocation of advertising and promotions dollars. As noted, agencies and advertisers may both have their preferences as to how monies will be spent. 2. Market size—The size of the market will often determine how much monies need to be allocated therein. For example, smaller markets may charge less for media time, may be more easily covered, etc. than larger ones. 7-9

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

3. Market potential—Certainly the potential of the market must be considered. The previously discussed concept of target marketing would dictate that market potential should be considered in the budget allocation decision. 4. Market share goals—The market share goals established by the firm—that is, increasing or maintaining share—will impact the allocation decision. A study by John Jones concluded that (1) new brands generally receive higher than average advertising support; (2) older, more mature brands are often “milked”—that is, advertising expenditures are reduced; and (3) there is an advertising economy of scale operating. In another study, James Schroer suggests that to have a growing market share marketers should: • segment markets • determine competitors’ cost positions • resist the lure of short term profits • consider niching strategies 5. Economies of scale in advertising—Some practitioners believe that there are economies of scale that accrue to marketers holding large market shares, which allows them to spend less money due to their past successes. As noted in the text, there is little or no evidence to support this theory, and some studies show that an opposite effect may occur. 6. Organizational characteristics—After reviewing the literature, Low and Mohr conclude that a number of organizational factors influence the budget allocation decision. These factors include: • the organization’s structure, • power and politics in the organizational hierarchy, • the use of expert opinions, • characteristics of the decision maker, • approval and negotiation channels, and • pressure on senior managers to arrive at an optimal budget. Professor Notes

McGraw-Hill Connect ®: Budgeting Approaches Type of Activity: Click and Drag Activity Summary: In this activity, students will match the budgeting approaches with the disadvantages associated with each of the methods. Activity Learning Objective: 07-07 Compare different methods of setting budgets.

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

CONCEPT REVIEW: There are two broad budgeting approaches for setting advertising and promotions budgets – top-down and build-up. In top-down budgeting methods, a budgetary amount is established, usually at an executive level, and then monies are passed down to form the promotional budget. These budgets are predetermined and have no true theoretical bases. In contrast, build-up budgeting methods are those in which the firm's communications objectives are considered, the strategies and tasks needed to achieve them are identified, and the estimated total cost for those strategies and tasks forms the promotional budget. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

McGraw-Hill Connect ®: Allocating the Promotional Budget Among Brand Managers Type of Activity: Case Analysis Activity Summary: Bee & Gee is a multi-product, multi-brand, packaged goods company with a significant presence in the personal care and grooming category. Within each product category, it has numerous brands that sometimes compete with each other in the same geographical markets. Bee & Gee allocates its annual promotional budget for each product category using a top-down budgeting approach, after which brand managers of brands in each product category compete for promotional dollars for their own brand by submitting budget proposals. This activity will have the students select the best answer for each question related to their promotional budget. Activity Learning Objective: 07-07 Compare different methods of setting budgets.

CONCEPT REVIEW: Once the promotional budget has been set, the next step is to allocate it. The allocation decision involves determining which markets, products, and/or promotional elements will receive which amounts of the funds appropriated. Some factors that influence budget allocation are—IMC element mix, client/agency policies, market size, market potential, market share goals, economies of scale in advertising, and organizational characteristics of the marketer's firm. Difficulty: Medium Bloom’s: Analyze AASCD: Analytical Thinking

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

Teaching Suggestions

We feel that from an integrated marketing communications planning perspective, this is one of the most important chapters in the text. It is very important for students to understand the importance of setting good objectives to guide the planning and development of an advertising campaign as well as for providing a benchmark or standard against which performance can be measured and evaluated. This chapter builds on material in previous chapters, particularly Chapters 2 and 5, as it stresses the difference between marketing and sales versus communication objectives and the role of advertising in influencing sales. The DAGMAR model relies heavily on the response hierarchy models discussed in Chapter 5. Students should recognize that the specific communication objectives that are appropriate will vary depending on the buying situation. The DAGMAR model is discussed in detail as a viable approach to setting advertising objectives. A very valuable aspect of Colley’s work on DAGMAR is the specification of characteristics of good objectives which are discussed in the text. While most companies are not going to meet all of the criteria set forth in DAGMAR, it is important that students recognize the characteristics of good objectives. Another important issue to address in discussing this material is the difference between sales versus communication objectives. We discuss the basic characteristics of each, when they are appropriate and problems with using sales and communication objectives. The instructor may want to find some examples of campaigns which have won awards and/or have been very effective from a communications perspective but not in terms of sales. The discussion can focus on the role of advertising and whether there are other problems or factors which may be inhibiting sales. A very good and interesting example which might be used here is to demonstrate that an advertising campaign can impact sales is presented in the discussion on GEICO. Some instructors may wish to divide the lecture into two sessions. The first can be devoted to discussing the objective setting process and the second on budgeting. In the budgeting session we usually start the lecture with the theoretical perspective, explaining the two advertising/sales response models discussed in the text. A discussion and evaluation of each of the budgeting methods usually follows. (For example, Figure 7-13 can be very useful in demonstrating the percentage-of-sales method. It could also be noted that many companies use this as a guide in setting their budgets to remain at competitive parity). The budget allocation decision is illustrated very well by showing Competitive Media Reporting examples of monies and percentages of budgets assigned to the media this service tracks. It is important for the instructor to demonstrate some of the strengths and weaknesses associated with both the theoretical models and the budgeting methods themselves. The major problem with the former is the fact that sales are used as the dependent variable. Students need to know that while it is sales (or some other behavior) that is ultimately sought, it is often very difficult to demonstrate directly the advertising/sales relationship—which to a large degree explains why regression-based models have also had limited success. The chapter’s discussion of ROI demonstrates both the importance and frustration involved in attempting to make this determination. Likewise, the budgeting methods discussed are also fraught with weaknesses the student must be aware of. An effective way of demonstrating this for the bottom-up methods is to ask students to prepare a fictional budget for a product. They will very quickly realize the problems associated with trying to determine payouts and assigning costs to the tasks required to attain specific objectives.

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

Answers to Discussion Questions

Explain some of the factors that might lead to success in increasing sales and achieving communications objectives when competitors decrease their budgets. (LO 7-7) As the text notes, some companies are keen to take advantage of competitors’ decreases in budgets. Their experiences have shown that by increasing their own budgets at the same time they can make sometimes significant gains. The fact that the competitors sometimes leave the advertising arena, results in these companies no longer even being seen, known, or reminded to the consumer. Even if the competitor just cuts the budget, the non-cutter will achieve a greater share of voice, as the competitors’ ads will be shown less often. If one believes that advertising is an effective mechanism for communicating to the market, then those companies reducing budgets will lower the possibility of using this to their advantage. 2. Discuss why the allocation of media dollars to digital and social media at the expense of traditional media is considered by some marketers to be a “knee-jerk reaction.” (LO 7-5) The monies previously allocated to traditional media are increasingly being moved to digital media. At the same time, not everyone is on board with what they consider to be more of a kneejerk reaction than a sound strategy, as many managers admit they don't yet know if their digital expenditures are paying off. Those managers who have been hesitant to move strongly into digital argue that it is necessary to establish concrete communications objectives to guide their media strategies. These objectives should be based on purchase decision models that guide the budget allocation to various media, and not just the fact that a particular media category is trending. Many large companies have been using these purchase decision models for a number of years, and continue to do so. At the same time, not everyone agrees with their use or their validity, arguing that the models are either outdated or should never have been used in the first place. As the media environment continues to change, marketers continue to examine these models and their value in guiding the IMC program. The success of a program can and should be measured by both marketing and communications objectives. 3. Why are the affordable and arbitrary allocation budgeting methods considered to be very poor budgeting methods? (LO 7-5) Top-down approaches—in these methods of budgeting, the budget is established at the “top” by management, and is passed down to the managers. Top down approaches generally include the following: a. the affordable method—In this approach, the firm determines what level of advertising and promotions expenditures they feel that they can afford, and set this amount as the ad budget. b. arbitrary allocation—when budgets are set through arbitrary allocation, there is no real rhyme or reason for the amount established. Sad as this may seem, the truth is that for many firms this is the method employed. 4. Explain why communications measures may be better to use than sales or market share objectives when developing the IMC plan. (LO 7-1)

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

Specific objectives for the IMC program facilitate coordination of the various groups working on the campaign. Many people are involved in the planning and development of an integrated marketing communications program on the client side as well as in the various promotional agencies. The advertising and promotional program must be coordinated within the company, inside the ad agency, and between the two. Any other parties involved in the promotional campaign, such as public relations and/or sales promotion firms, research specialists, and media buying services, must also know what the company hopes to accomplish through its marketing communications program. Many problems can be avoided if all parties have written, approved objectives to guide their actions and serve as a common base for discussing issues related to the promotional program. In regard to marketing versus communications objectives, it is well known that sales and marketing objectives have too many other variables influencing their outcome. What if the communications strategy attained the sought purchase intention, but the product was not found in the distribution channel? Did the communications strategy work? Yes. Distribution failed to achieve the marketing and sales goals. Achieving communications objectives can be more precisely measured and their attainment will contribute to the achievement of marketing and sales objectives. 5. Explain the S-shaped response curve and the concave-downward curve as they relate to budget setting. What are the differences in these two curves? Give examples of how each might be more appropriate for different products. (LO 7-6) The s-shaped response curve makes the assumption that certain levels of advertising expenditures must be reached before any noticeable impact on sales will occur. According to this model, initial outlays will have little or no noticeable impact on sales, then additional outlays will have a very noticeable effect to a point at which sales will level off and additional expenditures will again have little or no impact. The concave-downward model follows the economic model of the law of diminishing returns. That is, as the amount of advertising increases, its incremental value decreases. thus, the effects of advertising would almost immediately begin to decrease. As can be seen, the models differ substantially in respect to the impact of advertising expenditures. In the former model, the impact of advertising will not even begin to be felt until a certain level of expenditures has been reached. Those who believe that advertising spending has a cumulative effect would adhere to this mode. In the concave downward model, the impact takes place almost immediately, with incremental expenditures having less and less value. The models would also differ in respect to their appropriate us based on the types of products being advertised. For example, the S-shaped response curve would seem to indicate an ability of the advertising to stimulate sales, both through the provision of information and throughout persuasive capabilities. As noted, it would support the fact that ads have a cumulative effect, and the additional ad spending may lead to additional sales. The concave-downward model, on the other hand, would argue that consumers are already in a mindset to buy or not buy, and the value of the advertising is primarily to inform not to persuade. Additional levels of ad spending will not be effective in changing one’s mind, or motivating them to purchase. If these assumptions are true, it would seem that for high-involvement products, the concave downward model would be more likely to be operating, while the S-shaped response might better explain products for which the consumers’ mind has not already been made up. In other words, the concave model assumes there will be little or no search, or that this search has been concluded. the ads primary impact is on the decision to buy. (Otherwise, additional expenditures would be likely to be effective at the search stage.) The S7-14 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

shaped model would seem to be more effective when the decision hasn’t yet been made, and the consumer can still be impacted by the ads. 6. Companies like P&G and Kraft Foods have found success by increasing their IMC budgets while other companies reduce theirs during a recession. Explain why they have likely achieved this success. (LO 7-7) Companies like P&G and Kraft are successful for a reason. That reason is making sound marketing decisions. Many companies treat advertising and promotions as an expense rather than an investment, with the first budgets to get cut when sales begin to decline are those of marketing. While common, this is not likely to be an effective strategy. Companies like P&G and Kraft have determined this, and typically do not make cuts. If one recognizes that advertising as an investment rather than in expense, it would make more sense to increase expenditures during a downturn. In fact, that is what advertising is supposed to do—help sell the product. Reducing the budget is likely to lead to even further sales declines, given the reduction in support. It seems illogical to think, “sales are going down, so let’s cut our marketing efforts,” but that is what most companies do. In addition, if competitors reduce their budgets, those who continue to allocate, or increase allocations, will experience a greater share of voice, as there will now be less advertising clutter in the marketplace. Kraft and P&G’s ads will be even more likely to be seen. Many successful companies actually increase their advertising expenditures in hard times for these very reasons. 7. Some marketers feel that the hierarchy of effects models may no longer reflect the characteristics of the consumer decision-making process. Discuss the pros and cons of these arguments. (LO 7-4) A study published in McKinsey Quarterly claimed the purchase funnel dead, arguing that consumers no longer make decisions in a linear fashion and have changed the way they go about making purchase decisions. The report states that decision making has become more complex and dynamic, and the stages have become interdependent and consumers are influenced at any time during the process. Likewise, Sue Unerman, chief strategy officer at MediaCom, claims that the purchasing funnel is not dead but pregnant. She contends that the traditional model must be adapted to account for new media. Unerman notes that the traditional funnel shape is being replaced by one that shows the traditional narrowing at the consideration stage but then bulges when the known and trusted brands are joined by new ones found on Internet searches, blogs, Facebook, and other new media. Yet another nonbeliever in consumer funnels is Joseph Jaffe, president of Crayon, who thinks funnels need to be flipped. According to Jaffe, the traditional funnel is outmoded, as marketers spend too much money trying to funnel the consumer universe (many of whom don’t care about the product or service) down to a handful. He says monies should be spent on this handful to get more out of them, resulting in a more efficient, effective, and profitable strategy. By focusing on establishing a strong relationship with customers after the sale, companies can take advantage of the new viral world as consumers 7-15 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

interact with and influence many other consumers, each of whom may make multiple transactions. Not everyone is convinced that employing a funnel is no longer a viable strategy. In a study designed to determine if the purchase funnel still works, the Television Bureau of Advertising (TVB) was more interested in how media impacts consumers in the decision-making process. Yankelovich (a research company) and TVB examined how 3,002 consumers employed traditional and new media at each step in the process. The results indicated that media had an influence on 80 percent of the consumers at the awareness phase, declining to 53 percent at the transaction stage, and that the impact varied depending upon the product category, but the funnel approach still made sense. The Advertising Research Foundation (ARF) found data to support both sides of the argument, again concluding it varies by product category.

8. Explain why it is so difficult to directly measure the impact of advertising on sales. What factors may inhibit this determination? (LO 7-3) Perhaps one of the most common questions to which marketers seek an answer (and are asked by stockholders, accountants, and others) is whether the money being spent on advertising are leading to sales, and is being spent wisely. Thus, there has always been an attempt to relate advertising to sale, primarily be economists, without any concrete conclusions forthcoming. The problem with establishing this relationship is that a number of other factors affect sales, including environmental effects, other marketing variables, etc. For example, if one has good advertising and draws customers to the stores, but the store is out of inventory, it is possible to get a good assessment of the advertising? Or, what if the product is of poor quality? The advertising may have drawn people to the product, but once they tried it they refused to buy it again? What if the advertisement leads to my wanting a Rolls Royce? If the price is too high, was it the fault of the advertising that I did not buy? Sometimes advertising can be effective at creating sales but at a later date. In advertising, this is referred to as the “lag” effect. What if I see the ad now, but don’t buy until later? Is it possible to measure the impact of the advertising directly on the sales? Many factors impact the advertising-sales relationship, making it difficult to isolate the impact of only the advertising. While marketers have made great strides in this regard, unless there is testing in a controlled environment, the exact relationship will not be known. 9. Explain some of the reasons marketers are shifting their budget allocations from traditional to digital and social media. What are some of the advantages and disadvantages with this reallocation? (LO 7-5) The world is becoming—or already has become—a digital world. Almost everyone is on the Internet, and the majority of the population in the U.S. and first world countries are involved with social media. Children are learning in school on iPads. High schoolers can only get assignments and grades online ins some schools and digital toys have become the new babysitters replacing television. With the coming of the digital age is the demise of many traditional media. Younger people rarely read a newspaper, and if they do, it is probably online. Programming is watched on mobile 7-16 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

devices almost as much as TV. General news magazines are struggling to survive—Newsweek hasn’t. Mobile is the fastest growing medium, and is not only enjoyed, but relied upon, by the younger generation. The result of all of this is that many marketers have shifted their advertising allocations to digital media, at the expense of traditional media. But traditional media are not dead yet. Numerous studies have indicated that at the top of the funnel (awareness and interest), television is still the main source of information for consumers. Magazine ads have also been shown to drive search, as have newspapers (to a lesser degree). While digital media have taken over at the later stages of the response hierarchies, they are not as effective as some traditional media at earlier stages. More than one company, for example P&G and GM, have moved advertising dollars from traditional media to digital only to move them back again. While both had discontinued ads on the Super Bowl, they have both come back, recognizing the reach from this event as well as the ability for these media to generate interest. In a successful IMC program there is a need for a mix of traditional and new media. In a sense, that is what IMC is all about.

10. Why is it important for marketers to set specific objectives for advertising and promotion? What criteria must these objectives meet to be valid? (LO 7-1). Objectives are necessary to effectively plan and evaluate the communications program. Think about it as taking a trip. The roadmap serves as the plan, and specific objectives are set in regard to where you want to be and when. Your progress is measured by the attainment of these objectives. It is important for marketers to set objectives for proper coordination of the promotional program elements. What is the message going to achieve? How will various media like advertising, public relations, and the Internet be used? How much money is to be spent in each medium? Secondly, as noted, the communications are part of the strategic map as to what is to be accomplished, and when. Without these communications, there is no plan. Finally, communications objectives serve as a basis for evaluation of the success or failure of the program. Too many marketers fail to measure the effectiveness of their programs because they do not know what to measure. Once they understand the value of communications programs, they will be more effective in determining the proper metrics for this purpose. To serve as valid objectives, specific criteria must be met. These include (1) they must be concrete and measurable, (2) they must include and define a specific target audience, (3) they must establish a benchmark and specify the degree of change sought, and (4) they must be time specific. In addition, objectives must be realistic and attainable. By adhering to these criteria, the objectives will be useful in developing the overall IMC plan.

Additional Discussions Questions (not in text) 11. As noted in the chapter, there is an increased emphasis on the determination of ROI. Discuss some of the reasons leading to this increase in attention. Why is it so difficult to measure ROI? (LO 7-7) 7-17 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

For years marketers have wondered about the impact of their promotional expenditures. While some media, like direct marketing and sales promotion, could demonstrate some of the impact of their investments, others –particularly advertising—had a much more difficult time doing so. Many advertisers recognized the difficulties associated with measuring effectiveness, and as a result, made little or no attempts to do so. However, as the media landscape changed, particularly with the growth of direct marketing and the Internet, the importance of being able to determine which media would provide the greatest ROI increased significantly. As direct marketers were able to show the returns through measures such as cost per order, etc. the pressure on demonstrating the returns of other media naturally increased. When companies invest millions of dollars in their IMC programs, the need for accountability seems obvious. Unfortunately, the measure that most marketers want to see is the impact on sales. Thus, for the most part, when companies attempt to measure ROI, they attempt to look at the impact of various media expenditures on sales (or other marketing objectives). Because there are other factors beyond advertising and promotions that impact sales, it is often difficult to isolate the ROI of the communications programs specifically. For example, what if the IMC program is very effective, but the consumer doesn’t like the product? What if the price is too high? What if the product is not available when the consumer goes to make a purchase? Using sales as the criterion for determining ROI, could lead to the conclusion that the communications program didn’t work, when in fact it did. Certainly sales is the critical element that marketers want to see. However, achieving one’s communications objectives will likely lead to increases in sales (all other factors such as price, product and distribution being in place). Thus, marketers need to understand that they must measure communications objectives and not just drop to the bottom line (sales, marketing objectives) to determine IMC effectiveness. By measuring communications objectives, the marketer may be able to isolate the contributions of the IMC program, as well as determine what other factors might be impacting. 12. Chapter 7 differentiates between communications objectives and sales objectives. Explain the difference. What are examples of communications objectives? From where are these objectives derived? (LO 7-3) As noted in the text, marketing objectives are stated in the marketing plan and refer to what is to be accomplished by the overall marketing program. These objectives are derived from the marketing situation analysis, and typically relate to sales, market share, and similar goals. Communications objectives are specifically related to what the organization will attempt to achieve with the promotional program. While these objectives are designed to assist in the achievement of the overall marketing objectives, they are not the same (though some companies may treat them as such). Communications objectives, while designed to help achieve overall marketing objectives, are those sought in the development of the communications program. Awareness, knowledge, interest, and attitude change are just a few examples of communications objectives. As with marketing objectives, communications objectives must meet the same criteria of effective objectives, e.g., measurability, attainability, and the like. Communications objectives are often derived from response hierarchy models (see Chapters 5 and 6). As noted in the text these models may vary somewhat depending upon their original intent (to determine advertising effects, adoption, etc.), but they still meet the criteria for sound objectives, and 7-18 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

focus on the necessity for the communications program to move potential consumers through a series of steps toward the ultimate goal. These hierarchies are supported by years of studies demonstrating their validity. As such, they serve as excellent measures of communications impact. 13. The AAAA contends that advertisers should not cut their budgets during a time of recession. Explain why advertisers usually do make cuts in marketing communications budgets during a recession. Is this likely to be an effective or ineffective strategy? Explain why. (LO 7-5) It seems logical to some that when sales start to decline, such as in a period of recession, that advertising expenditures should be cut. To others, like the AAAA, this is exactly the wrong thing to do. The primary reason for cutting advertising expenditures during a recession is because many advertisers consider advertising an expense rather than an investment. When there are less revenues coming in, they feel that they have less to spend on advertising. In fact, one of the criticisms of the percentage of sales method is exactly this point. As sales drop, the % stays the same, but the total amount serving as the base for that expenditure is lower. Thus, advertising expenditures drop. In fact, many companies have been successful by increasing or maintaining advertising expenditures during downturns in the business cycle. Minute Maid, and Toyota are two such examples. The logic behind their thinking is that if other advertisers cut their budgets, or pull out of the market completely with their advertising, there is an opportunity to gain a competitive advantage. With less advertisers, there is less clutter, and a greater share of voice. For those with the same mindset as Minute Maid and Toyota, advertising is an investment in the brand. Opportunities arise when competitors think of it as an expense. These companies recognize that when there is a recession, and when sales are off, that is the time to increase expenditures in advertising to assist the brand.

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

14. The chapter discusses the results of a study conducted by Yoo and Mandhachitara that shows that advertising spending and effects may differ in different competitive environments. Explain each of the four scenarios presented in Figure 7-16 and give examples of brands in each of these cells. (LO 7-5) The study focuses on the fact that advertising by competitors may not always be to the detriment of one’s brand. In fact, there may be cumulative gains to both competitors when both advertise. Figure 7-1 provides some examples. Advertiser’s Advantage—In this case, one’s brand is stronger than that of the competition. Given the competitive advantage, the brand should focus on advertising versus other promotional tools. The reason for this is that advertising serves as a reminder as well as an introduction to the brand. Given the brand’s strength, incentives—some of which may be costly—are not required. Rather, keeping the brand in front of the consumer, and maintaining a brand image may be most important. An example may be the Apple iPod versus other MP3 players. Apple is clearly the dominant brand, and should focus on communicating its brand image and benefits. There is no need to offer discounts. Symbiotic competition—Brands competing in a growing market that complement each other should still focus on advertising, according to Figure 7-16. The adoption of satellite radio by auto manufacturers offers consumers an attractive option to enhance their driving experience, and a competitive advantage to competitors not offering such an option. For both the automobile and the satellite radio company (i.e., BMW and Sirius), continued advertising of the brand is likely to benefit both. Zero-Sum Competition—In a mature market, one of the ways to gain market share is by taking it from the competition. Thus, increases in advertising may lead to gaining share, and may have to be matched to ward off the competition by others. Consider the competition between Energizer and Duracell, while the market for batteries is growing very slowly or may even be flat, both companies will continue to advertise in attempts to gain share and defend against the other as well. Competitor’s Advantage—In a market situation in which a company’s brand is inferior to the competition, head to head advertising may not be the best strategy. By gaining a niche position, and focusing on promotional tools as opposed to advertising, some share may be gained. Using batteries as an example, again, consider the smaller share brands such as Panasonic, EverReady, etc. Head to head advertising battles are not likely to be effective. On the other hand, offering coupons, sweepstakes, etc. may entice the consumer to try the brand, and sales may increase. 15. Different companies believe that various media are more important than others for their marketing purposes. Discuss the various perspectives taken by these companies, and explain why everyone may not agree on the same level of importance for media. (LO 7-6) As Chapter 7 demonstrates, there are a number of factors that influence the media strategy. Communications objectives, corporate policies, politics, and the size of the budget are just a few of these. Because of the difficulty in determining a precise ROI for media, the decision is often subjective, and may not always achieve consensus. Jaguar prefers a method of tracking prospects that respond to their advertising, then providing the contact information to dealers for follow up through direct marketing, etc. Jaguar believes that this method leads to a better determination of media efficiencies.

Chapter 07—Establishing Objectives and Budgeting for the Promotional Program

Other companies focus on other media. For example, more and more companies are spending more monies on public relations. Many marketers believe that PR may be the best medium to employ. Ries & Ries, previously published a book specifically to this point, noting that numerous companies now employ PR strategies prior to advertising, and that this medium may be more effective. As will be clearly demonstrated in Chapters 13 and 15, other media—many not traditional—are favored by some companies. The rapid growth of the Internet and Interactive media appeals to many companies, while others like the new media such as product placements, branded entertainment, etc., and are spending more and more monies in these areas. One of the basics of an IMC orientation is the effective and efficient uses of media. As will be evidenced throughout the remainder of this text, each medium has its advantages and disadvantages. The astute marketer will learn and understand the uses of these media for various marketing situations, adopting an integrated marketing communications strategy for the specific market situation.

IMC Exercise Students should find examples of advertisements for several products or services and discuss the specific types of objectives the marketer may have for these ads. They should explain why sales objectives may be appropriate for some ads while communications objectives are most relevant for others. Have the students attempt to determine the percentage of sales ratios for the product categories they have ads for and explain why these ratios may be as they are.

Chapter 8—Creative Strategy: Planning and Development

CHAPTER 8 CREATIVE STRATEGY: PLANNING AND DEVELOPMENT Chapter Overview This is the first of two chapters devoted to the area of creative strategy in advertising. This chapter focuses on the planning and development of the creative strategy. We will examine the concept of creativity and the process that guides the creation of the advertising campaign as well as various types of research and information that can provide input and insight into the creative process of advertising. We discuss the concept of copy platforms that are used to guide the development of advertising campaigns. Attention is also given to various approaches used for determining major selling ideas that form the basis of an advertising campaign.

Learning Objectives 1. Describe the role of creative strategy in advertising. 2. Identify inputs to the creative process. 3. Describe the development of creative strategy. 4. Examine approaches to developing the major selling ideas that are used as the basis for an advertising campaign.

Chapter and Lecture Outline I.

INTRODUCTION

One of the most important components of an integrated marketing communications program is the advertising message. It will be obvious to students that there are a myriad of ways to convey an advertising message. However, underlying all of these messages is a creative strategy that involves determining what the advertising message will say or communicate and creative tactics dealing with how the message strategy will be implemented or executed. The focus of this chapter is on the development of creative strategy while tactical issues are covered in Chapter 9. Attention is given to the creative strategy development process and various approaches to developing the big idea that will be used as the central theme of the advertising campaign and translated into messages. The opening vignette to the chapter discusses how Intuit’s advertising agency, Wieden+Kennedy, created a big idea–led campaign titled “It Doesn’t Take a Genius to Do Your Taxes” for TurboTax. The campaign included 30-second TV spots featuring some of the world’s greatest minds appearing in amusing commercials showing that TurboTax is so simple and intuitive that even real-life geniuses cannot make it any easier to use or understand.

Chapter 8—Creative Strategy: Planning and Development

II.

THE IMPORTANCE OF CREATIVITY IN ADVERTISING

The creative side of advertising is one of its most interesting aspects. The creative strategy used to communicate an advertising message is an integral part of the promotional process and is often critical to the success or failure of the campaign. Numerous examples or cases can be cited of how a good creative strategy was an important factor in determining the success of a product or service or reversing the fortunes of a struggling brand. Of course, there are also many situations where companies struggle to find a creative formula that works effectively. These companies change their creative strategy frequently in hopes of finding a campaign theme or tagline that strikes a responsive chord with consumers. Attention must also be given to the issue of creative versus effective advertising as many ads may be critically acclaimed from a creative perspective but fail to help the sales of the brand. III.

ADVERTISING CREATIVITY

It is important to examine the concept of creativity, how it applies to advertising, and the challenge marketers face in developing creative and effective advertising. Good creative strategy and execution can be very important in determining the success of a product/service or reversing the fortunes of a struggling brand. Marketers must also consider how creative strategy can be leveraged across paid, owned and earned media. Digital and Social Media Perspective 8-1 discusses the top ad campaigns of the 21st century moving beyond traditional media. A.

What Is Creativity?—Creativity is one of the most commonly used terms in advertising as those who develop advertising messages are often referred to as “creative types” and agencies develop reputations for their creativity. So much attention is focused on the concept of creativity because the major challenge given to those who develop advertising messages is to be creative. Creativity has been defined as “a quality possessed by persons that enables them to generate novel approaches in situations, generally reflected in new and improved solutions to problems.”

Different Perspectives of Advertising Creativity—Perspectives of what constitutes creativity in advertising vary. At one extreme are the “suits” or “rationalists” who argue that advertising is creative only if it sells the product or service. At the other end of the continuum are the “poets” who judge creativity in terms of its artistic or aesthetic value and argue that creative advertising must be novel, original and unique. The answer as to what constitutes creative in advertising is probably somewhere between these two extreme positions. We are concerned with advertising creativity, which refers to “the ability to generate fresh, unique and appropriate ideas that can be used as solutions to communications problems.” This perspective recognizes that creative advertising ideas are those that are novel, original and appropriate. To be appropriate a creative idea must be relevant or have some importance to the target audience.

Determinants of Creativity – It is generally agreed upon that there are two central determinants of creativity, which are divergence and relevance. Divergence refers to the extent to which an ad contains elements that are novel different or unusual. Some of the ways divergence can be achieved in advertising include the following: 1. Originality: Ads that contain elements that are rare, surprising, or move away from the obvious and commonplace. 2. Flexibility: Ads that contain different ideas or switch from one perspective to another. 8-2

Chapter 8—Creative Strategy: Planning and Development

3. Elaboration: Ads that contain unexpected details or finish and extend basic ideas so they become more intricate, complicated or sophisticated. 4. Synthesis: Ads that combine, connect, or blend normally unrelated objects or ideas. 5. Artistic value: Ads that contain artistic verbal impressions or attractive shapes and colors Relevance reflects the degree to which the various elements or the ad are meaningful, useful, or valuable to the consumer and can be achieved in two ways. Ad-to-consumer relevance refers to situations where the ad contains execution elements that are meaningful to consumers. For example, advertisers may use celebrities which whom consumers identify, music that they like or visual images and other execution techniques that capture their interest and attention. Brand-to-consumer relevance refers to situations where the advertised brand of a product or service is of personal interest to consumers. Relevance or appropriateness can also be viewed in terms of the degree to which an advertisement provides information or an image that is pertinent to the brand. The ski-mask commercial for the Volkswagen Beetle convertible provides a very good example of creative advertising that relies on the divergence criterion of originality. Professor Notes

IV.

PLANNING CREATIVE STRATEGY

Those who work on the creative side of advertising often face a major challenge. They must take all the research, creative briefs, strategy statements, communication objectives and other inputs and transform them into an advertising message. Their job is to write copy, design layouts and illustrations and produce commercials that communicate effectively. Marketers usually hire advertising agencies to develop and implement their advertising campaigns because they are specialists in the creative function of advertising. However, it is important to point out that the development of creative strategy also involves representatives from the client side and other people in the agency as well as the creative staff. A.

The Creative Challenge—Those who work on the creative side of advertising have the responsibility of developing an effective way of communicating the marketer’s message to their customers. The creative person or team is often provided with a great deal of input and background information on the target audience, such as their demographics, needs and motives, and communication objectives. However, every marketing situation is different and requires a unique approach.

Chapter 8—Creative Strategy: Planning and Development

Taking Creative Risks—Many creative people in agencies argue that they often follow proven approaches or formulas when creating ads because they are safe and less likely to fail. They note that their clients are very often risk averse and feel uncomfortable with advertising that is too different. It is important to note that companies who have very creative advertising are more willing to assume some risk. However, many managers are more comfortable with advertising that is straightforward in communicating with customers and gives them a reason to buy. Examples of agencies known for taking creative risks, such as Wieden+Kennedy, TBWA/Chiat/Day, and Crispin Porter + Bogusky might be noted.

The Perpetual Debate: Creative versus Hard-Sell Advertising—The issue of how much latitude creative people should be given and how much risk the client should be willing to take is open to considerable debate. However, clients and agency personnel generally agree that the ability to develop novel yet appropriate approaches to communicating with the customer makes the creative specialist valuable—and often hard to find.

Creative Personnel—A fairly common perception is that those individuals who work on the creative side of advertising tend to be somewhat unique and different from those working on the managerial or business side. It is worthwhile to discuss some of the characteristics of creative personnel in advertising and the need to create an environment that fosters, and is conducive to, the development of creative advertising.

THE CREATIVE PROCESS

A number of advertising people have argued that creativity in advertising is best viewed as a process and that creative success is most likely when some organized approach is followed. While most advertising people reject and/or resist attempts to standardize creativity or develop rules or guidelines to follow, most creative people do follow some type of process when approaching the task of developing an advertisement. There are several models or approaches to the creative process including those of James Webb Young, a former creative vice president at the J. Walter Thompson agency, which is similar to the approach of English sociologist Graham Wallas. Young’s model of the creative process contains five steps: 1. Immersion 2. Digestion 3. Incubation 4. Illumination 5. Reality or verification Wallas suggests that creative thought evolves in four stages: 1. Preparation 2. Incubation 3. Illumination 4. Verification

Chapter 8—Creative Strategy: Planning and Development

Account Planning—To facilitate the creative process, many agencies now use account planning which is a process that involves conducting research and gathering all relevant information about a client’s product or service, brand, and consumers in the target audience. Account planning plays an important role during creative strategy development by driving the process from the customers’ point of view. Planners work with the client as well as agency personnel, such as the creative team and media specialists, to discuss how information they have gathered can be used in the development of the creative strategy as well as other aspects of the advertising campaign.

Inputs to the Creative Process: Preparation, Incubation, Illumination—These models of the creative process offer an organized way of approaching an advertising problem. Both models stress the need for preparation or gathering of background information that is relevant to the problem as the first step in the creative process. Various types of research and information can provide input to the creative process of advertising at each stage. There are numerous ways the creative specialist can acquire background information that is relevant to the advertising problem. Some of those discussed in the text include: 1. Background research—informal fact-finding techniques and general preplanning input. Various ways of gathering background information might be discussed. 2. Product- or service-specific research—This involves different types of studies such as attitude, market structure and positioning, perceptual mapping and psychographic studies. 3. Qualitative research input—This type of input includes techniques such as in-depth interviews focus groups, or ethnographic studies. Qualitative research can provide the creative team with valuable input, particularly in the early stages of the creative process. As discussed in the chapter, creative personnel in agencies often feel that their creativity can be stifled by research techniques such as focus groups and consumer surveys. Many marketers and agencies prefer to use observational or ethnographic research to gain insight into consumers.

Inputs to the Creative Process: Verification, Revision—The purpose of the verification and revision stage of the creative process is to evaluate ideas that come from the illumination stage, reject any that may be inappropriate, and refine those that remain and help give them final expression. Some of the techniques used at this stage include: • Directed focus groups • Message communication studies • Portfolio tests • Pretesting of ads in storyboard or animatic form

Professor Notes

Chapter 8—Creative Strategy: Planning and Development

McGraw-Hill Connect ®: The Creative Process for the WPU Campaign Type of Activity: Click and Drag Activity Summary: The newly appointed president of West Park University (WPU) has hired an advertising agency to develop an IMC campaign designed to attract the best student prospects and their parents to the university. Students will match the various steps in the creative process undertaken by the ad agency for developing the campaign for WPU, to the steps in Young’s model of the creative process. Activity Learning Objective: 08-02 Identify inputs to the creative process.

CONCEPT REVIEW: The creative personnel in an advertising agency take all the research, creative briefs, strategy statements, communications objectives, and other input and transform them into an advertising message. Their job is to write copy, design layouts and illustrations or produce commercials that effectively communicate the central theme on which the campaign is based. The job of the creative team is challenging because every marketing situation is different and each campaign or advertisement may require a different creative approach. Some say creativity in advertising is best viewed as a process and creative success is most likely when some organized approach is followed. This does not mean there is an infallible blueprint to follow to create effective advertising. However, most do follow a process when developing an ad. One of the most popular approaches to creativity in advertising was developed by James Webb Young, a former creative vice president at the J. Walter Thompson agency. Young's process of creativity is similar to a four-step approach outlined much earlier by English sociologist Graham Wallas in his classic book The Art of Thought. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

VI.

CREATIVE STRATEGY DEVELOPMENT

The creative process is guided by specific goals and objectives and requires the development of a creative strategy or plan of action for achieving the goal. Creative strategy development actually begins with a thorough assessment of the marketing and promotional situation and a determination of what needs to be communicated to the marketer’s target audience. Creative strategy should, however, also be based on a number of other factors that are stated in the creative brief or copy platform.

Chapter 8—Creative Strategy: Planning and Development

Advertising Campaigns—Most advertisements are part of a series of messages that make up an IMC or advertising campaign, which consists of a set of interrelated and coordinated marketing communication activities that center on a single theme or idea that appears in different media across a specified time period. The determination of a strong idea for the campaign theme is very important, as it is the central message that will be communicated in all of the advertising and other promotional activities and thus set the tone or direction for the development of the individual ads that make up the campaign. The theme or idea for the campaign is usually expressed through a slogan or tagline that reduces the key idea into a few words or a brief statement. IMC Perspective 8-1 discusses some of the reasons why many advertising slogans do a poor job of communicating a distinctive identify for a company or brand and presents some guidelines for developing more effective taglines.

Creative Brief—The creative brief (which some agencies refer to as a creative platform or work plan or creative contract) is a written document that provides a plan or checklist that is useful in guiding the development of an advertising message or campaign. This document is prepared by the agency team or group assigned to the account and may include creative personnel as well as the account coordinator and representatives from media and research. The advertising manager and/or the marketing and product manager from the client side will also be involved in the process and must approve the copy platform. An example of a creative brief and the Tacori ad that resulted from it are shown in Exhibits 8-14a and b.

The Search for the Major Selling Idea—An important part of creative strategy development is determining the central theme that will become the major selling idea or big idea for the ad campaign. Big ideas are important in business-to-business advertising as well as advertising targeting consumers. Dos Equis’s “The Most Interesting Man in the World” campaign is an example of an effective big idea and is discussed.

Developing the Major Selling Idea—There are several different approaches that can be used for developing major selling ideas and as the basis of creative strategy. Some of the best known and most discussed approaches include: 1. The unique selling proposition—This concept was popularized by the famous copywriter Rosser Reeves in his book Reality in Advertising. Its three characteristics include: • each advertisement must make a proposition to the consumer • the proposition must be one that the competition either cannot or does not offer • the proposition must be strong enough to pull over new customers to your brand 2. Creating a brand image—Some competing brands are so similar it is difficult to find or create a unique attribute or benefit so the creative strategy is based on the development of a strong, memorable identity for the brand through image advertising. 3. Finding the inherent drama—The famous ad man Leo Burnett, founder of the Leo Burnett agency in Chicago, believed that advertising should be based on a foundation of consumer benefits with an emphasis on the dramatic element in expressing these benefits. This type of advertising bases the creative strategy on presenting the message in a warm and realistic way. 4. Positioning—The basic idea is that advertising is used to establish or “position” the product or service in a particular place in the consumer’s mind. Various approaches to positioning a brand are discussed in Chapter 2 and might be reviewed again here. Many of the top brands

Chapter 8—Creative Strategy: Planning and Development

in various product or service categories have retained their leadership position because they have established and maintained a strong position or identity in the minds of consumers. E.

Contemporary Approaches to the Big Idea—These approaches to determining the major selling ideas discussed above are very popular and are often used as the basis of the creative strategy for advertising campaigns. These creative approaches represent specific “creative styles” that have become associated with some of the most successful advertising creative minds and their agencies. However, it should be noted that many other creative approaches and styles are available and are often used in advertising. Some of the creative styles associated with more contemporary advertising visionaries, such as Lee Clow of TBWA/Chiat/Day and Rich Silverstein of Goodby Silverstein & Partners, are worth noting. The challenge to the creative team is to find a major selling idea and use it as a guide to the development of an effective creative strategy.

McGraw-Hill Connect ®: Creative Strategy for WPUs Advertising Campaign Type of Activity: Click and Drag Activity Summary: In this activity, students will match the various portions of the creative brief developed by the ad agency for the campaign for WPU, to the basic elements of a creative brief. Activity Learning Objective: 08-03 Describe the development of creative strategy. CONCEPT REVIEW: The written creative brief specifies the basic elements of the creative strategy for an advertising campaign or for any advertising and promotion activity. It is also referred to as the creative platform, the work plan, the creative blueprint, or the creative contract. The creative brief is developed by executives in the account management and account planning departments in an ad agency. Other ad agency executives from the group assigned to the account, such as creative personnel and media personnel, also give their input. This document is shared with the client (the advertising manager, or brand manager), who often approves the brief. The creative brief is then shared with/presented to the creative group assigned to the account, who develop the ads and other IMC items for the campaign. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

McGraw-Hill Connect ®: Big Ideas for Big Brands Type of Activity: Case Analysis Activity Summary: Bee & Gee is a multi-product, multi-brand, packaged goods company with a significant presence in the personal care and grooming category. Within each product category, it has numerous brands that 8-8 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 8—Creative Strategy: Planning and Development

sometimes compete with each other in the same geographical markets. Bee & Gee has four different shampoo brands that it markets to consumers in multiple countries. This activity will have the students select the best answer for each question related to the “big idea” for each of their brands. Activity Learning Objective: 08-04 Examine approaches to developing the major selling ideas that are used as the basis for an advertising campaign. CONCEPT REVIEW: An important part of the creative strategy is determining the central theme or the major selling idea of the ad campaign. According to A. Jerome Jeweler - The major selling idea is the strongest singular thing you can say about your product or service. This claim should contain the most meaningful appeal to your target audience, and should be strong enough to remain the central issue in every ad and commercial in the campaign. Difficulty: Medium Bloom’s: Analyze AASCD: Analytical Thinking

Teaching Suggestions For many students, the most interesting aspect of advertising and promotion is the creative side. Most students really do not have an appreciation for what is involved in the development of an advertising campaign. They may think that the development of a campaign and individual messages involves only the agency creative department. It is important to stress the fact that the development of a campaign involves numerous individuals from both the other departments of the agency as well as on the client side. Many students will not end up being directly involved in the design and creation of advertisements. However, creative strategy is often critical to the success of the firm’s integrated marketing communications efforts. Thus, it is important that everyone involved with the marketing and promotional program have some understanding of the creative process that underlies the development of advertising messages, as well as the creative options available to the advertiser. Some interesting discussion can be generated over the issues of what constitutes creative advertising. Students might be asked to debate the different perspectives of advertising creativity. One side can take the “its only creative if it sells” position versus the “aesthetic, novelty/uniqueness” perspective. Some interesting discussions can also be generated over the issue of creative risk taking and just how much latitude the client should give the agency when it comes to creating the advertising message. For a very interesting discussion and still relevant debate over different perspectives on creativity, we suggest an article on “Creative Differences” by Anthony Vagnoni, which appeared in Advertising Age on November 17, 1997. You may also want to update students on the advertising that wins the Lions awards at the Cannes International Advertising Film Festival each year. Advertising Age and AdWeek have articles covering the Lions awards toward the end of June each year. You can also direct your students to the festival’s official website at www.canneslions.com. Students should be encouraged to research advertising that has won creative awards from other organizations. For example, the Clio Awards is an international awards competition that recognizes outstanding creative work done by agencies and winners can be found on the website at clios.com/awards. Effie Worldwide sponsors the Effie Awards, given each year to marketing communication campaigns based on their proven success for a company or brand. Information about the Effie Awards can be found at www.effie.org.

Chapter 8—Creative Strategy: Planning and Development

It is also important to discuss how research is used as an input to the creative process of advertising. Time might be spent discussing the value of both qualitative and quantitative research techniques and how they can be used to provide the creative department information that gives them more insight into the consumer. It is also interesting to spend some time discussing advertising campaign themes currently being used by various advertisers. This discussion can focus on the creative strategy being used by the advertiser, the image or position they are trying to establish for the company or brand, and what type of analysis or background research might have been used in developing the campaign. It is important to stress that advertising campaigns are often the result of extensive planning and research provided to the creative team by marketing planners and researchers on both the client and/or agency side. The text also has a brief discussion of account planning which is becoming an important function in many advertising agencies. If you would like further information on account planning, we recommend the book Truth, Lies & Advertising by Jon Steele, who was the Vice Chairman and Director of Account Planning for Goodby, Silverstein & Partners in San Francisco. This book provides an excellent discussion of the account planning and how the Goodby, Silverstein & Partners agency has used the process in the development of many successful advertising campaigns for clients such as Adobe, Norwegian Cruise Lines, Frito-Lay, and the “got milk?” campaign for the California Fluid Milk Processors Advisory Board. A discussion of a Model of Marketing Information flow developed by John Sutherland, Lisa Duke, and Avery Abernethy is presented and warrants discussion. This model shows the flow of marketing information regarding customers, the product or service, and the market from clients to agency creative staff and the major interfaces and decision points where gatekeepers can impede the flow of information to agency creatives. Their research has found that agency personnel often lack the information needed to effectively design and execute creative strategies. Time can be spent discussing this model and ways of improving the flow of important information to agency creatives. A new video case on Intuit’s TurboTax was produced for this edition, which focuses on the “It Doesn’t Take a Genius to Do Your Taxes” campaign for TurboTax created by the Wieden+Kennedy agency. In addition to the creative strategy, the video focuses on the strategy behind the IMC campaign used to position TurboTax as the smarter way for consumers to do their taxes.

Answers to Discussion Questions 1. Discuss the creative challenges Intuit and the Wieden+Kennedy agency face in developing advertising campaigns for a tax preparation software product such as TurboTax. Evaluate the creative strategy W+K used for the “It doesn't take a genius to do your taxes” campaign that is discussed in the chapter opener. (LO 8-1, 8-3) Tax preparation software is not an easy product to advertise as filing taxes creates anxiety in most people, as they fear making a mistake, not getting a full refund, or paying too much in taxes, not to mention the fear of being audited by the IRS. While tax preparation software has made tax filing much easier, fear, uncertainty and doubt persist. During the 2016 tax season, Intuit decided it was time to take the next step in its journey to disrupt people’s notion and communicate how it was delivering superior value through its product innovation. Intuit developed an insight-driven, integrated marketing campaign designed to reinforce the positioning of TurboTax as the smarter way to do taxes. The campaign dramatized and celebrated “ownable moments” in the TurboTax experience that demonstrate key customer benefits in ways that change people’s current beliefs about and expectations of TurboTax. To execute on its strategy and show how TurboTax has transformed the tax filing process into something anyone can do, Wieden+Kennedy created a big idea–led campaign titled “It Doesn’t Take a Genius to Do Your Taxes.” The campaign included seven 30-second TV spots featuring some of the 8-10 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 8—Creative Strategy: Planning and Development

world’s greatest minds appearing in amusing commercials showing that TurboTax is so simple and intuitive that even real-life geniuses can’t make it any easier to use or understand. Among the brainiacs appearing in the spots are a physicist, a mathematician, and a computer scientist. TurboTax’s integrated marketing campaign not only leveraged the product innovation in its TV campaign, but also promoted the “ownable moments” on the TurboTax.com website and the payoff people experience from using the product. Another important goal of the campaign was to prove that Intuit has transformed the tax filing process into something anyone can do by promoting how TurboTax was giving 60 million Americans with simple tax returns the ability to file their federal and state states for free by using its Absolute Zero service. For example, one commercial features theoretical physicist Michio Kaku explaining the concept of “absolute zero” as it applies to TurboTax—which charges nothing for its basic, easy-filing service—by noting that “Nothing is the absence of something. Zero is absolute nothing.” At the peak of the tax season, Intuit ran a clever commercial on the 2016 Super Bowl featuring Sir Anthony Hopkins being interviewed as an award-winning actor who has resisted the temptation to sell out in his illustrious career. However, as Hopkins explains that he would never impugn his integrity or tarnish his name by selling a product, he lifts a teacup to his mouth with the TurboTax logo. He is also wearing blue slippers promoting the tax service and his dog is wearing a TurboTax sweater. Hopkins notes that he has “way more integrity” than to sell out and rationalizes that he really is not doing so since it is free to file taxes with TurboTax Absolute Zero, noting, “It’s free, there’s nothing to sell.” To leverage its Super Bowl ad message, Intuit also utilized digital and social media to extend the Absolute Zero message across online channels and keep it in the forefront of consideration during the offer period. TurboTax took home the 2016 Merkle Digital Bowl crown, which is given each year to the brands that best leverage digital marketing tools such as social media, SEO, paid search, and email marketing to support their Super Bowl advertising. Intuit is well on its way to repositioning the TurboTax brand and building meaningful connections with the core target of On My Way consumers. The company plans to continue to disrupt people’s notions of with it’s like to do their own taxes with TurboTax, supporting its brand purpose of putting hardworking Americans in charge of their money, starting with taxes

2. Discuss the role and importance of creativity in advertising. Do you think advertising agencies often emphasize creativity at the expense of developing ads that can help generate sales for a product or service? What can clients do to avoid this problem? (LO 8-1) Perspectives on what constitutes creativity in advertising differ. At one extreme are people who argue that advertising is creative only if it sells the product. An advertising message or campaign’s impact on sales counts more than whether it is innovative or wins awards. At the other end of the continuum are those who judge the creativity of an ad in terms of its artistic or aesthetic value and originality. They contend creative ads can break through the competitive clutter, grab the consumer’s attention, and have some impact. As you might expect, perspectives on advertising creativity often depend on one’s role. A study by Elizabeth Hirschman examined the perceptions of various individuals involved in the creation and production of TV commercials, including management types (brand managers and account executives) and creatives (art director, copywriter, commercial director, and producer). She found that product managers and account executives view ads as promotional tools whose primary purpose is to

Chapter 8—Creative Strategy: Planning and Development

communicate favorable impressions to the marketplace. They believe a commercial should be evaluated in terms of whether it fulfills the client’s marketing and communicative objectives. Everyone involved in planning and developing an advertising campaign must understand the importance of balancing the “it’s not creative unless it sells” perspective with the novelty/uniqueness and impact position. Marketing and brand managers or account executives must recognize that imposing too many sales- and marketing-oriented communications objectives on the creative team can result in mediocre advertising, which is often ineffective in today’s competitive, cluttered media environment. At the same time, the creative specialists must recognize that the goal of advertising is to assist in selling the product or service and good advertising must communicate in a manner that helps the client achieve this goal. Despite having different perspectives on creativity, both sides are likely to agree that creative advertising is important because it often garners more attention and can lead to deeper processing by consumers. Marketing professor Scott Koslow also notes that “creativity gives permission to consumers to be open to what appears to be new information about a brand and brings a fresh perspective—the ultimate ‘new-news.’”

3. Digital and Social Media Perspective 8–1 discusses some of the advertising campaigns that were selected as the best of the 21st century. Choose one of these campaigns and analyze it from a creative perspective giving attention to the strategy used for the campaign and the reasons why it has been effective. (LO 8-1) Of the top 100 campaigns of the past century, only a few are, like the iconic Nike campaign, still in use today: “Got Milk?,” the “Energizer Bunny,” Wheaties’ “Breakfast of Champions,” “The Ultimate Driving Machine” for BMW, and “A Diamond Is Forever,” which has appeared in every ad for a DeBeers engagement ring since 1948. While it is interesting to take a walk down advertising’s memory lane and talk about the great campaigns of the past century, students are more likely to be interested in campaigns that are relevant to your generation and may have impacted your purchase decisions. The good news is that Advertising Age extended its list of the best ad campaigns in 2015 by selecting the 15 best campaigns of the 21st century thus far by having some of the most influential and acclaimed industry creatives and executives judge the nominees. The campaign selected as the best of the 21st century thus far is Dove’s “Campaign for Real Beauty” (discussed in Chapter 6) that originated in the UK and Canada, and was turned into a global IMC campaign by Unilever, which owns the brand. Rather than using traditional models like most ads for beauty products, the Dove campaign featured real women whose physical appearance was outside the stereotypical norms of beauty and triggered conversations and debates about society’s notions of female standards of beauty. It also arrived at a time when the Internet, and then social media, allowed consumers to interact and share messages such as the popular “Evolution” and “Real Beauty Sketches” videos which are two of the most viral videos of all time. The Ad Age Panel used terms such as groundbreaking, bold, transparent, and authentic to describe the “Campaign for Real Beauty,” which has led other companies to run purpose-driven campaigns such as the “Like a Girl” movement for P&G’s Always brand. Other campaigns on the 21st century list include Apple’s “Get a Mac” series of comparative ads that aired 66 TV commercials over a three-year period poking fun at Microsoft’s Windows operating system. The ads featured actor Justin Long as the cool, hip, and unflappable Mac and writer John Hodgman as the uptight and somewhat nerdy PC. Other top campaigns include Procter & Gamble's "Thank You, Mom" campaign that featured U.S. Olympic athletes' moms cheering them on in the Olympic Games; “the “Whassup?” campaign for Budweiser that made the catchphrase a part of popular youth culture; Burger King’s “Subservient Chicken” which included a website where users 8-12 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 8—Creative Strategy: Planning and Development

could submit more than 300 different commands and a chicken character would respond; and the “Truth” antismoking campaign for the American Legacy Foundation which is the largest, and arguably most effective, effort to discourage young people from smoking. Several of the top campaigns capitalized on the popularity of social media and viral marketing. Chipotle’s “Back to the Start” campaign started with an animated short film posted on YouTube about a farmer abandoning his traditional operations in favor of more sustainable farming practices. Chipotle waited for the buzz to build through social media and public relations before taking a shorter version of the video to television. Red Bull also used viral marketing for its “Stratos” video, which captured the record-breaking, 24-mile free-fall of Felix Baumgartner from the stratosphere in 2012. The video racked up 171 million views online in addition to a tremendous number of earned media mentions and helped increase Red Bull sales by 7 percent in the first six months following the jump. Another campaign that used the power of social media and viral marketing to leverage great creative work was “The Man Your Man Could Smell Like” effort for Old Spice body wash, which helped revive a mostly forgotten brand. The tongue-in-cheek ads developed for the campaign featured a barechested, Casanova-like character (played by Isaiah Mustafa, a former NFL wide receiver and obscure actor with a magnetic presence to go along with his six-pack abs) who tells female viewers that Old Spice body wash will make their male partners smell like him. The most popular spot in the series opens with Mustafa stepping out of the shower with a towel around his waist brandishing a bottle of Old Spice body wash and saying: “Hello ladies, look at your man. Now back to me. Now back at your man. Now back to me. Sadly, it isn’t me. But if he stopped using lady-scented body wash and switched to Old Spice, he could smell like me.” The agency for Old Spice, Wieden+Kennedy, built on the popularity of the ads with the “Responses” campaign which involved having questions solicited for the “Old Spice Guy” via Twitter and Facebook and having him answer them in short video clips online. Thousands of questions and comments poured in from fans and W+K shot nearly 200 video clips with Mustafa’s responses, including one in which he proposed to a man’s girlfriend for him. Within a week, online views of the new videos soon eclipsed the original TV spots and Google searches for “Old Spice” increased by 2,000 percent. Old Spice became the most-viewed brand in online videos in 2010 and the campaign helped make it the market leader in the body-wash category. Students should be encouraged to read the article, Top Campaigns of the 21st Century,” which appeared in the January 12, 2015 edition of Advertising Age and can be found online at (http://adage.com/article/news/members-voted-21st-century-ad-campaign-picks/296505/) and choose one of the campaigns to analyze.

4. The chapter discusses how advertising agencies are sometimes fired even though they create award-winning ads and campaigns for their clients. Evaluate the decision by companies such as AB InBev to dismiss their ad agency and hire a new one even though the agency has done award-winning creative work for the company/brand. (LO 8-1) DDB had been the agency for Anheuser Busch’s two major brands, Budweiser and Bud Light, for 30 years before AB InBev terminated the relationship in 2011. The decision by AB InBev to switch agencies came as somewhat of a surprise given the excellent creative work DDB had done for the two agencies over the past three decades. In 1981, the agency helped launch Bud Light, which is now the leading brand of beer in the U.S. market, and developed a number of award winning campaigns such for the brand such as the “Real Men of Genius” radio campaign and ads featuring the Spuds McKenzie mascot dog. DDB also created the popular “Whassup?” campaign for Budweiser as well 8-13 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 8—Creative Strategy: Planning and Development

as numerous commercials featuring the iconic Clydesdales. Commercials for Budweiser and Bud Light, developed by DDB were among the most popular on the Super Bowl each year as Anheuser Busch has been the major advertiser on the big game. One of the reasons AB InBev may have switched agencies is that while Bud Light and Budweiser are the two leading brands of beer in the U.S., both brands have struggled to increase their sales during the economic downturn that began in 2009. Thus, AB InBev decided it was time to change its creative direction for both brands. The company had begun using other agencies for Budweiser in countries such as Brazil even though DDB was the global agency of record and had an office in the country. AB InBev also began asking other agencies to submit creative ideas for its U.S. advertising for the brands, which was a sign of a strained relationship with DDB. As discussed in Chapter 3, marketers often will consider changing agencies when sales are struggling and they feel that a fresh creative approach is needed. AB InBev had relegated DDB to the sidelines several years ago and decided to use a campaign developed by the agency Anomaly as its main creative campaign called “Grab Some Buds.” In early 2012 DDB was replaced by the two agencies on the Bud Light account, McGarry Bowen and the independent agency Translation. However, McGarry Bowen lasted only eight months before begin terminated with more of the creative work going to Translation. In 2013 A-B InBev changed agencies for Bud Light once again, moving to BBDO, which positioned it as a brand for spontaneous fun with the “Up for Whatever” campaign. However, two years later, as sales continued to decline, the Bud Light account was moved from BBDO to Wieden+Kennedy. A spokesperson for A-B InBev suggested that BBDO was trying too hard to appeal to young adult drinkers, noting that Bud Light is a brand that appeals to everyone and that everybody who is young at heart should be attracted to the brand, not just young adults.

5. Advertising creativity is viewed as the ability to generate unique and appropriate solutions to communication problems. This definition suggests that a creative ad is one that is novel but also relevant or appropriate. Find an example of an advertisement (either a print ad, TV commercial or online ad/video) that is novel but not necessarily relevant to the product or services Discuss why the client would have approved this ad. (LO 8-1) For an ad or campaign to be considered creative, it should meet the criteria of being both a unique and appropriate solution to a communication problem. Creative specialists have the responsibility of developing advertising messages that capture the attention of and persuade the target audience to consider a brand. While many ads are entertaining, they do little to contribute to the brand. Students should find a print ad or TV commercial that is novel or unique but does not contain a relevant message that encourages consumers to consider purchasing the product or service. Many of the ads that appear in magazines or TV shows targeting young people fit into this category as the focus of the advertisement is on being different or unique and breaking through all of the advertising clutter. However, these ads often communicate very little about the product or service or give consumers little, if any, reason to purchase the brand. Creative personnel are often able to convince the client that something novel or unique needs to be done to get the attention of consumers and break through the clutter. Many marketing mangers defer to the judgment and expertise of agency creative personnel and give their approval for these ads. 6. Discuss the various factors that account for the way divergence can be achieved in advertising creativity. Find an example of an advertisement that reflects these various characteristics and explain how it does so. (LO 8-1) Divergence is viewed as one of the two key determinants of creativity (along with relevance) and refers to the extent to which an ad contains elements that are novel, different, or unusual. Robert 8-14 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 8—Creative Strategy: Planning and Development

Smith and Xiaojang Yang have identified five factors that could account for the ways divergence can be achieved in advertising, which they describe as follows. These include: • • • • •

Originality: Ads that contain elements that are rare, surprising, or move away from the obvious and commonplace. Flexibility: Ads that contain different ideas or switch from one perspective to another. Elaboration: Ads that contain unexpected details or finish and extend basic ideas so they become more intricate, complicated or sophisticated. Synthesis: Ads that combine, connect, or blend normally unrelated objects or ideas. Artistic value: Ads that contain artistic verbal impressions or attractive shapes and colors

Students should find examples of ads that reflect one of more of these characteristics and explain how it does so. They should be able to find examples of print ads that are high in artistic value or TV commercials that reflect characteristics such as originality or flexibility. 7. Discuss the types of research that can be used by an advertising agency during the preparation, illumination, and incubation stages of the creative process. Find an example of an advertising campaign that has used research as input to the creative process and discuss how they have done so. (LO 8-2, 8-3) Many agencies, particularly larger ones with strong research departments, have their own research programs and specific techniques they use to assist in the development of creative strategy and provide input to the creative process. In addition to the various quantitative research studies, qualitative research techniques such as in-depth interviews or focus groups can provide the creative team with valuable insight at the early stages of the creative process. Focus groups are a research method whereby consumers (usually 10 to 12 people) from the target market are led through a discussion regarding a particular topic. Focus groups give insight as to why and how consumers use a product or service, what is important to them in choosing a particular brand, what they like and don’t like about various products or services, and any special needs they might have that aren’t being satisfied. A focus group session might also include a discussion of types of ad appeals to use or evaluation of the advertising of various companies. Ethnographic research involves studying consumers by observing or interacting with them in their natural environment such as in their homes, at work, or at play. This type of research can be very valuable as input to the creative process as it provides insight into the behavior patterns, purchase motives and idiosyncrasies of consumers that are gained by observing or interacting with them. For example, researchers at Procter & Gamble used ethnographic research whereby they observed consumers in their homes during the early morning hours when they were preparing and enjoying a cup of coffee. Insight was gained into the importance of the ritual of having a cup of coffee by observing how consumers enjoy the experience. The popular campaign for Folgers coffee that utilizes the tagline “The best part of waking up is Folgers in your cup” evolved from ethnographic research done by P&G researchers. P&G sold Folgers to the J.M. Smucker Co. in 2008, which still uses the tagline in advertising for the brand. Students should be encouraged to find other examples of advertising campaigns that have used ethnographic research as input to the creative process. Sources of information for this assignment might include Advertising Age, AdWeek or the Effie or Clio Awards case studies. 8. Many advertising creative personnel are opposed to focus group research as they argue that they may inhibit the creative process. Discuss the problems, as well as the value, of using focus groups to evaluate advertising creative work. (LO 8-2) 8-15 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 8—Creative Strategy: Planning and Development

Focus groups are a qualitative research method whereby a small group of consumers are led through a discussing regarding a particular topic or issue. They can be used to gather detailed insight as to why and how consumers use a product or service, problems they might have and are looking to resolve as consumers, what is important to them in choosing a particular brand, and what they like or dislike about various brands. They can also be used to evaluate advertisements as consumers can be shown examples of current or proposed ads and asked to evaluate them. All of this information can be useful to those involved in the creative process as input gathered from focus groups provides creative specialists with a better sense of who the target audience is, what they are like, their purchase motives, and what they like and dislike about various types of advertising. Malcolm Gladwell has been critical of focus groups as he argues that there is very little psychological justification for the notion that you can find out what people think about an idea, particularly a revolutionary new idea, by asking them. In his book, Blink: The Power of Thinking Without Thinking, Gladwell examines the content and origin of instantaneous impressions and argues that decisions made quickly can be as good as those made after much deliberation. Agency creative personnel have long been critical of the idea of having their ideas and work critiqued by consumers as they argue that it limits their ability to develop innovative and breakthrough advertising. Recently focus groups have been criticized for a number of reasons. Many advertising creative people insist that good ideas do not need to be tested and that testing can weaken a creative execution. They note that focus group participants often have difficulty expressing how they feel about a commercial and often mimic the responses of a dominant member of the group. It has also been argued that focus groups do not provide enough insight into consumer’s emotional responses to an ad and may encourage consumers to think too much rather than respond the way they might while watching television. While creatives may be opposed to the use of focus groups, it is very unlikely that clients will allow them to produce ads without some early indication of how consumers will respond to them. There are many examples of situations where the testing of creative concepts and even finished commercials has provided very valuable input that was used to make modifications to an ad or campaign before it ran. Companies that are spending millions in production and media costs want to be confident that their ads are going to effectively communicate with consumers and will want to test them either through focus groups or some other type of testing method. A very good article on this issue titled “Why the Traditional Focus Group is Dying” can be found in the October 31, 2005 issue of AdWeek, pp. 24-25, 32. 9. Digital and Social Media Perspective 8-2 discusses the pros and cons of pretesting advertising creative work and how it is being impacted by the digital revolution. Discuss the pros and cons of the pretesting of creative work done by agencies and how the shift to digital media is impacting copy testing. (LO 8-2, 8-3) Copy or pretesting has long been a research stalwart for marketers and many companies such as FritoLay still pretest TV commercials or videos that will be used online, particularly those backed by large media budgets. However, copy testing, like so many other areas of advertising and marketing communication, is changing as a result of the digital revolution and marketers’ desire to move more quickly and keep pace with the new media consumption patterns of consumers. Many marketers feel that today’s digital and social media environment requires them to create multiple executions of TV commercials, videos, and other content to keep pace with consumers who are spending more time online and can easily avoid or skip their ads and other messages. Some are also critical of traditional copy testing methods arguing that it they are based on outdated thinking regarding how advertising works and no longer valid. They note that while pretesting methods may be effective for evaluating informational ads, it does not work well for emotional messages, as most only scratch the surface of which emotions an ad can evoke and how a consumer will respond after viewing it. Resistance to pretesting of advertising messages is nothing new; many advertisers have respected their ad agencies' request not to subject their creative ideas and work to the metrics that copy-testing 8-16 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 8—Creative Strategy: Planning and Development

services churn out. For example, Wieden+Kennedy has a reputation for resisting copy testing, and the former director of global marketing for Nike claimed that he had an agreement with W+K’s founder Dan Kennedy not to pretest its ads noting that “It makes you dull. It makes you predictable. It makes you feel safe.” The former brand manager for Old Spice also notes that the popular “The Man Your Man Could Smell Like” spot was not copy tested. Other popular campaigns that have gone live without pretesting include the “Mayhem” ads for All State Insurance, which are very popular with young people. The campaign has used a number of different executions featuring a villainous character who wreaks havoc on cars and property as a way of showing that many accidents involve more than your average fender bender. Allstate’s senior VP of marketing noted that while there was some internal pressure to kill the ads, the company did not do any market testing or focus groups; she just asked herself, “Would I want to watch those ads?” The debate over the value of pretesting TV commercials as well as videos and other types of digital content is likely to continue. Leading market research companies such as Ace Metrix, Ipsos, and Millward Brown are adapting their testing methods and developing ways to pretest commercials and videos more quickly online as well as incorporating new types of measures such as biometrics and online behavioral data. However, as more marketers feel the need for speed in developing content, they are likely to forego copy testing and use tools such as social media monitoring to decide whether their messages are resonating with consumers and then respond accordingly. 10. Assume that you have been hired as an account planner by an advertising agency and assigned to work on the development of an advertising campaign for a new brand of bottled water. Describe the various types of general and product-specific preplanning input you might provide to the creative team. (LO 8-2) General preplanning input includes overall information on trends, developments and conditions in the marketplace that would be relevant to the marketing of the product. In the case of a new brand of bottled water, the advertiser would want to know about a number of trends and developments affecting the beverage market such as the increasing popularity of new age drinks and environmental concerns over the use of plastic bottles. Information on the changing lifestyles of consumers and how this might affect their beverage consumption would also be relevant, as would product specific information on the bottled water segment of the beverage market. Product-specific preplanning input includes information that is directly relevant to the product or service. Usage and attitude studies regarding bottled water users and nonusers in particular, could be performed, as well as psychographic studies. Problem detection studies could be performed to determine what changes or improvements consumers would like to see in bottled water (e.g., taste, flavors, nutritional supplements, packaging changes). The outcome of a problem detection study may provide input for product improvements, reformulations, or new brands. It would also be important to have information on the type of advertising being used by competitors such as Evian, Dasani, Arrowhead, Propel, and other brands. 11. Discuss the role an advertising slogan plays in the development of an advertising campaign as well as some of the factors that should be considered in developing an effective tagline. Find an example of a good tagline as well as one that does not communicate effectively. Discuss the reasons why you view these as either good or bad examples of advertising slogans. (LO 8-3) An advertising slogan or tagline is used to express the central theme or message that is being communicated in an advertising campaign. The slogan should serve as a summation line that succinctly expresses the company or brand’s positioning, as well as the message it is trying to deliver to the target audience. Marketing experts note that a good tagline must break through the advertising clutter, differentiate the company or brand and be memorable. As noted in IMC Perspective 8-1, the tagline is a hardworking collection of words that should give you that ‘aha’ moment every time you 8-17 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 8—Creative Strategy: Planning and Development

see or hear it.” A slogan or tagline is the brand’s sound bite and is often all you can expect consumers to remember. Long-time marketing executive Steve Cone argues that creating strong slogans is a marketer’s most important job but today is a forgotten part of marketing planning. He suggests that advertising messages should contain “powerlines”, or powerful taglines, which he describes as “words that are well-chosen and have the power to awe, inspire, motivate, alienate, subjugate, and in a marketing context, change the buying habits of consumers.” He argues that since we are bombarded by so many advertising messages, a powerline can do the heavy lifting and break through all of the sensory overload. Students should find examples of slogans or taglines that they think are very good or effective in meeting these criteria, as well as those that do a poor job of communicating because they use meaningless phrases that do little, if anything, to differentiate the brand or company using it from their competitors or providing an identity for the brand.

12. Find an example of an ad or campaign that you think reflects one of the approaches used to develop a major selling idea such as unique selling proposition, brand image, inherent drama, or positioning. Discuss how the major selling idea is used in this ad or campaign. (LO 8-4) Jeweler refers to the major selling idea as “the strongest singular thing you can say about your product or service. This should be the claim with the broadest and most meaningful appeal to your target audience.” O’Toole describes the big idea as the insight that synthesizes the product benefit with consumer needs or desires. Major selling or big ideas should attract the consumers’ attention, get a reaction, and differentiate the advertiser’s product or service from the competition. There are four approaches discussed in the text for developing major selling ideas that can serve as the basis of the creative strategy. These include the unique selling proposition, creation of a brand image, the use of inherent drama and positioning. Students should bring in examples of ads that they feel are examples of each approach to developing a major selling idea and describe the logic of their selection.

Additional Discussion Questions (not in text) 13. Explain what is meant by creative strategy and creative tactics in advertising. Find an example of an advertising campaign and evaluate the creative strategy and tactics used in the ads. Creative strategy determines what an advertising campaign and messages will say or communicate. It is best viewed as a process designed for determining what the advertising should communicate about the product or service and the big idea that will be used as the central theme of the advertising campaign. Creative tactics focus on how the advertising campaign and messages will be communicated with regard to areas such as various appeals and execution styles as well as the tactical issues involved in the design and production of advertising. Students should find an example of a current advertising campaign and evaluate the creative strategy and tactics used in the ad. They should analyze the creative strategy in terms of the big idea used as the central theme of the advertising campaign as well as the type of appeal, execution style and tactical elements used in the individual ads that are part of the campaign. 14. Television commercials are often developed that rely on unusual creative tactics and have very little relevance to the product or service being advertised. Creative personnel in agencies defend the use of the strange messages by noting that they are novel and break through the clutter. Evaluate the pros and cons of this argument. Creative personnel do face a major challenge, as they must develop ads that will break through the clutter that occurs in various media such as television, radio, online, magazines and newspapers and grab the attention of the viewer, listener or reader. This can be particularly difficult in the broadcast 8-18 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 8—Creative Strategy: Planning and Development

media and online as consumers watching TV, listening to radio or surfing the Internet are often trying to avoid ads rather than pay attention to them. While consumers may be more receptive to advertising in magazines or newspapers, the vast numbers of ads that appear in most publications makes it very challenging an ad to be noticed. Thus, creative personnel argue that they must use novel tactics such as startling images, sexual or suggestive appeals or very irreverent ads that can break through the clutter and be noticed by consumers. It often appears that the goal of these ads is to entertain the viewer or listener rather than to deliver a strong message to them. These types of ads often do not contain a message that is relevant to the product or service but do manage to be noticed and register a brand name or attribute association. Creative personnel will also argue the main goal of advertising is to create and maintain top-of-mind awareness and novel or unusual ads are an effective way of doing this. Those who are from the “it is not creative unless it sells” school of advertising argue that the goal of advertising should be to deliver relevant information that helps sell the brand. They do not accept the breaking through the clutter, capturing attention or creating controversy argument as viable excuses for developing ads that do not deliver a relevant message or communicate a selling point. They expect advertising to do more than maintain brand awareness and feel that creative personnel must be challenged to do more than develop irreverent or unusual messages. 15. Evaluate the debate over creative versus hard-sell advertising. Discuss the arguments for and against each perspective. Who should be responsible for judging the creativity of an ad— clients or agency creative personnel? (LO-8-1) There has been an ongoing battle in advertising between those who believe ads should move people and those who feel they should just move product. The “suits” or “rationalists” on the hard-sell side argue that the primary function of advertising is to sell the product or service. They take the position that advertising is not creative unless it sells and should be driven by sales results rather than creative awards. They argue that the high costs of commercial production and media time are making it more important than ever for advertising to produce measurable results. They also note that there is tremendous financial pressure on businesses to produce results so they are looking for campaigns that can move the sales needle. Those advocating the hard-sell approach often feel that the more selling points or information in an ad, the better its chances of moving the consumer to make a purchase. They argue that the goals of an advertising message or campaign should be to deliver relevant and favorable impressions to consumers, which will help sell a product or service. The impact of advertising on sales is the real measure of its creativity and is more important than whether it is innovative or wins awards. On the other side are the “poets” or proponents of creativity, who argue that advertising has to build an emotional bond between consumers and brands or companies rather than focusing on product features and benefits. They feel that it has become very difficult to differentiate a company or brand based on functional features, as most products have become indistinguishable from their competitors. They argue that in today’s highly competitive market place where many companies offer high quality products at similar prices, strong brand images are the key to differentiating a product or service. Their perspective is that consumers are tired of seeing traditional forms of advertising for products such as automobiles that focus on sleek appearances and advanced features. They argue that consumers want to see ads that are more entertaining, fun and make them feel good. The “poets” also defend the advertising as art and entertainment approach by noting that this type of advertising is needed to break through the clutter as well as the consumers’ boredom barrier. Moreover, they note that highly creative ads are often effective, even though it is difficult to quantify their impact on sales. They argue that creativity cannot be judged solely based on sales since and might argue that advertising that is unique or different is often needed to break through the competitive clutter, grab the consumer’s attention and have some impact. They are more likely to view creativity in terms of 8-19 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 8—Creative Strategy: Planning and Development

the ad’s ability to generate an emotional response and create certain feelings or images that can be transferred to the brand. Those involved with an advertising campaign must understand the importance of balancing these two perspectives. The position of creative personnel must be respected and they should be given some latitude in developing advertising messages. However, the creative team should recognize that ads that are creative only for the sake of being creative often fail to communicate a relevant or meaningful message that will help sell a product or service. There are numerous examples of advertising campaign that have won awards for creativity but failed to sell the product (e.g., Alka-Seltzer). When this occurs, the agency usually loses the account and the client looks for a new approach that will help move the sales needle. Students can be asked to debate these two perspectives on advertising creativity. There is no easy answer to the second part of this question as ideas and perceptions regarding what constitutes a creative ad vary among those who are involved with and evaluate advertising. The issue of who should have the responsibility for judging the creativity of an advertisement is debatable. Obviously creative personnel are probably best able to evaluate an ad in terms of criteria such as its novelty, uniqueness, and artistic merits. However, the client may be in the best position to evaluate the ad in terms of its ability to communicate the intended sales message to the target audience. Ideally, there should be agreement between the creative specialists and client. The client does not want creativity for creativity’s sake but rather a creative message that effectively communicates with consumers. On the other hand, the client must respect the creative insight and background of the agency 16. Briefly describe the five major communication interfaces and decision points in the model of marketing information flow shown in Figure 8-3. Discuss how breakdowns in communication can occur at each interface and how this might negatively impact the creative process. (LO-8-3) This model, which was developed by developed by John Sutherland, Lisa Duke, and Avery Abernethy, shows the flow of marketing information regarding customers, the product or service, and the market from clients to agency creative staff and the major interfaces and decision points where gatekeepers can impede the flow of information to agency creatives. The five major communication interfaces and decision points where breakdowns can occur include (1) between clients and their agencies (2) the client or client gatekeeper lacking knowledge of some or all of the information needed for effective advertising (3) the client deciding not to share all the available information that is relevant to creating effective advertising (4) the agency gatekeeper(s) deciding not share with creative staffers all the client information they receive (4) and internal agency communication failures which may result in the creative staff not receiving all the relevant information from the client. Breakdowns can occur at each interface clients may not have important marketing information or gatekeepers on the client side, such as brand managers, may choose not to share all the relevant information with their agency. Problems can also occur on the agency side as the gatekeepers such as account managers may not share all of the relevant information with their creative staff or there can be breakdowns in communications among the various departments within the agency. These breakdowns result in agency personnel often lacking the information needed to effectively design and execute creative strategies such as demographic profiles of the target audience, product usage information, information regarding the performance of the client’s product or service, competitive information, and insights into the client’s marketing strategy and major selling points. 17. Discuss the key characteristics of a unique selling proposition. What are some of the factors an advertiser must consider in developing an advertising campaign that uses a USP as the basis for the major selling idea? (LO8-4) The famous advertising copywriter Rosser Reeves developed the concept of the unique selling proposition (USP). The concept of a USP is that it offers the consumer a specific feature or benefit 8-20 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 8—Creative Strategy: Planning and Development

that is important to them and unique to this particular brand. The three characteristics of a USP are that each ad must make a proposition to the consumer that tells them the benefit they will get by buying the brand; the proposition must be one that the competition either cannot or does not offer; and the proposition must have motivating power and thus be able to convince consumers to buy the brand. Students should be encouraged to find an example of an advertisement that they feel uses a USP as its major selling proposition. The ad should be evaluated against the three characteristics of USPs discussed here and in the chapter.

Chapter 09—Creative Strategy: Implementation and Evaluation

CHAPTER 9 CREATIVE STRATEGY: IMPLEMENTATION AND EVALUATION Chapter Overview In the previous chapter, the importance of advertising creativity was examined along with the creative process of advertising. Attention was also given to various approaches for determining the big idea that will be used as the central theme of the advertising campaign. This chapter continues the discussion of creative strategy by turning attention to how these big ideas are developed into advertising messages. We will examine various appeals and execution styles that can be used in developing an advertisement along with tactical issues involved in the design and production of advertising messages. The chapter concludes with a discussion of some guidelines for evaluating the creative work of the advertising agency.

Learning Objectives 1. Compare the different types of appeals used in advertising. 2. Identify creative execution styles and their most appropriate applications. 3. Compare tactics for the creation of print ads and TV commercials as well as online advertising. 4. Discuss guidelines for clients to evaluate creative work.

Chapter and Lecture Outline I.

APPEALS AND EXECUTION STYLES

Once the major selling idea and the advertising campaign theme has been agreed upon, the creative team then turns its attention to determining the specific type of appeal and execution style that will be used to carry out the creative concept. The focus in this chapter is on how the advertising message will be executed and considers the various appeals or approaches used to as well as the creative execution styles that can be used to turn the appeal into an actual advertisement. A.

Advertising Appeals—The advertising appeal refers to the basis or approach used in the advertisement to elicit some consumer response or to influence their feelings toward the product, service, or cause. At the broadest level, these approaches can be broken down into two categories or classes, which are informational/rational appeals and emotional appeals. 1. Informational/rational appeals—These types of appeals focus on the consumer's practical, functional or utilitarian need for the product or service and/or specific reasons for owning a particular brand. The Honda Accord ad shown in Exhibit 9-1 provides an example of a rational appeal. Examples of a number of product- or service-related appeals that would fall under the category of rational appeals are discussed including:

Chapter 09—Creative Strategy: Implementation and Evaluation

• • • • • B.

Feature appeals Competitive advantage appeals Favorable price appeals News appeals Product/service popularity appeals

Emotional appeals—These types of appeals relate to consumers' social and/or psychological needs for purchasing a brand of a product or service. Emotional appeals have become very popular in advertising as marketers recognize that many purchase decisions are made based on feelings and emotions since rational, functional-based differentiation is often very difficult. Examples of psychological states or feelings that can serve as a basis for emotional appeals are shown in Figure 9-1 of the text and can be reviewed. The effectiveness of emotional appeals has been documented in a number of research studies by Pringle and Field, which are discussed in their new book Brand Immortality. A key finding from their research is that advertising campaigns with purely emotional content are nearly twice as likely to generate large profit gains versus campaigns using only rational content. The emotional only campaigns were also more effective than those that used a combination of emotional and rational content. One of the reasons given for why emotional campaigns work so well is that they reduce price sensitivity and strengthen the ability of brands to charge a price premium, which contributes to profitability. Another reason for using emotional appeals is to influence consumers' interpretations of their product usage experience through the use of transformational advertising. This type of advertising creates feelings, images, meanings and beliefs about the product or service that may be activated when the consumer uses it and thus "transforms" their interpretation of the usage experience. The “Find Your Beach” campaign for Corona Extra beer is a very good example of transformational advertising. 1. Combining rational and emotional appeals—Many purchase decisions are made based on both rational and emotional motives. Thus rational and emotional appeals may be combined in the advertisement to attempt to influence both types of purchase motives. Attention should be given to the concept of emotional bonding, which focuses on how consumers feel about brands and their relationships with them. The strongest relationship between a consumer and a brand is based on feeling or emotional attachment to the brand. 2. Additional types of appeals—Other appeal types that are discussed in the text include reminder advertising, teaser advertising and user-generated content whereby ads are created by consumers rather than by the company and/or its agency. The “Fiesta Movement: A Social Remix” campaign was based on user-generated content as the various print ads and TV spots used in the campaign were created by consumers rather than an advertising agency. The increasing use of social media such as YouTube and Facebook is likely to result in greater use of user-generated content to by marketers as a way of getting consumer more engaged with their brands.

Chapter 09—Creative Strategy: Implementation and Evaluation

Advertising Execution—Creative execution refers to the manner in which an advertising appeal is carried out or presented. A particular advertising appeal can be executed in a variety of ways and a particular means of execution can be applied to a variety of advertising appeals. Some of the more commonly used execution techniques include: 1. Straight-sell or factual message—This type of execution relies on a straightforward presentation of information about the product or service such as specific attributes or benefits. 2. Scientific/technical evidence—A variation of the straight sell where scientific or technical evidence or information is presented in the ad to support a claim. 3. Demonstration—This type of execution is designed to illustrate the key advantages or benefits of a product or service by showing it in actual use or in some contrived or staged situation. 4. Comparison—This type of execution involves a direct or indirect comparison of a brand against the competition. 5. Testimonial—Many advertisers present their advertising messages in the form of a testimonial whereby a person speaks on behalf of the product or service based on his or her personal use of and/or experiences with it. 6. Slice of life—This type of execution is often based on a problem/solution type of format. The ad attempts to portray a real-life situation involving a problem, conflict or situation consumers may face in their daily lives. The ad then focuses on showing how the advertiser's product or service can resolve the problem. Slice-of-life executions are also becoming very common in business-to-business advertising as companies use this approach to demonstrate how their products and services can be used to solve business problems. 7. Animation—This technique uses animated characters or scenes drawn by artists or on a computer. Animation is often used as an execution technique for advertising targeted at children, such as in toys and cereal commercials. Animated characters have been used in many campaigns, including Green Giant vegetable (the Jolly Green Giant) and Keebler cookies (the Keebler elves). Some advertisers use ads that mix animation with real people. For example, Star-Kist tuna often uses commercials featuring Charlie the Tuna that mixes animation with real people. Kraft Foods recently revitalized its Mr. Peanut character to make him more appealing to younger consumers. Many advertisers now rely on computergenerated animation, such as the award-winning “Back to the Start” short film for Chipotle’s Cultivate Foundation, which is shown in Exhibit 9-17.

Chapter 09—Creative Strategy: Implementation and Evaluation

8. Personality symbol—This type of execution involves the use of a central character or personality symbol to deliver the advertising message and with whom the company or brand can be identified. The personality symbol can take the form of an actual person who is used as a spokesperson, animated characters or even animals. For example, AFLAC has made effective use of this execution style by developing commercials that have made a duck a popular personality symbol for the company. The chapter discusses how the Wieden+Kennedy agency created a campaign for KFC that resurrected Colonel Harlan Sander, who founded the company (originally known as Kentucky Fried Chicken) in 1940 and appeared in ads for decades for the chicken restaurant chain. The campaign harkens to the company’s past by using comedians Darrell Hammond and Norm Macdonald playing the founder as well as actor George Hamilton. Dos Equis also used this technique by creating a popular personality symbol for the brand with “The Most Interesting Man in the World” campaign, which was discussed in Chapter 8. 9. Imagery—This type of appeal is used when the goal is to encourage consumers to associate the brand with the symbols, characters, and/or situation shown in the ad. An imagery execution may be based on usage imagery by showing how a brand is used or performs and the situation in which it is used. It can also be based on user imagery where the focus is on the type of person who uses the brand. For example, ads for cosmetics and clothing often use very attractive models in the hope of getting consumers to associate his or her physical attractiveness with the brand. 10. Dramatization—This execution technique creates a suspenseful situation or scenario in the form of a short story. Dramatizations often use the problem/solution approach as they show how the advertised brand can help resolve a problem. 11. Humor—Humor can be used as the basis for an advertising appeal. However, humor can also be used as a way of executing the message and presenting other types of advertising appeals. 12. Combinations—many of these execution techniques can be combined in presenting an advertising message. For example, slice-of-life ads are often used to demonstrate a product or make brand comparisons. Professor Notes

McGraw-Hill Connect ®: Appeals Used in WPU's Campaigns Type of Activity: Click and Drag Activity Summary: In this activity, students will match the various campaign options developed by the ad agency for WPU’s campaign with the type of advertising appeals used. Activity Learning Objective:

Chapter 09—Creative Strategy: Implementation and Evaluation

09-01 Compare the different types of appeals used in advertising. CONCEPT REVIEW: The advertising appeal refers to the approach used to attract the attention of consumers and/or to influence their feelings toward the product, service, or cause. An advertising appeal can also be viewed as something that moves people, speaks to their wants or needs, and excites their interest. Many different appeals can be used as the basis for advertising messages. At the broadest level, these approaches are generally broken into two categories: informational/rational appeals and emotional appeals. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

McGraw-Hill Connect ®: Bee and Gee Ad Executions Type of Activity: Case Analysis Activity Summary: Bee & Gee is a multi-product, multi-brand, packaged goods company with a significant presence in the personal care and grooming category. Within each product category, it has numerous brands that sometimes compete with each other in the same geographical markets. Bee & Gee has four different shampoo brands that it markets to consumers in multiple countries. This activity will have the students select the best answer for each question related to their execution techniques. Activity Learning Objective: 09-02 Identify creative execution styles and their most appropriate applications.

CONCEPT REVIEW: Once the specific advertising appeal that will be used as the basis for the advertising message has been determined, the creative specialist or team begins its execution. Creative execution is the way an advertising appeal is presented. While it is obviously important for an ad to have a meaningful appeal or message to communicate to the consumer, the manner in which the ad is executed is also important. Difficulty: Medium Bloom’s: Analyze AASCD: Analytical Thinking

II.

CREATIVE TACTICS

Once the creative approach, type of appeal, and execution style has been determined, attention turns to creating the actual advertisement. The design and production of an advertising message involves a number of activities such as writing copy, developing illustrations and other visual elements of the ad and bringing all of the pieces together in a finished product. 9-5 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 09—Creative Strategy: Implementation and Evaluation

A. Creative tactics for print advertising—There are three basic components of a print ad including the headline, body copy, and the visual elements or illustrations. These elements are brought together through a layout. 1. Headlines—The headline refers to the words in the leading position of the advertisement— those that are likely to be read first or are positioned to draw the most attention. The most important function of a headline is to attract the readers’ attention and make them interested in the remainder of the advertising message. There are various types of headlines including: • Direct headlines – straightforward and informative in terms of the message presented • Indirect headlines—provoke curiosity and intrigue by using questions, challenges, provocations, and other methods • Subheads—Many ads also contain a main headline and one or more secondary headlines or subheads. These subheads usually appear in a smaller type size than the main headline and are generally larger the type size used for the body copy. They are used to break-up or section off large amount of body copy and highlight key sales points in the ad. • Body copy—The main text portion of a print ad is referred to as the body copy. Body copy content depends on the type of advertising appeal and/or execution style being used. 2. Visual elements—Another major component of a print ad is the visual elements or illustrations. Visual components often dominate print advertising and play a very important role in determining effectiveness. 3. Layout—A layout refers to the physical arrangement of the various parts of the ad including the headline, subheads, illustrations, body copy and any identifying marks. B.

Creative Tactics for Television—As with print ads, television commercials have several components which must work together to create the right impact to communicate the advertiser's message. 1. Video—The video or visual elements are what is seen on the television screen. Decisions have to be made regarding the main focus of the visual components of a television commercial, such as the product, the presenter, scenery, action sequences, lighting graphics, color and other factors. 2. Audio—The audio portion of a commercial includes several elements such as voice, music and sound effects. Voices may be heard in several ways such as through the direct presentation of a spokesperson or as a dialogue or conversation among people in the commercial. A common method for presenting the audio portion of a commercial is through a voiceover, whereby the message is delivered or action on the screen is narrated by the voice of an announcer who is not visible. A trend among major advertisers is to hire celebrities with distinctive voices to do the voiceovers for their commercials. • Music—A very important part of many television commercials is music, which plays various roles and functions such as providing a pleasant background or helping create the appropriate mood or setting. Some artists are concerned about the backlash they might get when their songs are used in commercials Another important musical element in both television and radio commercials is jingles, which are catchy songs about a product or service that usually carry the advertising theme and a simple message. 9-6

Chapter 09—Creative Strategy: Implementation and Evaluation

Planning and production of television commercials—The various elements of a television commercial •

Planning the commercial—The script which is a written version of a commercial that provides a detail description of its video and audio content. The script indicates the various audio components of the commercial such as the copy to be spoken by voices, music and sound effects. The video portion of the script provides the visual plan of the commercial. Once the basic script has been conceived, the writer and art director get together to produce a storyboard or a series of drawings used to present the visual plan or layout of a proposed commercial. Once the client approves the storyboard, the commercial is ready to move to the production phase.

•

Production—The process for a commercial actually involves three phases: 1. Preproduction—all the work and activities that occur before the actual filming of a commercial. 2. Production—the period during which the commercial is filmed or videotaped and recorded. 3. Postproduction—activities and work that occur after the commercial has been filmed and recorded.

Creative Tactics for Online Advertising—Marketers are allocating more of their media budgets to digital ads that appear on websites, social media and mobile devices which are creating a new set of challenges from a creative perspective. Compared to traditional media such as television or magazines, the Internet is a more goal-oriented medium. Getting consumers to pay attention to, let alone engage or interact with, a digital ad is very difficult since doing so takes them away from the content on the web page or social media site they are visiting on their computers, tablets, or phones. Online ads often interrupt our viewing sessions, and unless they are providing relevant information and/or are very creative or entertaining, it is likely they will be ignored. 1.

Role of Digital Ads—A variety of digital advertising formats are available to marketers including banner ads, search ads, interstitials, native ads, and videos. The type of online ad used by marketers will vary depending on the goal(s) they are trying to achieve. The goal of digital concept ads is to drive top-of-the-funnel goals such as awareness and interest, which can be achieved through banner ads, or videos such as commercials. Content ads typically have a mid-funnel goal of enhancing consumers’ knowledge or understanding of a product or service, which can be done by providing high-quality content with which the viewer can engage. Different types of online ads can be used to provide content such as videos, webisodes, in-feed ads to Facebook or Twitter with sponsored content, and native ads. Native advertising is a type of paid placement designed to fit seamlessly into the content that surrounds it. The design, content, and writing style of a native ad mirrors the nonpaid content around it, giving the user the impression that it really belongs. Native advertising is becoming a dominant form of content advertising, particularly in digital editions of magazines and newspapers. The third form of digital advertising is commerce ads, which primarily have a bottom-ofthe-funnel goal of getting consumers to take action and make a purchase. Commerce ads are the dominant form of display advertising, particularly retargeting types that follow consumers across the Web, and typically are not visually rich as their success is based on serving the right offer to consumers and can be easily measured in terms of clicks and conversions. 9-7

Chapter 09—Creative Strategy: Implementation and Evaluation

•

Display ads—Many online display ads use large-size ad formats such as rectangular ads, horizontally oriented leaderboards, or skyscrapers that are vertically oriented and give advertisers the ability to place an ad adjacent to the website content.

•

Online video—The use of online video advertising is growing rapidly and is part of the tremendous growth in the viewing of videos across all online platforms including websites, YouTube, Facebook, Twitter, Snapchat, and other popular social media sites. The use of video for online advertising can include multiple formats ranging from the airing of a digital video or commercial in a program streaming online to more customized formats for viewing on mobile devices. Digital and Social Media Perspective 9–2 discusses the award-winning “Unskippable” campaign the Martin Agency developed for GEICO which consisted of a series of ads created specifically for use as pre-roll to YouTube videos.

Professor Notes

McGraw-Hill Connect ®: Sunday Motor's Creative Tactics Type of Activity: Click and Drag Activity Summary: An advertising agency is currently in the process of planning and developing television ads for the Sunday Santa Barbara, an SUV made by the Sunday Motor Corporation, an Asian automaker. Students will identify the correct sequence of the various stages in the planning and development process of a television commercial. They will then match activities with the corresponding stage of the commercial planning and development process for the Sunday Santa Barbara TV commercial. Activity Learning Objective: 09-03 Compare tactics for the creation of print ads and TV commercials as well as online advertising. CONCEPT REVIEW: Once the creative approach, type of appeal, and execution style have been determined, attention turns to creating the actual advertisement. The design and production of advertising messages involve a number of activities, among them writing copy, developing illustrations and other visual elements of the ad, and bringing all of the pieces together to create an effective message. The verbal and visual elements of an ad are part of the tactical considerations in creating print ads and TV commercials. Difficulty: Hard Bloom’s: Understand AASCD: Analytical Thinking

Chapter 09—Creative Strategy: Implementation and Evaluation

III.

CLIENT EVALUATION AND APPROVAL OF CREATIVE WORK

While the creative specialists determine the advertising appeal and execution style that will be used in the campaign, the client must evaluate and approve the creative approach before any ads are actually produced. A number of different people on the client side may be involved in evaluating and approving the creative work of the agency. The amount and influence of these individuals will depend on the company's organization and policies, the importance of the product to the company, the role of advertising in the marketing program, and the nature of the advertising approach being recommended. The text discusses the challenges the Chiat/Day agency had in convincing Apple’s board of directors to approve the famous “1984” television commercial that was used to introduce the McIntosh personal computer. There are two basic stages in the development of advertising—creation and production. Most of the attention in this chapter has focused on the creation stage and creative process. Once the creative approach has been determined and approved, the attention turns to the production process, which involves a variety of functions needed to produce the ad or commercial and put it into a finished form suitable for use by the media. The client will have the opportunity to review the final version of the advertisement after the production stage. However, it is important that a careful evaluation be made before the ad actually enters production, as this stage requires a substantial investment of time and money.

Guidelines for Evaluating Creative Output—There are a number of guidelines that personnel on the client side might use to evaluate the creative approaches suggested by the agency. Some of the most important and basic criteria or guidelines that might be used in evaluating creative approaches are discussed in the text and include the following: • Is the creative approach consistent with the brand's marketing and advertising objectives? •

Is the creative approach consistent with the creative strategy and objectives? Does it communicate what it is supposed to?

•

Is the creative approach appropriate for the target audience?

•

Does the creative approach communicate a clear and convincing message to the customer?

•

Does the creative execution keep from overwhelming the message?

•

Is the creative approach appropriate for the media environment in which it is likely to be seen?

•

Is the ad truthful and tasteful?

Professor Notes

Chapter 09—Creative Strategy: Implementation and Evaluation

Teaching Suggestions Nearly every student has an opinion about the quality and effectiveness of various ads and those they feel are particularly good or bad. Students should enjoy reading this chapter and learning about the various creative appeals and execution styles that can be used by advertisers. An interesting way of beginning the lecture on creative strategy is to ask the students to name the TV commercial or print ad they would rate as the "most outstanding" one they have seen lately. You might then ask them how they think their list of top commercials would compare against that of ad critics. Publications such as Advertising Age and AdWeek pick the best ads each year and feature them in special editions. For example, the Advertising Age Best Awards are given each year in various product and service categories and for various media including television, radio, newspapers magazines, out of home and interactive. There are two very interesting websites that you may want to visit and direct your students to including Ad Forum (www.adforum.com) and Advertising Age’s Creativity Online (http://creativity-online.com/). Commercials currently running can be viewed on these sites and they also include reviews of spots, industry news and many other interesting features. A number of marketers now have their own YouTube channel where they make their commercials available as well as other videos used. For example, Nike’s channel can be found at http://www.youtube.com/user/nike. This chapter does not go into a great amount of detail regarding the process of creating and producing the advertisement. If more detail is desired on areas such as art and layout, copywriting or print and broadcast production students might be referred to a more traditional advertising principles book such as Contemporary Advertising by William F. Arens, Michael Weigold and Christian Arens. There are also numerous books available on the creative process such as Creative Strategy in Advertising by A. Jerome Jeweler and Bonnie L. Drewniany and Creative Advertising: Theory and Practice by Sandra E. Moriarty. Students interested in specific areas of the creative process such as copywriting or layout can be referred to books such as Creative Advertising by Mario Pricken, The Design of Advertising by Roy Paul Nelson, Advertising Copywriting by Philip Ward Burton and Fundamentals of Copy & Layout by Albert C. Book and C. Dennis Schick. A new video case is available for this edition that examines the IMC program for Dasani, which is marketed by the Coca-Cola Company and is the leading brand of bottled water in the U.S. The chapter opener discusses how The Lambesis Agency developed an IMC campaign to reposition Dasani as well as leverage the new PlantBottle recyclable plastic bottle developed by The Coca Cola Company. This video goes into detail on the creative process used by Lambesis in developing the print, television, and online advertising for Dasani.

Answers to Discussion Questions 1. The chapter opener discusses how DASANI was able to use creative advertising to reposition the brand and make it the leading brand of bottled water. Evaluate the creative strategy used by The Lambesis Agency for DASANI bottled water as well as the two line extensions, DASANI Drops and DASANI sparkling. Why have they been effective? (LO 9-1, 9-2) The Coca-Cola Company and Lambesis recognized that the environmental concerns regarding bottled water also had to be addressed and could be a point of differentiation. Coca-Cola had created PlantBottle® packaging, a 100% recyclable bottle made from up to 30% plant based material that was being used for some of its other beverages. The Company was ready to reintroduce its DASANI brand in this new, more environmentally friendly bottle and knew that the launch had to make the brand likeable and relevant to both consumers as well as retailers. Lambesis recognized that the relaunch campaign could serve the DASANI brand in two ways – by appealing to light green consumers who were seeking simple ways to be more environmentally conscious and by positioning 9-10 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 09—Creative Strategy: Implementation and Evaluation

the DASANI brand as a more premium brand in the highly competitive bottled water market. The agency created a fully integrated rebranding campaign that combined environmentally-conscious messaging with premium high design to celebrate the DASANI brand, the PlantBottle packaging, and the brand’s sustainability platform. A sleek and minimalist aesthetic was used throughout all of the creative work to reflect purity and the pure, clean and refreshing feeling of water. Lambesis utilized these design elements for the website as well as for high-impact online display ads, both of which helped educate consumers about the PlantBottle packaging. Print and outdoor advertising used for the campaign centered around an impactful image of natural plant life “growing” the PlantBottle packaging. Lambesis created an innovative print insert on 100% recycled paper with a peel-off plantable seed paper leaf to highlight the environmentally conscious design of the packaging. Seeded leaf paper with eco-conscious messaging was also placed on products in retail stores to further communicate DASANI’s commitment to sustainability. The integrated campaign also used television advertising, as the first TV spot used bright, clean natureinspired imagery to showcase the brand’s commitment to being more sustainable and to portray DASANI bottled water as clean, crisp and refreshing. A second spot was set to music from the classic Chubby Checker song “The Twist” and leveraged its enduring appeal to demonstrate to consumers how easy it is to twist and recycle the new PlantBottle packaging. The integrated campaign was very successful as it helped the DASANI line regain distribution in key retail accounts and positioned it as the mass prestige brand that stands out as the clear choice between higher-priced premium brands and lower-priced private label options. Building on the successful repositioning of DASANI bottled water, The Coca-Cola Company launched a new product named DASANI Drops®, which is a zero-calorie flavor enhancer with various flavors that can be added to water. DASANI Drops flavor enhancers give consumers a new way to enjoy drinking water by enhancing the taste of water with a simple squeeze of an easy to carry bottle and targets mothers and health-conscious people who are very busy with their daily routine. An integrated campaign themed “Turn Your Flavor On” supported the introduction of the Dasani Drops enhancers, and included print, digital and outdoor advertising along with in-store promotions and sampling at stores, on college campuses and at concerts. The successful repositioning of DASANI made the brand the market leader in the bottled water category and The Coca-Cola Company decided to leverage the brand equity by introducing DASANI Sparkling, a carbonated water beverage. The new product is produced by adding carbonation to filtered water, has no sweeteners and comes naturally flavored with lime, lemon, berry and apple. The line extension leverages the brand’s strong identity as well as the strong growth in carbonated water, which is one of the fastest growing segments of the beverage industry. In 2016, The Coca-Cola Company debuted new flavors and introduced fresh packaging for the DASANI Sparkling line and supported these efforts with an integrated marketing campaign called “Break for Bubbles” which encourages people to take a break from everyday stresses with a refreshing beverage. The integrated marketing campaign includes television, digital, print and out-of-home advertising that delivers a message of how the DASANI Sparkling brand enlivens any moment with a refreshing and rejuvenating escape so you can renew, recharge and restart your day fresh. Over the past seven years, the excellent creative work done by the Lambesis agency has helped propel DASANI bottled water from a brand that was struggling to avoid commodity status to the highest ranked branded water in dollar volume. Moreover, bottled water has become the fastest growing mass-market beverage category in the U.S. with annual sales of nearly $15 billion. The DASANI brands have also become an important part of the Coca-Cola Company's product portfolio as consumers continue to move toward healthy, convenient and refreshing beverages.

Chapter 09—Creative Strategy: Implementation and Evaluation

2. Discuss some of the reasons why emotion-based advertising appeals are effective. Find an example of a company or brand that is using an advertising campaign based on emotional appeals and analyze its effectiveness. (LO 9-1) Emotional appeals relate to the consumer's social and/or psychological needs for purchasing a product or service. Emotional appeals are most appropriate for products and services where social and/or psychological needs and feelings are important or where consumers need to be reached on an emotional level. Many consumer products are difficult to differentiate on a functional/utilitarian basis and advertisers often turn to appeals to emotions to create feelings, images and beliefs that can be activated when the consumer uses the product. Moreover, marketers recognize that commercials must be meaningful to consumers, as well as entertaining, and emotional appeals are often the best way to touch the consumer and hold their interest. Emotional appeals are not, however, limited to consumer products that are difficult to differentiate. Appeals to emotions are also used for major purchases such as automobiles, financial investments, and many other purchases. Figure 9-1 lists various personal psychological states (safety, security, fear, joy, nostalgia, pride) as well as social-based feelings or needs (recognition, status, respect, approval) that can be used as the basis for emotional advertising appeals. Students should have no trouble finding ads that use social and psychological needs as the basis for their appeal. However, they should be encouraged to discuss whether the needs appealed to in the ad are appropriate for the product or service they are analyzing. 3. Explain the concept of transformational advertising. Find an example of a company that is using transformational ads and discuss how the ads might enhance the experience of using the product or service. (LO 9-1) A transformational ad is one which associates the experience of using (consuming) the advertised brand with a unique set of psychological characteristics which would not be typically be associated with the brand experience to the same degree without exposure to the advertisement. Transformational ads create feelings, images meanings, and beliefs about the product or service that may be activated when consumers use it and thus "transforms" their interpretation of the usage experience. There are many good examples of how companies use transformational advertising to enhance the consumption experience of consumers. McDonald’s has used TV commercials showing parents or grandparents enjoying the experience of taking their children or grandchildren to the fast food restaurant and enjoying a bonding experience with them. These types of commercials can be very effective as they can make the experience of a trip to McDonalds with a child richer, warmer and more enjoyable. The “Find Your Beach’ campaign for Corona Extra beer that is discussed in the chapter is also a very good example of transformational advertising as the ads are designed to preserve Corona’s iconic beach image while extending the Corona state of mind beyond the sun, sand and surf. 4. Discuss the value of virtual reality (VR) as a way for marketers to communicate with consumers. What are some of the applications of VR to integrated marketing communications? What challenges will marketers face in using virtual reality as a way to connect with consumers? (LO 9-1, 9-2) Virtual reality is a fully immersive digital simulated environment that gives the user the feeling and sensation of actually being in a situation or setting. It allows for a much richer experience whereby a consumer feels that s/he is actually in an environment such the playing field at a sporting event or a tourist destination such as a national park. Many experts feel that virtual reality is going to revolutionize the way we live, play, learn, and shop as marketers continue to find ways to connect with consumers through the new technology. Virtually reality offers tremendous opportunities for 9-12 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 09—Creative Strategy: Implementation and Evaluation

marketers; however, its use as a marketing tool requires the development of quality content that captures the environment they are trying to simulate and presents it well to the consumer. Consumers must also have the proper equipment to experience the VR content. Facebook is betting big on virtual reality; the company paid $2 billion in 2014 to purchase Oculus Rift, which makes high-end VR headsets and is developing handheld controllers that let users see and incorporate their hands in VR games and other experiences. Samsung, Sony, HTC, and Google are also investing heavily in VR. Several companies are developing online ads that utilize VR and in the future, it is likely that we will be immersed in TV commercials rather than just watching them. 5.

IMC Perspective 9-1 discusses the new “Live Más” campaign for Taco Bell. Analyze the creative strategy used for this campaign, giving attention to the type of creative appeals used as well as the advertising execution. (LO 9-1, 9-2) The Live Más campaign for Taco Bell uses a variety of creative appeals and executions. One of the best-known ads was the “Viva Young” commercial that debuted during the 2013 Super Bowl and was one of the most popular spots on the big game. The commercial features a group of senior citizen sneaking out of their retirement home late at night and embarking on a night of partying that includes dancing, getting tattoos, sneaking into swimming pools, and other escapades. They eventually end up at a Taco Bell for a “Fourthmeal’ before returning home. The purpose of the ad is to show that you are never too old to Live Más. This commercial is clearly an emotional appeal that uses a combination of executions but is best classified as an entertaining humorous execution. It should also be noted that the spot uses music very effectively, as a Spanish version of Fun’s hit song “We Are Young” is integrated very well into the commercial. Taco Bell has used a number of other types of advertising appeals and executions to help with the launch of the Doritos Locos Tacos. For example, several spots for the DLTs relied on user-generated content. One spot is called “Road Trip” and is based on a video posted on YouTube showing a consumer who drove over 900 miles to find a DLT while another featured a series of Instagram posts strung together showing consumers taking their first bite of a Cool Ranch DLT. Another popular TV commercial is the launch spot for the Cool Ranch DLT called “World’s Most Obvious Idea” which capitalized on the swell of consumers wondering when Taco Bell would make a Cool Ranch version of the new product. The humorous spot uses a form of a slice-of-life execution by showing various scenes of people eating a Nacho Cheese DLT as they go about their business and daily lives but noting that “they should make a Cool Ranch one.” All of the advertising for Taco Bell is very upbeat and designed to promote the positive experience consumers have at Taco Bell while building an image for the company as a lifestyle brand. Examples of television commercials used by Taco Bell can be found on the company’s YouTube channel (https://www.youtube.com/user/tacobell).

6. Choose three of the advertising execution techniques discussed in the chapter and find examples of advertisements that are using them. Discuss why the marketers might be using these particular ad execution techniques. (LO 9-2) A number of advertising execution techniques are discussed in the chapter and students should be encouraged to select three of them to analyze and find examples of their use. We discuss two of them here to as an example of how this question might be answered. The slice-of-life format relies on a problem-solution approach that is often presented with a little drama. These spots usually begin by showing consumers facing or talking about a problem such as bad breath, dingy laundry, dandruff, headaches, or dry skin. The short drama always ends with the problem being resolved by the advertiser’s product. Many advertisers feel that the slice-of-life format is a more interesting and effective way to present their message than just making performance or efficacy claims. Consumers purchase products to solve problems and marketers feel the slice-of-life 9-13 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 09—Creative Strategy: Implementation and Evaluation

execution format is an effective way of registering a product feature or benefits and showing how it can resolve common problems we encounter in our daily lives. The slice-of-life execution format is very popular among packaged-goods companies such as Procter & Gamble because it is an effective way of connecting with consumers by showing common situations or problems they encounter in their everyday lives. Some business-to business marketers use a variation of the slice-of-life technique known as slice-ofdeath advertising, which involves showing the negative consequences that, can result when companies make the wrong decision in choosing a vendor or service provider. B2B marketers use this advertising execution technique to demonstrate how their products and services can be used to solve their customers’ business problems and how they are better than their competitors’ products or service. This execution style is often used in conjunction with a fear appeal although some companies, such as Fed Ex, also integrate humor into their slice-of-death commercials. Another execution technique is dramatization, where the focus is on telling a short story with the product or service as the star. The approach is similar to a slice-of-life execution in that it usually relies on a problem/solution approach but uses more excitement and suspense in telling the story. Products and services for which there are significant consequences or outcomes associated with their use or performance are good candidates for the use of dramatization executions. Dramatization is an effective way to draw the viewer into the action and hopefully to get them to experience the feelings and concerns of the characters. For example, Exhibit 9-21 shows some images from the TV commercial for the Buick Enclave, which uses dramatization by showing a family coming home from a trip and landing at an airport on a cold and snowy night. As the plane touches down, the man takes out a smartphone and uses the MyBuick remote start feature to start the vehicle so that it is nice and warm when the family gets off the shuttle bus and into the Enclave. 7. Discuss some of the reasons a marketer might choose to create a personality symbol or character to represent the company or brand. Analyze KFC's decision to bring back Colonel Sanders as a personality symbol for the brand. Do you agree with this decision? (LO 9-2) Marketers might choose to create a personality symbol or character for their company or brand for a number of reasons. One of the major reasons is that a personality symbol or character can be an effective way to draw attention to a company’s advertising and a way to break through the clutter of competing ads. They can also be a way to build and maintain an identity for a company or brand, particularly when the character is well liked by consumers. They can also bring some continuity to an advertising campaign as consumers will be seeing the person or character regularly and thus can associate him/her or the character with the company or brand. A recent campaign created by the Wieden+Kennedy agency for KFC resurrected Colonel Harland Sanders, who founded the company (originally known as Kentucky Fried Chicken) in 1940 and appeared in ads for decades for the popular chicken restaurant chain. Although Sanders died over 35 years ago, KFC decided to harken back to its past by having comedians Darrell Hammond and Norm Macdonald play the bespectacled founder. In 2017 George Hamilton, the handsome actor best known for his extreme suntans, was added to play the Colonel. Hamilton appears as an extra bronzed colonel in commercial for Extra Crispy Colonel, making him KFC’s first product-specific colonel. A major goal of the campaign is to appeal to millennials, many of whom have never tried KFC, by adding a modern, comedic twist to his character. The integrated campaign includes new packaging, menu items, websites, and social media and has helped increase KFC sales since its launch. Same store sales at KFC locations have increased every quarter since the campaign reintroducing the Colonel began in May 2015. The campaign has also generated a considerable amount of earned media, as the commercials are very popular on YouTube and other social media platforms.

Chapter 09—Creative Strategy: Implementation and Evaluation

8. Discuss the role of headlines in a print advertisement. What is the difference between a direct headline and an indirect headline and when might each be used? (LO 9-3) The most important function or role of the headline is to attract the readers' attention and make them interested in the remainder of the message. Headlines can also perform a segmentation function by engaging the attention and interest of consumers who may be most likely to buy a particular product or service. Some ads use little or no body copy so the headline must work with the illustration or visual portion of the ad to communicate the entire advertising message. Subheads are secondary headlines that are usually smaller than the main headline but larger than the body copy. Subheads are often used to enhance the readability of the message by breaking up large amounts of body copy and highlighting key sales points. Their content often reinforces the headline and advertising slogan or theme. A direct headline is very straightforward and informative in terms of the message presented and the audience the ad is targeting. Examples are headlines that make an announcement or provide news or information to the reader. Indirect headlines are not straightforward but rather may be designed to create attention, interest or curiosity with questions, provocations, or challenges. Direct headlines are often used when marketers have a specific product attribute or benefit they want to communicate or are making a promise or offering something that is very likely to be of interest to the reader. Indirect headlines are often more effective at attracting readers’ attention and interest because they provoke curiosity which can be a way to motivate readers to become more involved with the advertisement. Students should find an example of ads that use direct and indirect headlines.

9. Discuss the role of music in advertising. Find an example of a television commercial that is using a specific song and discuss the role the music plays in delivering the message. (LO 9-3) Music can play a variety of roles and functions in commercials. In many spots, the role of music is primarily to provide a pleasant background or to help create the appropriate mood or setting for the commercial. In some ads, the role of music is much more central to the delivery of the advertising message. It can be used to break through clutter, help establish an image or position, or add emotion or feeling. Music can work through a classical conditioning process whereby it creates positive feelings or affect that become associated with the company or brand being advertised. Music can also create a positive mood state that can make the consumer more receptive toward the advertising message. Companies/brands pay large sums of money for the rights to use these songs such as because they feel the music is central to the feeling or image they want to create in the commercial. For example, Google has used Lady Gaga’s hit song “Edge of Glory” in commercials for its Chrome web browser while Citibank has used Alicia Keys’ song “Girl on Fire” in its commercials. General Motors used the music from Led Zeppelin’s hit song “Rock and Roll” in its commercials for Cadillac as part of its effort to attract baby boomers by creating a more hip image for the brand. Microsoft licensed the rights to use the classic Rolling Stones song “Start Me Up” in ads for its Windows 95 operating system as the music helped deliver a message regarding the integral role the operating system plays in the functioning of a personal computer. The company also licensed the rights to Madonna’s hit song “Ray of Light” for use in ads introducing its new XP operating system as the company felt that the lyrics were very appropriate for promoting a technology product. Other example of how music has played a very effective role in TV commercials is Meghan Trainor’s hit song “Lips Are Movin,” which resulted in a 26 percent increase in sales for the HP x360 tablet among teens and young adults. Ford also had great success with the use of Rachel Platten’s hit “Fight Song” in commercials for its Edge SUV in 2015.

Chapter 09—Creative Strategy: Implementation and Evaluation

Students should be encouraged to find an example of a current advertising campaign that is using a song and analyze the role the music plays in delivering the message. There are a number of advertisers that are rely heavily on the use of music in their advertising such as Kia, Apple, Nike, Coca Cola, PepsiCo and many others. 10. Discuss the challenges marketers face in developing online advertising messages. How will the creative strategy for online advertising differ depending on whether the goal is for concept, content or commerce types of online advertising? (LO 9-3) Online advertising can take various forms including various types of banner ads such as skyscrapers and leaderboards, text-only ads used for paid search, webisodes and video. Many online video ads are similar to or the same as the commercials that are aired on television. One of the challenges face when using online advertising is that getting consumer to attend to and engage with an online ad can be very difficult as doing so takes them away from the content on the website or social media page. Television and radio ads air during commercial breaks and do not compete for viewers’ attention during a program while print ads often appear on separate pages of a magazine or newspaper and can be easily attended to or ignored. The clutter problem that traditional media advertising faces is also an issue for online advertisers, as consumers are bombarded by online ads and often annoyed by them. As discussed in Chapter 1, most consumers are using some type of ad-blocking software to prevent ads from appearing on their computers, tablets and smartphones. A variety of digital advertising formats is available to marketers including banner ads, search ads, interstitials, native ads, and videos. The type of online ad used by marketers will vary depending on the goal(s) they are trying to achieve. Peter Minnium of the Internet Advertising Bureau notes that digital advertising is trifurcating into three types of advertising—concept, content, and commerce ads—and their use varies based on the goals and/or objectives the marketer is trying to achieve all along the purchase funnel. The goal of digital concept ads is to drive top-of-the-funnel goals such as awareness and interest, which can be achieved through banner ads, or videos such as commercials. Content ads typically have a mid-funnel goal of enhancing consumers’ knowledge or understanding of a product or service, which can be done by providing high-quality content with which the viewer can engage. Different types of online ads can be used to provide content such as videos, webisodes, in-feed ads to Facebook or Twitter with sponsored content, and native ads. Native advertising is a type of paid placement designed to fit seamlessly into the content that surrounds it. The design, content, and writing style of a native ad mirrors the nonpaid content around it, giving the user the impression that it really belongs. Native advertising is becoming a dominant form of content advertising, particularly in digital editions of magazines and newspapers. The third form of digital advertising is commerce ads, which primarily have a bottom-of-the-funnel goal of getting consumers to take action and make a purchase. Commerce ads are the dominant form of display advertising, particularly retargeting types that follow consumers across the Web, and typically are not visually rich as their success is based on serving the right offer to consumers and can be easily measured in terms of clicks and conversions. Critics argue that one of the major problems with online advertising is that it has been too focused on ubiquitous banner ads as marketers often try to build awareness and/or brand identity by simply buying large amounts of banner ads across a myriad on online platforms. A great deal of time and effort is devoted to optimizing media placement, retargeting, and measuring the effects of digital advertising campaigns, but less attention is given to creative considerations and the fundamentals of great advertising.57 However, the domination of banner ads at the top or side of a page is weakening as new online display formats are being developed that are larger, richer, and take up more of a page, either initially or upon expansion. The Internet Advertising Bureau refers to these new formats as “Rising Stars” which include ad unit formats such as billboard sidekicks and sliders as well as various 9-16 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 09—Creative Strategy: Implementation and Evaluation

video formats. One format that has become very popular is expanding pushdown ad units that push page content down rather than expanding over it, which helps address the annoyance issue. Exhibit 9– 29 shows examples of these various formats offered on the website of Cox Media. These formats are also available for online videos; we now turn our attention to this form of digital advertising. 11. Digital and Social Media Perspective 9-2 discusses the Unskippable online advertising campaign created by the Martin Agency for GEICO. Why do you think this campaign was so popular among consumers? Do you think other marketers could use the technique used for the GEICO campaign as a way to draw attention to their online video ads? The Unskippable online campaign for GEICO was very effective as it was able to avoid the problem which most pre-roll ads face, which is getting consumers not to skip out of it. The Martin Agency, which handles all of GEICO’s advertising, was well aware of research showing that more than 90 percent of people skip online pre-roll ads because they fail to hook them before they press the skip button. The agency knew it was important to get the attention of consumers in the first few seconds of the spots, which they did by freezing the video and having a voiceover tell viewers “You can’t skip this GEICO ad because it is already over. As the Cannes Jury president noted in discussing its selection of the family dinner spot for its top honor: “Instead of begging you to watch this ad, it challenges you not to watch it. Instead of a long story with a tenuous link to the brand at the end, there is a gigantic logo of the brand in middle of screen the entire time. To us it’s a deceptively simple piece of communication and really showed us how film can reinvent the way we look at media, even the least-sexy media in the world, which is pre-roll.” Consumers are very likely to continue watching online videos and marketers will keep trying to get them to watch their pre-roll ads before doing so. Perhaps more will follow the lead of GEICO and create pre-roll ads that are worth watching. However, it will be important that advertiser find creative ways to grab the attention of online viewers in the first 5 seconds of an online video if they are going to get them to watch it. This will continue to be a major challenge for marketers using pre-roll and other forms of online video advertising. 12. Choose a current advertising campaign and analyze it with respect to the creative guidelines discussed in the last section of the chapter. Identify any areas where you feel the campaign does not meet the guidelines and discuss why this is so. (LO 9-4) The last section of the chapter discusses criteria or guidelines that can be used for evaluating the output from the creative process of advertising. Some of these concern factors that are not directly accessible and thus more difficult to evaluate, such as consistency with marketing and advertising objectives. However, answers to many of these questions are judgmental in nature and can be evaluated such as appropriateness for the target audience, communication of a clear and convincing message, whether the creative overwhelms the message, appropriateness for the media environment, and whether the ads are truthful and tasteful. Students should be encouraged to choose a particular campaign, conduct some research on it in the business press or trade publications, and then evaluate the creative approach as well as some of the individual ads against these guidelines. Excellent sources of information that can be helpful to students in this assignment are the ad reviews that appear in publications such as Advertising Age, and AdWeek.

Chapter 09—Creative Strategy: Implementation and Evaluation

Additional Discussion Questions (not in text) 13. Discuss the difference between an advertising appeal and a creative execution style. Find several ads and analyze the particular appeal and execution style used in each. (LO 9-1) An advertising appeal refers to the basis or approach used in the advertisement to elicit some consumer response or influence feelings toward the product, service, or cause. The creative execution style refers to the way in which a particular appeal is turned into an advertising message and presented to the consumer. A particular appeal can be executed in a variety of ways and a particular means of execution can be applied to a variety of advertising appeals. For example, an informational appeal that focuses on a product's features or advantages can be executed through a straight-sell or factual message, a demonstration or a comparison. A particular execution technique such as animation could be used for an informational/rational appeal or for an emotional appeal. Students should be encouraged to analyze the particular appeals and execution styles used in selected ads. 14. Discuss how teaser advertising might be used to introduce a new product or brand or to reposition an existing brand. What factors should marketers take into consideration when using a teaser campaign? (LO 9-1) Teaser advertising is designed to build curiosity, interest, and/or excitement about a product/service or brand by talking about it but not actually showing it. Teasers can also be used to draw attention to upcoming advertising campaigns and generate interest and publicity for them. Teaser ads are often used to introduce a new product or brand such as automobiles, movies or television shows. They can also be used to reposition an existing brand as the curiosity and interest they generate can create some excitement and intrigue that can help increase consumer involvement and make them more receptive to subsequent advertising. When using a teaser campaign marketers will have to consider several factors. They must make sure the teaser generates enough interest and/or curiosity among the target audience to be effective. If the message is too subtle, consumers may not even attend to it. Marketers must also be careful not to extend their teaser campaigns too long as this can create confusion among consumers or even generate negative reactions. As noted in the text, you have to give consumers enough information to hold their attention and interest yet maintain some level of mystery, intrigue and or curiosity. 15. Why do many advertisers pay large sums of money to celebrities to do the voiceovers for their commercials? Do you think consumers recognize the voices of the celebrities doing the commercials? Is it necessary that they recognize them for the commercials to be effective? (LO 9-3) Advertisers will often pay as much as $500,000 to celebrities just to have them do the voiceovers for their commercials. Some celebrities prefer this more subtle form of product endorsement as they do not have to appear in the ads and thus can avoid the potential negative image of being perceived as “selling out” and pitching products. Advertisers and agencies that pay these large sums of money for celebrity voiceovers argue that a voice consumers have heard before is reassuring and makes the message more effective. They also argue that some celebrities have very distinctive and engaging voices that communicate very effectively. It is difficult to say whether consumers recognize the celebrities doing the voiceovers in many commercials. Actors who have very distinctive voices may be recognized such as Donald Sutherland (Volvo), Morgan Freeman (VISA), Demi Moore (Verizon Wireless), and Jeff Goldblum (Apple Computer). However, most consumers probably do not recognize the celebrities doing the voiceover in many commercials. It is not necessary that consumers recognize the celebrity’s voice for the commercial to be effective. Distinctive voices are often part of the talent offered by actors and actresses as they may be help them be perceived a certain way (honest, humble, sincere, funny and 9-18 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 09—Creative Strategy: Implementation and Evaluation

the like). The voice characteristics that help make them popular entertainers may also be effective for television commercial voiceovers. 16. The chapter discuses how the campaign featuring the Aflac duck has been very successful in increasing awareness as well as sales for the supplemental insurance company. Why do you think this campaign has been so successful? What challenges does Aflac face by continuing to use the duck as the focal point of the campaign? (LO 9-2) The Aflac campaign is a very good example of how a company can take a cute character such as a duck and turn it into a personality symbol that can effectively deliver an advertising message with which the company can become identified. Aflac, which is an acronym for American Family Life Assurance Company, sells insurance policies which supplement primary health plans. The company’s various insurance plans are sold through independent agents who work with customers in putting together a program that best meets their needs. However, advertising plays an important role in making consumers aware of the company and interested in learning more about its insurance plans. Since this campaign was first introduced in 2000, awareness of AFLAC has increased tremendously and the ads have helped make potential customers more interested in the company. The campaign has been very popular and has been recognized by a number of major media, which has generated a great deal of publicity for the company and helped increase awareness. The primary reason the campaign has been so successful is because the humorous commercials have clearly struck a responsive chord with consumers. The spots featuring the quirky duck in all sorts of odd places are very entertaining and have been a very effective way to break through the clutter, get consumer to attend to the ads, and register the Aflac company name. Supplemental insurance is a product/service category that is not very easy to advertise as consumers are not interested in it or do not want to address the need for insurance. However, once the agents have the sales lead, it is up to them to explain Aflac’s insurance programs and close the sale. The campaign has helped increase Aflac sales as it paves the way for agents who are trying to the company’s supplemental insurance program and also helps Aflac recruit more agents to handle its products. The iconic duck has become an important part of Aflac and has recently been integrated into the company’s redesigned corporate logo. However, the company is reaching the saturation point with regard to awareness as nearly everyone is now aware of Aflac after being exposed to the ads over the past 16 years. Aflac has had to modify the commercials using the duck after research has showed that consumers are aware of the company but do not understand its insurance programs. Commercials using the duck now focus more attention on explaining supplemental insurance and its importance to consumers.

Chapter 10—Media Planning and Strategy

CHAPTER 10 MEDIA PLANNING AND STRATEGY Chapter Overview Chapter 10 introduces the concepts involved in media planning. The chapter begins with an overview of media planning by introducing some key terms and concepts. At this point, the text points out that media planning is as much an art as it is a science. A number of problems associated with the planning process are discussed. The role and purpose of the media plan follows with a presentation of the steps required in developing this plan. After an in-depth discussion of the elements of the media plan, the chapter presents information regarding the use of computers in the planning process. The characteristics of various media and sources of media information are presented at the end of the chapter.

Learning Objectives 1.

Define the key terminology in media planning.

Explain how to develop a media plan.

Describe the purpose of media objectives.

Describe how to develop and implement media strategies.

Compare the characteristics of various media.

Chapter and Lecture Outline I.

AN OVERVIEW OF MEDIA PLANNING

This overview presents a brief discussion of the factors involved in the media planning process and illustrates the fact that media planning is an involved process influenced by a variety of factors including the nature of the media, the overall marketing strategy, and the product or service being advertised. A.

Basic Terms and Concepts—Some of the critical terms necessary for understanding media planning are presented including: • media planning—the series of decisions involved in delivering the message to the target audience • media objectives—the objectives sought by the media plan • media strategies—the plans of action designed to attain the media objectives • medium—the general category of media channels such as broadcast, print, etc. • media vehicle—the specific carrier in a media category (television, magazines, etc.) • reach—the number of potential audience members exposed once to a media vehicle in a given period of time • •

coverage—the potential audience that might receive a message through a vehicle frequency—the number of times the receiver is exposed to the media vehicle in a given time period The Media Plan—The goal of the media plan is to find a combination of media that will enable the marketer to communicate the message in the most effective manner possible at minimum cost. The activities involved in this plan are detailed in Figure 10-2.

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Problems in Media Planning—A number of problems are identified, each of which directly impacts the planning process. These include: • insufficient information • inconsistent terminology • time pressures • problems in measuring effectiveness An understanding of these problems is critical to the proper design of the media plan.

Professor Notes

McGraw-Hill Connect ®: Activities Involved in Developing the Media Plan Type of Activity: Timeline (Click and Drag) Activity Summary: In this activity, students will identify the correct sequence of the various activities involved in developing a media plan for the new product launch of a new smartphone. Activity Learning Objectives: 10-01 Define the key terminology in media planning. CONCEPT REVIEW: The media plan determines the best way to get the advertiser's message to the market. In a basic sense, the goal of the media plan is to find that combination of media that enables the marketer to communicate the message in the most effective manner to the largest number of potential customers at the lowest cost. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

II.

DEVELOPING THE MEDIA PLAN

The process of developing the media plan involves a series of stages (see Figure 10-4). These stages are essentially the same as those presented in the decision sequence model presented in Chapter 1, except now they are involved directly with media decisions. These stages include: 1. 2. 3. 4.

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market analysis establishment of media objectives media strategy development and implementation evaluation and follow-up.

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Professor Notes

III.

MARKET ANALYSIS AND TARGET MARKET IDENTIFICATION

To Whom Will We Advertise? The discussion of target marketing is reviewed, though now the emphasis is on media, and some of the sources of information that are available to assist in making this decision. Secondary sources of information such as Experian Simmons Market Research, and GfK Mediamark Research, Inc. (GfK MRI) are described. A brief discussion of the use of index numbers and their use in determining target markets is also provided

What Internal and External Factors Are Operating? As in the overall situation analysis, both internal and external factors will directly influence the media decisions. Competitrack is a service that provides media spending figures for various industries down to the campaign or product level. Competitive information is also available from many other sources. Where to Promote? The decision as to where to promote at this point involves geographical considerations. Once again, the discussion turns to the use of secondary information and indices as aids in making this decision. 1. Using Indexes to Determine Where to Promote—A number of critical terms are introduced including: • The Survey of Buying Power Index • the Brand Development Index • the Category Development Index.

The calculation of both BDI and CDI is provided, based on actual examples. Figure 10-11 is a useful way of presenting strategies evolving around BDI and CDI. Professor Notes

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IV.

ESTABLISHING MEDIA OBJECTIVES

Media objectives relate to the goals to be attained by the media program, and as such should be limited to those that can be accomplished through media strategies. Such objectives are often expressed in terms of coverage, reach, frequency, scheduling, etc. Professor Notes

DEVELOPING AND IMPLEMENTING MEDIA STRATEGY

The Media Mix—Many media strategies require a combination of media to be used. The media mix involves the determination of the various channels to be used. The objectives of the plan, the budget and other factors, will directly impact this decision.

Target Market Coverage—Figure 10-13 provides a graphic illustration of market coverage possibilities. Of course, the marketer would like to achieve full coverage through a combination of media. As noted, this is not a likely outcome, and decisions have to be made that involve tradeoffs between less than full market coverage and over coverage or waste coverage.

Geographic Coverage—The strategy of geographical weighting, in which geographic areas receive differential amounts of media emphasis, is discussed.

Scheduling—Because it may not be feasible (or necessary) to maintain a constant advertising schedule, marketers will typically employ one of three scheduling alternatives: 1. Continuity refers to a continuous pattern of advertising—that is every day, week, or month (food products, laundry detergents, etc.) 2. Flighting is a scheduling method in which there are intermittent periods of advertising and nonadvertising (snow skis, etc.) 3. Pulsing is actually a combination of the two previous methods, in which a continuous schedule is used, though the amount of monies spent will vary throughout the time period (beer).

Reach versus Frequency—Given that advertisers have differing objectives, and are constrained by budgets, the media decision usually involves a trade-off between reach and frequency. This decision is essentially one of exposing more persons to the ad, or exposing fewer persons more often. In making this decision, the media planner must take into consideration a number of factors involving reach and frequency including: 1. How much reach is necessary? 2. What frequency level is needed? 3. Establishing reach and frequency objectives 4. Using gross ratings points (GRPs) 5. Determining effective reach

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6. Effective frequency 7. Recency F.

Creative Aspects and Mood—In developing a media strategy, marketers must consider both creativity and mood factors. 1. Creative aspects of the ad may require the use of specific media. For example, television may be required to implement certain types of creative campaigns. 2. The mood that a medium creates may carry over to the ad itself. For example, certain magazines may create various moods as they are being read. Flexibility—The media strategy must be flexible enough to respond to marketing threats and opportunities, as well as to adjust for changes regarding availability and/or in the media themselves. Flexibility may need to address the following: • • • •

market opportunities market threats availability of media changes in media or media vehicles

Budget Considerations—It is obvious that costs must be considered in the determination as to which media will be employed. Two types of costs must be addressed—absolute cost—which is the actual cost to place the ad in the medium—and relative cost—or the relationship between the price paid for advertising time or space and the size of the audience delivered. 1. Determining relative costs of media—A comparison of media vehicles is usually necessary • cost per thousand (CPM) • cost per ratings point (CPRP) • daily inch rate Professor Notes

VI.

EVALUATION AND FOLLOW-UP

As with other elements of the advertising/promotional program, the media program also requires evaluation to determine its effectiveness. Essentially, two questions need to be answered: (1) How well did these strategies perform the media objectives established; and (2) How well did this media plan contribute to the attainment of the overall marketing and communications objectives? Professor Notes

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McGraw-Hill Connect ®: Scheduling for Different Products Type of Activity: Click and Drag Activity Summary: In this activity, students will select the advantages, disadvantages, and a sample product category for each of the three scheduling methods: continuity, flighting, and pulsing. Activity Learning Objective: 10-04 Describe how to develop and implement media strategies.

CONCEPT REVIEW: Obviously, companies would like to keep their advertising in front of consumers at all times as a constant reminder of the product and/or brand name. In reality, this is not possible for a variety of reasons (not the least of which is the budget). Nor is it necessary. The primary objective of scheduling is to time promotional efforts so that they will coincide with the highest potential buying times. For some products these times are not easy to identify; for others they are very obvious. Three scheduling methods are available to the media planner—continuity, flighting, and pulsing. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking VII.

CHARACTERISTICS OF MEDIA

There are a number of sources of information available which define the various advantages and disadvantages of media. Figure 10-27 lists the major media, and the characteristics of each. Professor Notes

McGraw-Hill Connect ®: Pros and Cons of Various Media Type of Activity: Click and Drag Activity Summary: In this activity, students will match each IMC medium (television, radio, newspapers, magazines, Internet and interactive media, direct mail, and outdoor) with its characteristics. Activity Learning Objectives: 10-04 Describe how to develop and implement media strategies. 10-05 Compare the characteristics of various media.

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Chapter 10—Media Planning and Strategy

CONCEPT REVIEW: One of the most basic elements in this process is the matching of media to markets. Each medium has its own characteristics that make it better or worse for attaining specific objectives. Various media options must be analyzed for each situation. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking APPENDIX A Appendix A provides an example of a media flow chart of ASICS shoes. Professor Notes

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Teaching Suggestions

Both the length and complexity of this chapter make it a difficult one for students to comprehend. The chapter contains a large number of terms, definitions, and formulas. Unfortunately, there is no way to ignore all of these, as they are critical to the students' learning of media planning and strategy, and are the “buzzwords” with which they will need to become familiar to participate in the advertising world, regardless of which side of the buying-selling process they may be on. One suggestion is to break the chapter into two lectures. In the first, the terms, formulas, etc., as well as an overview of the planning process can be discussed. The second lecture can be more specific, focusing on some of the objectives to be accomplished, discussing reach and frequency trade-offs, effective reach, and the like.

Answers to Discussion Questions

1. Discuss some of the advantages of using programmatic media buying. Given that the majority of digital display ads are purchased this way, do you think this will be the only method media buyers use in the future? (LO 10-1). Basically programmatic is computer-based advertising buying using a real-time bidding process. When an opening is available the software advises advertisers which page it is, and supplies demographic and behavioral data about the user. Each advertiser’s software puts in its bid and in real time the transaction is completed along with the ad of the winning bidder. While originally used to buy and sell online display advertising, and used primarily by direct marketers, programmatic is now commonly used to buy mobile and video display advertising, and many expect that it will become the way to purchase ads on television as well. It is considered highly targeted resulting in improved results and efficiencies, and because it is automated it makes the buyer’s life easier. Proponents believe that it will replace all other types of ad buying in the nottoo-distant future. 2. There is new research that indicates that the number of ads one is exposed to in a day may be much lower than the thousands previously reported. Which numbers do you consider correct and why? (LO 10-4). Optimal frequency is that point at which the number of exposures is the exact amount necessary to communicate one’s message. Research conducted years ago has placed this number at a frequency level of three. Less than that number leads to the potential for the communication to fail. More than three results in overexposure and waste coverage. Thus the marketer would like to have the receiver receive exactly three exposures—nothing more, nothing less. Of course, in reality, this optimal exposure may be impossible to achieve, for a variety of reasons. One, no one truly knows how many times a receiver is exposed to the message. As an example, watch a college or pro football game. You will see the same commercials so many times that you become sick of them. Clearly, this is not in the advertiser’s best interest, as the commercial can actually become irritating and start to negatively impact the receiver. In addition, dollars are being wasted on ads that are clearly having no positive effect. . Hill Education

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At the time of this study, there was much less media proliferation than now. As a result there was less distraction, and less commercials. It has been estimated that at the time of the study one might be exposed to 1,500 ads a day. Now the estimate is somewhere between 3,000 and 5,000 a day. As you can imagine, there is much more clutter in the environment, leading to less likelihood that one will pick up on any specific message. As a result, some media buyers argue that optimal exposure is at least 5 but perhaps as many as 12—though they have no research to back this position. The fact is that as we don’t know how many times an ad is seen, and the enormous number of ads out there, three remains the number based on scientific research. Until new research is conducted, we pretty much need to live with this number.

3. Marketers rely heavily on demographics when purchasing media. IMC Perspective 10–1 talks about additional factors that may be important. Discuss some of these factors and why they might impact media usage. (LO 10-4) While social media usage takes away time that one might be watching TV, it can also can drive others to watch. A study from ShareThis shows a strong correlation between social engagement and higher tune-in rates. The study shows that social media users who click on shared content about a particular TV series are nearly 2.5 times more likely to become viewers. The study also indicated that the genre of the show will impact social engagement rates, with reality and variety shows generating the most social sharing and comedy shows the least. The timing of the sharing also differs, with reality and variety show sharing most often taking place during the show (70 percent), while drama fans share about 24 hours later. Being cosmopolitan can also make a difference. Recent studies have shown that cosmopolitan consumers are especially receptive to ads that signal the advertiser is addressing them. They are more likely to engage with communications that are consistent with their cosmopolitan values and lifestyles. Not only are they more likely to be reached through upscale magazines like Luxury and Cosmopolitan, but they are also more likely to use media that report on social causes, environmental issues, and so on. More than one study has shown that lifestyles are a much better predictor of consumer behaviors that demographics, many marketers are now focusing on this factor.

4. What are GRPs and target GRPs? Explain what these terms mean and discuss some of the strengths and weaknesses of using them. (LO 10-1) A summary measure that combines the program rating and the average number of times the home is reached during this period (frequency of exposure) is a commonly used reference point known as gross ratings points (GRPs). GRPs are based on the total audience the media schedule may reach using a duplicated reach estimate. Target ratings points (TRPs) refer to the number of people in the primary target audience the media buy will reach—and the number of times. Unlike GRP, TRP does not include waste coverage. As noted in the text, there are numerous problems associated with using either figure. 5. The media landscape is rapidly changing. Explain what is meant by this statement. Then discuss some of the reasons why this is occurring. What can traditional media do to continue to exist? A number of studies have examined the role that personality and/or other personal characteristics may have on consumers’ media usage. Discuss some of these studies. Do you . Hill Education

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think that these characteristics may have an impact, or should marketers rely primarily on demographic characteristics? (LO 10-5) What this statement means is that markets are changing in media usage, moving from traditional media like TV, print, radio, etc. to more digital and social media.(Figure 10–27) provides an overall comparison of media and some of the characteristics by which they are evaluated. This is a very general comparison, and the various media options must be analyzed for each situation. While some predict that traditional media will eventually go away, Figure 10-27 demonstrates that traditional media still have advantages over new media in some areas. Traditional media like TV and magazines have proven to drive people to the internet ,much more effectively than and digital or social media. 6. Explain the differences between CPM and readers per dollar. Which is the most valuable relative cost comparison for advertisers to use? Why? (LO 10-1) Cost per thousand (CPM) is a computation used in evaluating the relative cost of various media vehicles that represent the costs of exposing 1,000 members of a target audience to an advertising message. Readers per copy is a cost comparison used for magazines that estimates audience size based on pass-along readership. While the number of readers per copy makes intuitive sense, it has the potential to be extremely inaccurate. The actual number of times the magazine changes hands is difficult to determine. How many people in a fraternity read each issue of Sports Illustrated or GQ that is delivered? How many people in a sorority or on a dorm floor read each issue of Cosmopolitan or Vanity Fair? How many of either group read each issue of Bloomberg Businessweek? While research is conducted to make these determinations, pass-along estimates are very subjective and using them to estimate reach is speculative. These figures are regularly provided by the media, but managers are selective about using them. At the same time, the art of media buying enters, for many magazines’ managers have a good idea how much greater the reach is than their circulation figures provided. In addition to the potential for over- or underestimation of cost-efficiencies, CPMs are limited in that they make only quantitative estimates of the value of media. Although they may be good for comparing very similar vehicles (such as Time and The Week), they are less valuable in making intermedia comparisons, for example, CPM for magazines versus Internet banner ads.

7. Figure 10–27 discusses the advantages and disadvantages of media. Describe any factors that may be taking place that might change the disadvantages or advantages of various media. (LO 10-5). As you can see from this figure, each medium has advantages and disadvantages that it offers. For example, think about TV. Clearly, one of the advantages of TV is its wide exposure, ability to achieve reach. But trends show that younger audiences are moving away from watching TV, preferring YouTube and videos, etc. As the audience’s viewing habits change so too will the advantages of various media. Another example is newspapers. Newspaper readership is on a major downward trend. Less and less young people are reading papers, particularly in print. As a result, coverage may no longer be an advantage. While students say they read the news online (if you believe that!), this is a different form of newspaper. Now a digital version, there may be no coupons to cut, the versions may be . Hill Education

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Chapter 10—Media Planning and Strategy

shorter, and the “art of newspaper reading” is going away (browsing, etc.). Advertisers have learned this, which is why newspapers are in trouble financially. You can take every medium in that list in Figure 10-27, and recognize changes that are occurring that will alter their advantages and disadvantages (radio v. Pandora). As the new digital media mature, they will change as well—Facebook now takes ads. Instagram is more useful to marketers than Facebook. YouTube will someday over take CBS, and on and on. 8. One of the more popular metrics now being used in nontraditional media (Internet, social media, etc.) is engagement. This term has also been used in evaluating traditional media. Explain what is meant by engagement. Is this term being used the same in referring to both traditional and nontraditional media way? (LO 10-1) The term engagement is nothing new to media planners, and has been discussed for the past few years but with still no agreement as to exactly what it means. The reason for such attention stems from the fact that current traditional metrics, while still useful, are considered insufficient for today’s media planners, who are inundated with media options from which to choose. One of the terms that they have not only settled on, but have become fixated upon is engagement. For the most part, engagement refers to the degree of involvement the viewer demonstrates with the message. Others have also considered relevance, intent, etc. In fact, at last count, there were no less than 28 different definitions of engagement being offered. The basic concept is that more involved readers, watchers, and/or users will be more interested in the communication than will those merely exposed. For example, if I am in the market for a car, I may spend more time “engaged” with the ad. On the internet, if I spend more time on a page, I may be considered as more engaged. More engaged consumers are supposed to remember and prefer the brand. While certainly relevant, engagement has not yet shown to be as important as one might expect. While some research studies show that engaged viewers may demonstrate higher recall and like the ad better, as well as take some behavioral action after exposure to the ad, skeptics say “so what”? They argue that engagement may be explained by mere involvement with the product or service category, and of course involved consumers would be more inclined to reflect the same results. They argue that engagement is nothing new. Whether it is engagement or involvement, or relevance, or others on the list, all of these terms reflect the assumption that more interest in the ad is likely to occur. While this is certainly an advantage over mere exposure, it does not mean that engagement has provided some major breakthrough. 9. Discuss the differences between CDI and BDI. When would an advertiser use these indexes? (LO 10-2)

BDI compares the percentage of the brand's total US sales in a given market area with the percentage of the total population in the market. The resulting BDI indicates the sales potential for that brand in that market area. CDI provides information on the potential for development of the total product category rather than specific brands. Figures 10-9, 10-10, and 10-11 provide an excellent summary of how BDI and CDI can be calculated and used to develop marketing strategies. The use of these indices provides marketers with insights into the market potential for the product or brand. This, in turn, provides information regarding the amount of media emphasis, weighting, etc. to be allocated. . Hill Education

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Chapter 10—Media Planning and Strategy

Of particular value is Figure 10-11. This figure essentially sums up the value of BDI and CDI to marketers in developing their marketing strategies.

10. A number of studies have examined the role that personality and/or other personal characteristics may have on consumers’ media usage. Discuss some of these studies. Do you think that these characteristics may have an impact, or should marketers rely primarily on demographic characteristics? (LO 10-2)

IMC Perspective 10-1 reports on a number of studies that seem to indicate that personality characteristics may be useful for developing media strategies. While not suggesting that these traits will replace demographics, the researchers believe that they may contribute to more effective media buying. Reading IMC Perspective 10-1, one can see that stages in one’s family lifecycle and degree of social interactions may affect media usage. In addition, heavier users of the internet exhibit different personality traits than light or moderate users, liberals may be heavier users than conservatives. Newspaper readers are more likely to be optimists, while magazine readers may be more open-minded. Going the other way, the study of Facebook users demonstrating correlations between what they “liked” and personality and preferences for programming. The Pew Study offers additional insights into the personalities of Facebook users. While personality characteristics provide additional insights into users programming and media habits, one has to be careful not to put too much faith into these findings. Like demographics, it is often difficult to generalize personality traits to behaviors. The best thing to do at this point is use these traits with demographics to enrich the media buy.

Additional Discussion Questions (not in the text).

11.

Some business to business advertisers (for example, copy machine companies) advertise on NFL Sunday and/or Monday Night football games. As might be expected, such a buy would lead to a high level of waste coverage. Explain what is meant by waste coverage. Discuss whether this might or might not be a good media buy. (LO 10-3) Waste coverage refers to overexposure, in which the media coverage exceeds the target audience. If the media reaches people who are not sought as buyers and are not potential users, then it is potentially wasted, and of little or no value to the marketer. At first glance, an ad for a copy machine that is used in business markets (as opposed to home use) may seem like a lot of money. How many of those people watching a pro football game are now, or ever will be, in the market for purchasing such an expensive machine? In fact, it may not be such a bad buy after all. While there certainly will be a large amount of waste coverage, many marketers are willing to live with that fact due to the fact that to reach the same amount of members of the target audience through more targeted media might be even more expensive. In other words buying ads in . Hill Education

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Chapter 10—Media Planning and Strategy

Office Management magazine and other business related periodicals may actually cost more than the television ad to reach the same amount of people. Thus the large waste coverage is acceptable. In addition, one never knows when new buyers may enter the market, and the exposure would not hurt. Finally, word of mouth, or reaching influencers or users, (not necessarily buyers) may also be of value. 12.

Explain the differences between CPM and TCPM. Give examples of a company or product that might select one of the methods versus the other. (LO 10-1) As products and brands become more and more targeted, the use of CPM has been on the decline. As you can imagine, years ago with less market differentiation and more use of mass media, CPM was a good standard by which to compare the relative costs for various print media. However, as markets continue to be segmented into smaller and smaller segments, the marketing strategies of companies have led to more and more targeting. TCPM is considered by many to now be the more relevant relative cost measure. Nevertheless, there are companies who may still make use of the CPM measure. Companies that reach very broad audiences, and those with offerings to a variety of target segments—for example, automobiles, and furniture stores, CPM may have more relevance. That is not to say that these companies do not also employ TCPM, just that the broader cost comparison may still be of benefit. For companies targeting specific markets, such as 18-24 year olds, males versus females, etc., TCPM will have more relevance. The question is which medium will most cost efficiently deliver the message to these segments—as opposed to the general reading audience.

13.

The text lists both internal and external factors that might impact the media strategy. Provide examples of each and discuss how they might impact the media plan. (LO 10-3) Both internal and external factors may affect the development of the media plan. Internal factors include the size of the media budget, managerial and administrative capabilities or the organization of the agency. External factors include the economy, changes in technology, competitive factors, and the like. The size of the media budget will obviously impact the number of media vehicles that the buyer can consider. Obviously, the larger the budget, the more options that can be considered. Managerial factors may include the number of employees and the experience and/or expertise that they have regarding media strategy development. Should there not be enough managerial talent to develop a media plan, outside agencies may be required. The organization of the external agency may also have an impact on the media plan. Larger, IMC oriented agencies are more likely to be involved with more media options. Smaller agencies may focus attention of advertising and/or public relations or other media with which they feel comfortable. Changes in the economy may directly impact the media plan. As the economy improves or recesses, media costs may rise and/or fall, making some media cost prohibitive. In addition, more advertisers may result in less media available. Changes in technology—for example, the advent of cable television and the Internet—may make more options available to the media planner. Finally, the competition may also force the planner to reconsider his/her media strategy.

14.

As noted in the chapter, there is a trade-off between reach and frequency for advertisers with a limited budget. Explain what this means. Under which circumstances would a planner wish to emphasize reach? Frequency? (LO 10-3)

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In an ideal world, advertisers would like to maximize reach and frequency. Unfortunately, in the real world, they are faced with budgetary constraints. Given budget limitations, the media planner is forced to choose between reach and frequency. Given specific objectives of the plan, one or the other may be emphasized. Maximizing reach at the expense of frequency is more logical when the message is simple and easily understood, the receiver is in the early stages of the response hierarchy (for example, awareness and/or interest) and the target audience is broad. For example, campaigns targeting cola users use very simple messages and are targeted to a broad audience. Thus reach is important. When the consumer is at a higher level in the response hierarchy, for example, comprehension, retention, etc., or the message is more complex, and/or the target audience is narrowly defined, frequency may be a more important objective. For example, messages that have a lot of copy, and may be more difficult to comprehend must consider the importance of effective frequency. One or two exposures may not be enough to achieve the media objectives. Likewise, a narrowly defined target market may allow for an emphasis on frequency, and the minimization of waste coverage, thus placing less emphasis on reach. 15.

Describe the three methods of promotional scheduling. Give examples of products and/or services that might employ each method. (LO 10-3) The text discusses the various scheduling options available to the marketer. Given the fact that there are always budgetary constraints, and that some products/services do not need to be marketed yearround, scheduling allows for more efficient allocation of advertising and promotional dollars. The scheduling options available are: Continuity—A continuous schedule refers to constant advertising throughout the year, either daily, weekly or monthly. Products that would be most likely to employ this scheduling method include products that would be used consistently throughout the year with no seasonal variations. For example, toothpaste, mouthwash, laundry detergent, etc. Flighting—This schedule has intermittent periods of advertising, with times when there is advertising and others when there is none. The “on” advertising time is referred to as flights. Seasonal products (snow skis), swim wear and other products primarily consumed at some times of the year but not all year round would employ this method. Banks have used flighting, recognizing that consumers are much less involved in making banking decisions around the holiday season in November and December. One of the advantages of flighting is the ability to extend the limited ad budget. Pulsing—A combination of the previous two methods, pulsing employs a continuous schedule with periods of increased advertising to take advantage of intermittent opportunities. A good example of this is beer advertising, which takes place continuously, but increases at holiday times, particularly Memorial Day, The 4th of July and Labor Day.

IMC Exercise Have students access MRI online and examine the profiles and media usage characteristics for a particular product. Have them review the indices and to examine them carefully to determine if they seem logical. Have them present their findings to the class, describing the media strategy that should be employed to reach them.

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Chapter 11—Evaluation of Media: Television and Radio

CHAPTER 11 EVALUATION OF MEDIA: TELEVISION AND RADIO Chapter Overview The purpose of this chapter is to examine the media of television and radio. We examine the general characteristics of television and radio as well as their advantages and limitations as advertising media. Attention is given to how advertisers use TV and radio as part of their media strategy, how they buy television and radio time, how audiences are measured and evaluated for each medium, and how rates are determined. Recent developments in the area of audience measurement for television are examined. Various factors and developments that are likely to change the future role of television and radio as advertising media vehicles are also discussed.

Learning Objectives 1. Describe the role of television as an advertising medium and its advantages and limitations. 2. Discuss how television advertising time is purchased for network and local television as well as cable television. 3. Discuss how television viewing audiences are measured and developments in audience measurement. 4. Discuss the role of radio as an advertising medium and its advantages and limitations. 5. Discuss how radio advertising time is purchased. 6. Discuss how radio audiences are measured and developments in audience measurement.

Chapter and Lecture Outline I.

TELEVISION

Television has virtually saturated households throughout the United States and many other countries and has become a mainstay in the lives of most people. They rely on TV for news and information and it is their primary form of entertainment. The penetration and popularity of television makes it the predominant form of mass media. It has often been noted that television represents the ideal advertising medium with its ability to combine visual images, sound, motion, and color. While television has numerous advantages, it also has some problems and limitations as an advertising medium. A.

Advantages of Television 1. Creativity and impact—The interaction of sight and sound offers tremendous creative flexibility and makes possible dramatic, lifelike representations of products and services. 2. Coverage and cost effectiveness—Marketers selling products and services that appeal to broad target audiences find that TV lets them reach mass markets, often very cost effectively. 3. Captivity and attention—Television commercials are intrusive in that they impose themselves on consumers. Unless we make a special effort to avoid commercials, most of us are exposed to thousands of them each year. While some of the viewing audience may be lost during commercial breaks, most viewers are likely to pay some attention to commercials.

Chapter 11—Evaluation of Media: Television and Radio

4. Selectivity and flexibility—TV has often been criticized for being a nonselective medium, since it is difficult to reach a precisely defined market segment. However, some selectivity is possible due to variations in the composition of audiences because of program content, broadcast time, and geographic coverage. The growth of cable and alternative delivery systems, such as direct broadcast satellite (DBS), has made it possible for most households to receive more than 200 channels, which makes narrowcasting to specific viewing audiences based on program content possible. Sports programming has become particularly popular among advertisers since they attract the difficult to reach younger male audience and are usually watched live. IMC Perspective 11-1 discusses television broadcasting rights paying the way for college sports.

Limitations of Television 1. Costs—The absolute costs for commercial time can be very high, particularly on the major networks. Production costs for quality commercials can also be prohibitive. The production costs for a national brand commercial average nearly $350,000 and can be much higher for spots that are more elaborate. Major companies with national brands will produce several commercials as part of their advertising campaigns which increases production costs 2. Lack of selectivity—Advertisers who are seeking a very specific, often small, target audience find the coverage of TV extends beyond their geographic market, reducing its cost effectiveness particularly within a local market area. 3. Fleeting message—Most TV commercials are only 15 or 30-second spots and leave nothing tangible for the viewer to examine or consider. Thirty-second spots remain the dominant commercial length and account for 46 percent of network spots and nearly 47 percent of nonnetwork ads. Fifteen-second spots have remained at around 28 percent of commercial activity on the major television networks. 4. Clutter—The problems of fleeting messages and shorter commercials are compounded by the fact that the advertiser’s message is only one of many spots and other non-programming material seen during a commercial break. 5. Limited viewer attention—The increased penetration of DVRs and prevalence of remote control channel changing or zapping is creating a major problem for advertisers. Studies have shown that nearly a third of a TV program’s viewing audience is lost during commercial breaks as they stop watching television or switch to another channel. The opening vignette the chapter provides an interesting discussion of new technologies such digital video recorders, (DVRs), are impacting television advertising and have led to a change in way Nielsen Media Research now measures viewing audiences for commercials. Nielsen now makes commercial ratings available rather than just program rating. These new ratings take into account how many viewers bail out during a commercial break by changing channels or fast-forwarding (zipping) through ads and promotion spots. Digital and Social Media Perspective 11-1 discusses how the way we watch television is changing thanks to digital and social media. 6. Distrust and negative evaluation—TV commercials are probably the most criticized form of advertising because of the intrusiveness of the medium. Studies have shown that of the various forms of advertising, distrust is generally the highest for TV commercials. 11-2

Chapter 11—Evaluation of Media: Television and Radio

Professor Notes

II.

BUYING TELEVISION TIME

There are a number of options available to advertisers purchasing television time. The instructor should point out that the purchase of television advertising time is a very specialized part of the advertising business, particularly for large companies spending huge sums of money and advertising on a national or regional basis. The various considerations involved in the purchase of television time are examined. A.

Network versus Spot—A basic consideration that faces all advertisers is the allocation of their television media budget among network versus local or spot announcements. It is important to cover each of the ways television time can be purchased including: 1. Network advertising—A common way by which advertisers disseminate their messages is by the purchase of airtime from a television network which assembles a series of affiliated stations or affiliates to which its supplies programming. A major advantage of network advertising is that it simplifies the purchasing process for advertisers who want to reach broad target audiences. Most prime-time commercial spots, particularly on the popular shows, are sold during the up-front market while time can also be bought during the scatter market that runs throughout the TV season. Spanish-language television networks such as Univision and Telemundo are becoming increasingly popular and provide advertisers a way to reach the rapidly growing Hispanic market. 2. Spot and local advertising—Spot advertising refers to commercials shown on local television stations, with the negotiation and purchase of time being made directly from the individual stations. All non-network advertising done by a national advertiser is known as national spot, whereas airtime sold to local firms is known as local advertising. 3. Syndication—Advertisers may also reach television viewers by advertising on syndicated programs which are sold or distributed to local stations. There are three basic types of syndicated programs: • off-network syndication—reruns of network shows that are bought by individual stations • first-run syndication—shows produced specifically for the syndication market • advertiser-supported or barter syndication—both off-network and first-run syndicated programs offered free or for a reduced rate to local stations but with some advertising time pre-sold to national advertisers and the remainder available for sale by the local station Syndication now accounts for more than a third of the national viewing audience on traditional networks and generates advertising revenue comparable to any of the big four networks. Syndicated shows have become more popular than network shows in certain dayparts such as daytime, early prime time and late fringe.

Chapter 11—Evaluation of Media: Television and Radio

Methods of Buying Time—Television advertisers must also make decisions regarding the method by which they will advertise on a program. The options to be discussed include: 1. Sponsorships—Under a sponsorship arrangement, an advertiser assumes responsibility for the production and content of the program as well as the advertising that appears within it. 2. Participations—Most network advertising time is sold as participations, with multiple advertisers buying commercial time or spots on a program produced by the network or an outside production company which sells the show to the network. 3. Spot announcements—Spot announcements are bought from the local stations and generally appear during the adjacent time periods of network programs (hence the term adjacencies). Spot announcements are most often used by purely local advertisers but are also utilized by companies with no network schedule or by large advertisers that make dual use of network and spot advertising.

Selecting Time Periods and Programs—Another consideration in buying television time is the selection of the particular time period and program during which the commercial will be shown. Considerations here include the selection of a specific time period or daypart segment and audience size and demographic composition. Common television dayparts are shown in Figure 11-3 of the text. The different dayparts are important to advertisers because they attract different demographic groups. Cable Television 1. The growth of cable—Cable or CATV (community antenna television) is probably the most significant development in the broadcast media. By 2016, cable penetration reached 86 percent of the nation’s 116.4 million households, either through wired cable or through alternative delivery systems such as direct broadcast satellite (DBS). Cable subscribers receive and average of more than 200 channels, including the local network affiliates and independent stations in various markets. Cable channels now have the majority of the primetime viewing audience and national cable networks such as CNN, TNT, USA Network, ESPN and MTV have become very popular. Figure 11-4 shows the most popular cable channels along with the type of programming they carry. 2. Advertising on cable—As with broadcast TV, cable can be purchased on a national, regional, or local (spot) basis. Many national advertisers are turning to spot advertising on local cable systems to reach specific geographic markets. Spot cable is also becoming very popular among local advertisers since they find it very affordable. 3. Advantages of cable—Cable television has some important advantages including the opportunities it offers for narrowcasting or reaching very specialized markets though stations such as ESPN (sports), MTV (music/reality shows) or CNN (news) and the various other channels. Cable TV also offers lower rates and greater flexibility in the types of commercials that can be used. The low costs of cable make it a very popular advertising medium for local advertisers such as retailers. 4. Limitations of cable—Limitations of cable include the fact that it is still overshadowed by the major networks as it has less desirable programming and production than broadcast television. Another drawback is audience fragmentation as the ratings for most cable channels is very low. The prime-time program rating for most cable programs is only about a 1 or 2. Lack of penetration is also a problem, particularly in some major market areas. 11-4

Chapter 11—Evaluation of Media: Television and Radio

5. The future of cable—Cable television faces a number of challenges over the next decade such as competition from new channels, continued fragmentation, and changes in government regulation. However, as cable penetration increases and its programming quality continues to improve, more advertisers are discovering its efficiency and ability to reach targeted market segments. For example, as discussed in IMC Perspective 11-2, MTV is returning to its roots to connect with younger viewers.

McGraw-Hill Connect ®: Characteristics of Television Type of Activity: Click and Drag Activity Summary: Students will match the various characteristics of television with their implications for advertisers or media planners of various brands currently using TV as a medium as part of their IMC. Activity Learning Objective: 11-02 Discuss how television advertising time is purchased for network and local television as well as cable television.

CONCEPT REVIEW: Television (T.V.) is the primary form of entertainment in most households as well as the largest advertising medium in the United States and in the world. T.V. has virtually saturated households throughout the United States and most other countries and has become a mainstay in the lives of most people. The average American viewer watches over five hours of T.V. a day. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking E.

Measuring the TV Audience—One of the most important considerations in using television advertising concerns the size and composition of the TV viewing audience. Audience measurement is critical to the advertiser since they want to know the size and characteristics of the audience they are reaching when they buy time on a particular program. Audience size and composition are important to the network or station as these figures determine the amount they can charge for commercial viewing time. Programming decisions are made based on audience size and composition. 1. Audience measures—The sole source of network TV and local audience information is Nielsen Media Research since Arbitron exited the TV ratings business at the end of 1993 due to steep financial losses. There are some important terms and various types of information the rating services provide, which should be covered: a. Television households—the number of households in a market with at least one operable TV or monitor. Nielsen estimates that 116.4 million U.S. households that own at least one television set or monitor that can be used to watch TV. b. Program rating—the percentage of TV households in an area that are tuned to a specific program during a specific time period.

Chapter 11—Evaluation of Media: Television and Radio

c. Ratings point—a figure that represents 1 percent of the TV households in a particular market tuned to a specific program. d. Households using television (HUT)—the percentage of homes in a given area where TV is being watched during a specific time period. This figure is sometimes referred to as sets in use and is always expressed as a percentage. e. Share of audience—the percentage of households watching TV in a specified time period that are tuned to a specific program. Share figure are important because they reveal how well as program does with the available viewing audience. f. Total audience – the total number of homes viewing any five-minute part of a program. 2. Network audience information—The source of national and network television audience information is Nielsen which provides daily and weekly estimates of TV viewing and network program audiences. For many years, the audimeter was used as the basis for the famous “Nielsen Ratings.” However, the people meter has become the sole basis for the Nielsen’s national rating system. The people meter is an electronic measuring devices that records not only what is being watched but also by whom in the sample of 25,000 Nielsen households used to determine the national ratings. 3. Local audience information—Information on local television audiences is provided by the Nielsen Station Index (NSI). These measures are taken using the diary method whereby record what they are programs they are watching and who is watching. Nielsen provides NSI measures in 210 local markets known as designated market areas (DMAs). DMAs are nonoverlapping areas used for planning, buying and evaluating TV audiences and are generally a group of counties in which stations located in a metropolitan or central area have the largest audience share. The ratings period when all 210 DMAs are surveyed is known as the sweeps periods. As discussed in the chapter, there are many problems with the audience estimates gathered during the sweeps periods and advertising people are calling for changes in this system. 4. Developments in audience measurement—The advertising industry is likely to see changes in the way viewing audiences are measured. Much of the concern over the Nielsen audience measurement numbers involves the use of the diary system to measure local viewing audiences. Nielsen has been expanding the use of people meters to measure local viewing audiences as they are currently used in the top 56 markets and the company plans to expand their use to other markets as well. In 2007 Nielsen began providing commercial ratings data, know as “C3,” which includes measures of the average viewership of the commercials in a program, both live and up to three days after the ads on played back on a DVR. The new ratings did not track individual ads or specific time slots, but rather offered an average viewership of all the national commercial minutes in a program. The reasons behind the move to this new system and the ongoing issues associated with measurement of TV commercials are discussed in the chapter. Many television network executives began pushing for “C7” ratings, which include viewership of programs and commercials up to seven days after the airing of a show. This will allow for inclusion of viewers who may record a shown on a DVR and watch it during this time period. By 2014, Nielsen was providing C3 as well as C7 viewership numbers; however, the industry continued to argue that better measurement was still needed to account for viewership across all platforms to determine total viewership of a program as well as viewing patterns. In 2016 Nielsen began rolling out its total audience measurement system, which is a singlesourced platform that accounts for all viewing across linear TV, DVRs, video-on-demand, connected TV devices including streaming video devices and game consoles, enabled smart 11-6

Chapter 11—Evaluation of Media: Television and Radio

TVs, tablets, smartphones, and personal computers. The new measurement system accounts for viewers currently overlooked by current C3 and C7 metrics and also provides more insight into viewing patterns for television shows. The new system will be able to determine how much time people spend with devices overall and link program viewing to those specific devices. Nielsen is also developing a new metric called Total Use of Television (TUT), which adds connected TV usage to linear viewing to provide a complete view of TV usage. Professor Notes

McGraw-Hill Connect ®: TV Commercials for Various Brands Type of Activity: Click and Drag Activity Summary: Students will match the various media concepts related to buying television time with their implications for advertisers or media planners of various brands currently using T.V. as a medium as part of their IMC. Activity Learning Objective: 11-03 Discuss how television viewing audiences are measured and developments in audience measurement.

CONCEPT REVIEW: A number of options are available to advertisers that choose to use T.V. as part of their media mix. They can purchase time in a variety of program formats that appeal to various types and sizes of audiences. They can purchase time on a national, regional, or local basis. Or they can sponsor an entire program, participate in the sponsorship, or use spot announcements during or between programs. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

III.

RADIO

The role of radio as an entertainment and advertising medium changed dramatically with the rapid growth in the popularity of television. Radio has evolved primarily into a local advertising medium characterized by highly specialized programming which appeals to very narrow segments of the population. Radio has survived and actually grown as an advertising media vehicle because it offers advertisers certain advantages. However, radio does have certain limitations that affect its role as an advertising medium. A.

Advantages of Radio 1. Cost and efficiency—Radio commercials are inexpensive to produce and the absolute and relative costs for radio advertising time is generally lower than for television. 11-7

Chapter 11—Evaluation of Media: Television and Radio

2. Receptivity—Radio often provides advertisers with a very receptive environment for their advertising messages. 3. Selectivity—Radio allows marketers to focus their advertising on specialized audiences such as certain demographic and lifestyle groups. For example, talk radio reaches the adult market effectively while top 40 music reaches teens and young adults. 4. Flexibility—Radio is probably the most flexible of all the advertising media because it has a very short closing period, which means advertisers can change their message almost up to the time it goes on the air. 5. Mental imagery—Radio encourages listeners to use their imagination when processing a commercial message. Radio can also reinforce TV messages through a process called image transfer where the visual elements of TV commercials are implanted in a radio spot. 6. Integrated marketing opportunities—Radio provides marketers with a variety of integrated marketing opportunities such as event marketing and point-of purchase promotions. Advertisers often use radio stations and personalities to enhance their involvement with a local market and to gain influence with local retailers. B.

Limitations of Radio 1. Creative limitations—Radio is an advertising medium without a visual image. The radio advertiser cannot show the product, demonstrate it, or use any type of visual appeal or information. 2. Fragmentation—The percentage of the market tuned to any particular station is usually very small. 3. Difficult buying procedures—Acquiring information, evaluating, and contracting for radio time with even a fraction of the nearly 11,300 commercial stations that operate across the country can be difficult and time consuming.

4. Limited research data—Audience research data on radio are often limited, particularly compared with TV, magazines, and newspapers. 5. Limited listener attention—Radio programming particularly music, is often the background to some other activity and may not receive the listeners’ full attention. Many people who listen in their cars preprogram their radios and change stations during commercial breaks. Another factor that is detracting from radio listening in motor vehicles is the rapid growth of mobile telephones. Studies have found that commuters surveyed who own a mobile phone reported listening to less radio. Many consumers spend time on their phones while driving and also can listen to music stored on their phones or through streaming services.

Chapter 11—Evaluation of Media: Television and Radio

Competition from digital media—Commercial radio faces competition from several digitalbased technologies that are affecting the listening audience such as satellite radio. The major satellite radio companies, Sirius and XM, merged in 2008 and now have nearly 30 million subscribers. In addition to satellite, terrestrial radio is also being impacted by the growing popularity of MP3 players such as the Apple iPod as well as music services that are now available over the Internet such as Pandora, Spotify, and Apple Music.

7. Clutter—Most radio stations carry an average of nearly 10 minutes of commercials every hour. During the popular morning and evening rush hours, the amount of commercial time may exceed 12 minutes. In 2010 Clear Channel, which is now known as iHeartMedia, Inc., began offering advertisers a new service known as contextual radio ads that can automatically insert radio commercials immediately after specific programming or certain kinds of content, including other ads. A number of companies have been using the service to better target their radio advertising messages.

McGraw-Hill Connect ®: Bee and Gees TV Audience Measures Type of Activity: Case Analysis Activity Summary: Bee & Gee is a multi-product, multi-brand, packaged goods company with a significant presence in the personal care and grooming category. Within each product category, it has numerous brands that sometimes compete with each other in the same geographical markets. This activity will have the students select the best answer for each question related to audience measurement. Activity Learning Objectives: 11-03 Discuss how television viewing audiences are measured and developments in audience measurement. CONCEPT REVIEW: One of the most important considerations in T.V. advertising is the size and composition of the viewing audience. Audience measurement is critical to advertisers as well as to the networks and stations. Advertisers want to know the size and characteristics of the audience they are reaching when they purchase time on a particular program. And since the rates they pay are a function of audience size, advertisers want to be sure audience measurements are accurate. Difficulty: Hard Bloom’s: Analyze AASCD: Analytical Thinking C.

Buying Radio Time—The purchase of radio time is similar to that of television in terms of purchasing options as advertisers can make either network, spot or local buys during various time periods or dayparts. Various options should be discussed including: 1. Network radio—There are seven major national radio networks, such as CBS Radio, Cumulus, Westwood One, and Premiere. Advertisers can reach a national audience by advertising on one of the networks. There are also more than 100 regional radio networks 11-9

Chapter 11—Evaluation of Media: Television and Radio

across the country. An important trend is the number of syndicated radio programs that offer advertisers a package of several hundred stations. The Dan Patrick Show is an example of a popular syndicated program. 2. Spot radio—National advertisers can use spot radio to purchase airtime on individual stations in various markets. 3. Local radio—Most radio advertising is done by local companies who purchase advertising time from stations in local markets. D.

Time classifications—The broadcast day for radio is divided into various time periods or dayparts. The size of the radio listening audience varies widely across the dayparts, and advertising rates follow accordingly. The largest audiences (and thus the highest rates) occur during the early morning and late afternoon weekday drive times. Various dayparts for radio are shown in Figure 11-8.

Audience Information—One problem with radio is the lack of audience information that results from the vast number of radio stations with small, fragmented audiences. Developing precise measures of radio listenership is difficult because of the nature of the medium and the many station options available. Two major radio rating services should be discussed: 1. Nielsen Audio—covers over 300 local radio markets with two to four ratings reports per year by having a sample of representative listeners in each market maintain a diary of their radio listening for seven days. Various figures measured by Nielsen Audio include person estimates, ratings, and share. Nielsen Audio also recently began measuring listenership to webcasts of radio stations. 2. RADAR— Another rating service now owned by Nielsen is RADAR National Network Ratings. RADAR measurements are based on information collected throughout the year by means of diary interviews from a probability sample of 200,000 respondents age 12 and older who live in telephone households.

Professor Notes

Chapter 11—Evaluation of Media: Television and Radio

Teaching Suggestions This chapter is designed to provide the student with a general understanding of the media of television and radio. Radio and television are probably the most pervasive media in the lives of most American consumers. The instructor may want to direct the students’ attention to the statistics cited in the text regarding penetration of radio and television and the amount of time spent with these media. It is important for students to understand the general characteristics of television and radio including their specific strengths and weaknesses, the role they play as advertising media vehicles, how television and radio time is purchased and how audiences are measured and evaluated for each medium. For nearly 80 years, the broadcast media of radio and television have been a dominant part of the lives of most Americans. Radio was a major news, information and entertainment medium from the 1920s to the early 1950s. The introduction of television as a mass medium began in 1950 and has seen unprecedented growth over the past three decades, both as an entertainment and advertising medium. Much of the growth in the popularity of television has come at the expense of radio, although the latter has been experiencing a resurgence in popularity. As we enter a new millenium, television is changing as an advertising medium as the growth of cable has led to a fragmentation of viewing audiences and the major networks are facing a decline in the size of the viewing audiences they attract. An interesting and informative website that you may want to visit is that of the Television Advertising Bureau which can be found at www.tvb.org. The nature of television as an advertising medium has changed dramatically in recent years and will continue to do so with the evolution of digital technology. The trend toward shorter commercials and the resulting clutter problem, the growth of cable and concomitant decrease in network viewing audiences, the continued penetration of digital video recorders (DVRs), video on demand (VOD), and Internet steaming services such as Netflix, Hulu and Amazon Prime are likely to have a profound impact on television as an advertising medium. Advertisers are increasingly calling for more precision in audience measurement such as measures of commercial viewing rather than simply program viewership. The instructor should encourage the student to explore these changes and consider their impact on advertising in terms of not only media planning, but also creative strategy and sales promotional programs. It is important to keep informed about the changes occurring in the areas of audience measurement as well. The chapter discusses the ongoing battle between the television networks and advertisers over the measurement of television viewing audiences and how they are being impacted by new technologies such as digital video recorders. When teaching this chapter, we encourage you not to contribute to the “Rodney Dangerfield” problem of radio by giving it only limited attention. Radio has become a very viable media option for national as well as local advertisers. Examples of the creative and effective use of radio are readily available just by spending some time listening to the medium. Since students tend to be heavy listeners of radio, you might ask them to record some radio ads that could be discussed in class. The Radio Advertising Bureau has a very informative web site (www.rab.com) which you may want to visit for some interesting material and information on the effective use of radio by various advertisers. There are several interesting developments in radio that can be discussed including the growing popularity of various formats such as talk radio and webcasts of radio stations. Radio is facing more competition from cable television as advertising rates on local cable stations are often comparable to radio and there is the added advantage of TV’s visual impact and creative options. Attention should also be given to the growth of satellite radio and SiriusXM, which was formed by the merger of the two companies. While satellite radio offers more options to listeners, both companies are finding it difficult to attract subscribers.

Chapter 11—Evaluation of Media: Television and Radio

Answers to Discussion Questions 1. The chapter opener discusses the major developments impacting the television industry. Discuss these developments and how they are likely to impact TV’s role as an advertising medium. How might these factors impact the way marketers use television as part of their IMC programs? (LO 11-1, 11-2, 11-3) Television has long been the medium of choice for marketers who want to reach large audiences and deliver an impactful message; the TV commercial has been considered the quintessential form of advertising by many marketers. The number of U.S. households with television has more than doubled over the past half century, going from 55 million in 1965 to 116.4 million in 2016. For much of this time period television was dominated by the three major broadcast networks and by the mid90s, Fox had joined them as the fourth major network. The most significant development in the television industry prior to the turn of the century was the increasing penetration of cable TV and alternative delivery systems (ADS) such as direct broadcast by satellite, which dramatically increased the number of channels available to viewers. The number of homes with cable or ADS went from 13 percent in 1975 to nearly 90 percent today. As penetration increased, so did the number of channels available. At the end of the 1980s, only a third of cable households could receive 30+ channels, but by the beginning of the new millennium, the average household with cable had more than 100 channels available and today that number has nearly doubled. One of the most significant factors affecting the television industry, as well as its use as an advertising medium, is the fragmentation of the viewing audience that has occurred with the increase in channels available through cable and ADS. Total viewership of the four major networks has declined dramatically over the past two decades and collectively accounts for less than 25 percent of the prime-time viewing audience. The top-rated shows used to be watched by nearly 20 percent of all TV households. However, it is rare for the top-rated TV shows to reach this many people and most top 10 shows struggle to get double-digit ratings. Many of these viewers are being lost to cable channels that offer programs appealing to more specific audiences interested in news, sports, fashion, music, cooking, travel, entertainment, and other areas. While audience fragmentation is clearly impacting television, of even more concern to the industry is the effect technology is having on television viewing patterns. TiVo introduced the first digital video recorder (DVR) in 1999 and cable companies and ADS now make low-cost DVRs available to consumers who subscribe to their services. Just over half of TV households now have a DVR, which means they can record a show and watch it whenever they want while fast-forwarding through the commercials. However, the impact of technology extends beyond DVRs because many people, particularly those in the 18–49 demographic target that advertisers covet, are not watching TV in the traditional linear fashion whereby they view a scheduled TV program at the specific time it is offered, and on the particular channel it is presented on. In addition to time-shifted viewing on DVRs, TV shows are being streamed online over personal computers, tablets, and smartphones as well as through connected streaming video devices and gaming consoles such as Apple TV, Amazon Fire TV, Google Chromecast, Xbox, and PlayStation—as well as smart TVs. Just 10 years ago, most television shows were being watched live, but it is likely that by 2020 only 50 percent of viewership will be live while the other half will be nonlinear. Compounding the problem facing the television and cable networks is concern over cord cutting, which refers to households that are dropping their traditional pay-TV services such as cable or satellite TV. It is estimated that the number of pay-TV households will decline by a little over 1 percent per year and that by 2020 the total number of households that do not subscribe to pay-TV—a combination of cord-cutters and “cord-nevers” who had never signed up in the first place—will reach 11-12 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 11—Evaluation of Media: Television and Radio

23 percent of U.S. households. Moreover, many of the pay-TV providers plan to offer subscribers “skinny bundles” which will include fewer channels so they save money on their monthly bills. ESPN, the cable network with the most subscribers but also the highest monthly subscriber fee at just over $7, has lost an estimated 10 million subscribers since 2013 and now has its lowest subscriber total in nearly a decade at just under 90 million. Whereas all of these factors have led to predictions of television’s imminent demise as a major advertising medium, many experts are much more positive about it future. They note that while the viewing audience is clearly fragmented and viewing patterns are changing, TV advertising will remain valuable and important to marketers. Nielsen, the company that measures television viewing audience, launched a new measurement system in 2016 that will account for linear as well as nonlinear TV viewing, which means advertisers will no longer have to pay for eyeballs that are not watching their commercials. It is also likely that TV commercials will become much more targeted and even personalized, which should make them more relevant and engaging to viewers. It is also likely that television will remain important for marketers trying to reach large numbers of consumers in an impactful way. Even with the increase in cord-cutting, more than 90 million households will still subscribe to a pay-TV service; popular shows on the broadcast and cable networks will still reach millions of people. Sporting events on the major networks as well as cable channels such as ESPN and Fox Sports1 will be watched live and thus be DVR proof, while major events such as the Super Bowl, Grammys, and Oscars will deliver large viewing audiences to marketers. 2. Discuss the advantages and limitations of television as an advertising medium and how these factors affect its use by major national advertisers as well as smaller local companies. (LO 11-2) Television has often been described as the ideal advertising medium because of the many advantages it offers. These include the opportunity TV offers for developing creative and imaginative messages with high impact; its wide coverage and ability to reach large audiences in a cost-effective manner; the captive nature of the TV viewing audience which usually results in attention to commercials; and the selectivity and flexibility television offers for reaching various types of target audiences, particularly with the growth of cable television. These factors are very important to major advertisers such as automobile companies or packaged goods marketers. These companies are generally trying to reach mass audiences with their advertising messages and television is an excellent media vehicle for doing this. However, they can also take advantage of the selectivity TV offers through various programs or cable channels to reach more targeted audiences. Automobile companies and packaged goods marketers also rely heavily on the creativity and impact that is possible through TV commercials. These companies use the sight, sound and visuals offered through television to create high impact ads, develop images for their brands, and develop emotional or entertaining appeals. Television advertising can be particularly valuable for creating emotional or entertaining appeals that help make a low involvement product more exciting or interesting. Of course, there are limitations to television as an advertising medium, even for major advertisers with large budgets. Television can be a very expensive medium for national advertisers and production costs for high quality commercials are also very high. The viewing audience for television programs is becoming increasingly fragmented with the increase in the number of channels available to viewers. Clutter also continues to be a problem as the average amount of nonprogramming time averages more than 15 minutes during prime time and even more during the daytime. The increase in the number of homes with digital video recorders has also become a problem as many households are recording shows and skipping through commercials when playing them back.

Chapter 11—Evaluation of Media: Television and Radio

For smaller local companies, television has become a more viable medium in recent years. Local companies such as retailers, car dealers, restaurants and other merchants are spending a greater portion of their media budget on TV, particularly on local cable where the rates are low and they can target a specific market segment. Being able to use TV allows them to take advantage of the creative power of television. However, local companies also face some of the same problems as national advertisers such as audience fragmentation and competition from other media. Local companies also often lack the budget to produce high quality TV commercials, which can limit the effectiveness of the commercials they run on television. 3. IMC Perspective 11-1 discusses how intercollegiate athletic programs have become very dependent on revenue from broadcast rights for football and basketball games. Discuss the reasons behind the growing popularity of sports programming on television and why television networks are willing to pay such large sums of money for the rights to televise college and professional sports. Discuss the impact this is having on colleges and their athletic programs in particular. (LO 11-1, 11-2) As discussed in IMC Perspective 11-1, television networks have been paying large sums of money to the NCAA as well as the major conferences such as the Big 10, Pac 12, Big 12, Southeastern Conference (SEC), Atlantic Coast Conference (ACC) and others to broadcast their football and basketball games as well as end of the season tournaments. This revenue is very important to collegiate athletic programs as the vast majority of them operate at a loss each year, and they must fund their entire athletic programs, not just the two revenue-producing sports of football and basketball. The NCAA requires Division 1 programs to offer 15 sports collectively for men and women, which is very expensive. In addition to monies for scholarships, travel, equipment, and insurance, the schools must pay for coaching staffs, administrative support and other expenses. Most athletic programs rely on monies from student fees and the school’s general fund to operate their athletic programs. Given this situation, the importance of the revenue that comes to schools from television broadcast rights is critical for them to continue offering their athletic programs. The reliance on monies from TV broadcast rights is impacting collegiate sports in many ways as schools are doing whatever they can to maximize TV revenue such as changing conference affiliations, abandoning long-standing rivalries, adding additional games including conference championships, and even dismantling the traditional system of post-season bowl games and the much-maligned Bowl Championship Series (BCS) system. Some teams have moved to new conferences that are willing to pay them more money because they are located in major media markets and thus can help increase TV ratings. There is a great deal of concern that Division 1 collegiate football will eventually end up with four to six major conferences that include 12 to 16 teams. There has even been speculation that these schools might withdraw from the NCAA and govern themselves. While the major football schools would receive a large amount of revenue from broadcast rights deals, the remaining schools would be at a major competitive disadvantage and would find it difficult to build their programs and attract talented athletes. There is also concern that television will become saturated with football and basketball games which could lead to a decline in popularity of the sports on television. Collegiate football games currently are televised five days and/or nights a week with a full slate of games being shown on Saturday. There is also concern that the networks might eventually pass on the rights fees to cable operators who in turn will try to pass them on to subscribers, many of whom do not watch collegiate sports on television. 4. Discuss how digital and social media are influencing the way people watch television. What are some of the ways television advertisers can leverage social media to work to their advantage? (LO 11-2)

Chapter 11—Evaluation of Media: Television and Radio

Developments in digital technology over the past decade or so have had a profound impact on the way people watch TV and are challenging its role as the quintessential advertising medium. For nearly 60 years, consumers watched TV on huge, boxlike tube sets with screen sizes that slowly evolved from 19 to 36 inches in size. However, today nearly 90 percent of homes have highresolution, pixel-perfect HDTVs and as the prices decline, the size of the television in many homes gets larger; the average screen size today is 42 inches. Over 80 percent of homes also have broadband wireless Internet, and many have video gaming consoles or other connected devices such as Apple TV, Roku, Amazon Fire TV, or Google Chromecast that help them stream video content to their televisions. There are other ways TV viewing is being affected by technology. Today most people watch television while spending time on their computers, tablets, and smartphones. A recent study by Nielsen and Yahoo! study found that 86% of viewers multitask on their on their computers or mobile device while watching television. Within that group, 40 percent use their mobile devices for social networking, 33 percent utilize various apps, and over half text family and friends. The widespread multitasking and social media consumption during TV viewing is having a major effect on the television industry. One way is by bringing eyeballs to shows that otherwise would not be there. A Nielsen study showed that 46 percent of TV watchers started watching a show after hearing about it through Facebook while Twitter came in second at 14 percent, websites of TV shows at 9 percent, and online discussion boards at 8 percent. Additionally 70 percent indicated that they talked about a show through social media while it was on the air. Most television shows also have a Facebook page where fans can read up on the latest episodes, learn more about the actors, and enter to win prizes related to the show. This keeps fans more interested in the shows. Some television shows even provide sneak-peak videos through Facebook to get fans excited about upcoming episodes. 5. What are the various options available to advertisers for purchasing advertising time on television? How does the use of these options differ for national versus local advertisers? (LO 11-3) A number of options are available for purchasing advertising time on television. Advertisers can purchase time in a variety of program formats and it can be purchased on a national, regional or local basis. Advertisers can also sponsor an entire program, participate in the sponsorship of a program, or use spot announcements between programs. For national advertisers, one of the basic decisions is whether to purchase network versus local or spot announcements. Most national advertisers purchase advertising on the major networks to provide national coverage and supplement this with regional or local spot purchases. When network advertising is purchased, the commercial is shown on all of the affiliated stations in all designated market areas. National advertisers will also use spot advertising (also referred to as national spot advertising) which refers to commercials shown on local TV stations with time purchased directly from the individual stations. Spot advertising offers the national advertisers flexibility in adjusting to local market conditions as they can purchase more time in areas where market potential is greatest or where additional advertising support is needed. Local advertisers want to purchase television time on stations whose coverage is limited to the geographic markets in which they do business. This is done by purchasing spot ads on local network affiliates, independent stations or local cable networks. 6. Choose one of the major cable networks listed in Figure 11-4 and analyze it as an advertising medium. Discuss the audience profile for viewers of programming on this cable network and the type of advertisers that might want to reach them. You might visit the website of the cable network for information on its viewing audience. (LO 11-2) There are many advantages to advertising on cable TV including the opportunity for narrowcasting or reaching a very specialized target market. Students should select a cable network from the list shown in Figure 11-4 and develop a profile of it by visiting the Cable Network Profile section of the website for the Video Advertising Bureau (http://www.thevab.com/?s=cable+networks). Using the 11-15 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 11—Evaluation of Media: Television and Radio

information provided, they can discuss the target audience reached by this network, the programming, and the types of companies that might choose to use it as part of their television advertising media plan. They also might watch some shows on the network and discuss the types of commercials used by the advertisers with respect to factors such as creative style and execution, length and format 7. Evaluate the use of sweeps ratings periods as a method for measuring local television viewing audiences. Do you feel think sweeps ratings provide reliable and valid estimates of local television viewing audiences? How might they be improved? (LO 11-3) As discussed in the chapter, there are a number of problems with the sweeps ratings periods used to measure local TV viewing audiences. One of the major concerns is over the tactics used by the networks and their local affiliates to bolster their ratings during the sweeps periods such as special programming, contests games, and other promotional gimmicks. These extraordinary programming and promotional efforts during the sweeps periods pull in extra viewers and negatively affect the validity of audience measurements for the remainder of the year. They may inflate the size of the viewing audience for a particular network show or a local newscast and result in advertisers having to pay higher rates for advertising time during other nine months of the year. The advertising industry argues that the only real solution to the problems associated with the use of the sweeps is to do away with the “sweeps period” and move to a system of continuous audience measurement. However, a continuous measurement system like that used for the national ratings would be very expensive and the television and advertising industry would have to be willing to pay a higher price for local ratings information. 8. Discuss recent developments in the measurement of television viewing audiences and their implications for advertisers. Do you think advertisers should have to pay for viewers who watch TV shows on a time-shifted basis on their DVRs or video on demand? (LO 11-3) The major television and cable networks have been battling with Nielsen Media Research for years over the best way to measure the television viewing audience, particularly given the penetration of DVRs into more than 40 percent of television households. The two sides reached a compromise in 2007 when Nielsen Media Research began making commercial ratings available rather than program ratings. For decades, Nielsen had provided the number of TV viewers per half-hour for programs and prices for advertising time were based on the average viewership of the programs they interrupted. However, commercial ratings take into account how many viewers bail out during a commercial break by changing channels or fast-forwarding through the ads if they are watching a recorded show. Nielsen’s commercial-ratings data, known as “C3”, includes measures of the average viewership of the commercials both live and up to three days after the ads are played back on a DVR. Nielsen also provides C7 ratings that measure viewership of programs and commercials up to seven days after the airing of a show. However, advertisers do not usually go by C7 rating as they focus on the C3 commercial ratings. Currently C3 is the primary metric under which most broadcast prime-time is bought and sold, although this may change in the future as more consumer watch TV shows on a time-shifted basis. Television and cable networks use rating data from Nielsen to set prices for television advertising time and changes in that data can have a major impact on the prices advertisers ultimately pay. Nielsen’s C3 ratings mean the networks now have to negotiate with advertisers based on smaller live viewing audience numbers. However, in exchange for letting Madison Avenue have its commercial ratings, the networks are now paid for the DVR-enabled viewers who may watch the programs and the ads from 3 to 7 days later. They note that the Nielsen data refutes the myth that nearly all DVR viewers skips the ads when they playback a show and that those who watch the ads raise the program’s total commercial audience. However, many advertising and media executives still disagree with the networks over the value of the DVR viewers. They point to research showing that while the 11-16 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 11—Evaluation of Media: Television and Radio

viewing audience may grow over time, viewership of commercials still lags significantly behind viewership of programs. While Nielsen’s current C3 ratings are seen as an improvement over the old measurement system, many are still dissatisfied with the system since it is based on an average of all national commercial minutes in a program. Marketers argue that payment should be based on the viewership of each individual commercial rather than an average across all the commercial minutes. They argue that there is a substantial amount of research data available showing that viewership of commercials during a break depends on position as the first or second commercial may have more viewers than spots aired during the middle of a two- or three-minute pod. As DVRs become more pervasive along with Internet Protocol TV, the viewing patterns of consumers will continue to change and Nielsen will have to continue to adapt its measurement of the television viewing audience. 9. What is a commercial rating and how does this measure differ from a program rating? Discuss why advertisers and media planners prefer commercial ratings rather than program ratings. (LO 11-3) A commercial rating is a measure of the number of viewers of actual commercials in a program rather than the program itself. Traditionally, Nielsen provided advertisers and media planners with program ratings, which are a measure of the percentage of households in an area tuned to a specific television program during a specific time period. However, the advertising industry has long argued that there is a need to measure the viewing audience of the commercials rather than just the program since many TV viewers switch channels when commercials come on or fast-forward through them if the show was recorded on a DVR. In 2007, Nielsen began providing commercials ratings known as C3, which includes measures of the average viewership of the commercials both live, and up to three days after the ads are played back on a DVR. The new ratings do not track individual ads or specific slots in the commercial pod, but rather offer an average viewership of all the national commercial minutes in a program. Obviously, advertisers and media planners prefer commercial ratings since they have always argued that viewership of commercials is much lower than viewership of programs and they do not want to pay for eyeballs that are not watching their advertising messages. 10. Discuss the advantages and disadvantages of advertising on radio. advertising might be used by national versus local advertisers. (LO 11-2)

Discuss how radio

Advantages of advertising on radio include its low cost and efficiency. Radio commercials are inexpensive to produce and the cost of advertising time on most stations is relatively low. This allows advertisers the opportunity to build more reach and frequency into their media schedules. Another major advantage of radio is the high degree of audience selectivity available through various program formats and geographic coverage of the numerous stations. Radio is also a very flexible medium with very short closing periods for running a spot and also offers the potential for mental imagery in the creation of a commercial. Many radio stations also offer valuable merchandising assistance and support to advertisers. Disadvantages of radio include creative limitations due to the absence of a visual image, a high level of audience fragmentation because of the large number of stations, chaotic buying procedures for purchasing radio time, limited amount of research data on radio audiences and limited listener attention (particularly in cars where station changing occurs frequently or where commuter are talking on cellular telephones). Radio is most likely to be used by local advertisers such as retailers who are trying to reach consumers in their trade area. However, radio has also become a popular medium for national advertisers, particularly those with products and/or services which appeal to hard-to-reach audiences such as teenagers. National advertisers can purchase time on network radio and the growing number of nationally syndicated programming such as sporting events and talk radio shows. 11-17 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 11—Evaluation of Media: Television and Radio

11. Discuss the way Nielsen measures the listening audience for radio stations. Do you think the rating methods are providing reliable measures of radio audiences? (LO 11-6) The listening audience for radio is measured by Nielsen Audio, which covers nearly 300 local radio markets with two to four ratings reports per year. Nielsen has a sample of representative listeners in each market who maintain a diary of their radio listening for seven days. Audience estimates for the markets are based on these diary records and reported by time period and for selected demographics in the Radio Market Report. In the top 50 markets, Nielsen Audio uses the Portable People Meter (PPM), which is a wearable device that electronically tracks what consumers listen to on the radio by detecting identification codes embedded in the programming. There is considerable concern over the validity of the audience measurement numbers gathered by Nielsen, particularly in markets that rely on the diary method. Critics argue that most panelists do not fill out the diaries on a regular basis and often do not provide accurate reports of their listening behavior. The estimates of listenership by demographic groups can also be unreliable as the number of panelists in specific demographic segments is often small and only a few listeners can influence the ratings numbers. The Portable People Meter provides more accurate and reliable measurement and advertisers are pushing Nielsen to expand the use of PPMs beyond the top 50 markets. 12. Discuss how radio stations, as well as advertisers, can deal with the clutter problem on radio and draw attention to their commercials. (LO 11-5) One of the problems facing radio, like most other advertising media, is clutter as most radio stations carry an average of nearly 10 minutes of commercials each hour and during the popular early morning and evening drive times, the amount of commercial time may exceed 12 minutes. Some stations have begun offering “commercial free” blocks of programming time (such as music) but this often results in listeners switching to another station when they begin airing commercials. The clutter problem for radio is compounded by the fact that many people listen to radio in their cars and can easily change channels or may choose to listen to music on their phones rather than radio. Advertisers deal with this problem by trying to develop creative commercials (often by using humor) or may hire a local celebrity to help attract the attention of listeners. Some radio stations have addressed the clutter problem by reducing the number of commercials aired each hour, which is more appealing to both listeners as well as advertisers. The radio industry is looking for other ways to make radio advertising more valuable to marketers. In 2010 Clear Channel, which is now known as iHeartMedia, Inc., began offering advertisers a new service known as contextual radio ads that can automatically insert radio commercials immediately after specific programming or certain kinds of content, including other ads. A number of companies have been using the service to better target their radio advertising messages. Students should be asked to identify examples of an advertiser who might benefit from the contextual programming service.

Chapter 11—Evaluation of Media: Television and Radio

Additional Discussion Questions (not in text) 13. Television is often described as a mass medium that offers little selectivity to advertisers. Do you agree with this statement? What are some of the ways selectivity can be achieved through TV advertising? (LO 11-2) For many years, television was essentially a mass medium as there were only three major networks, which accounted for over 90 percent of the prime-time viewing audience. However, some selectivity has always been available due to variations in program content, broadcast time and geographic areas. For example, Saturday morning cartoon shows appeal primarily to children while weekend sports programs are watched primarily by males. Geographic selectivity is possible through local of spot ads in specific markets. With the growth of cable TV, television has become less of a mass medium. The major networks now account for less than 50 percent of the prime-time viewing audience and the market has become very fragmented. The selectivity of TV has increased significantly, as advertisers can reach groups with specific interests such as sports, news, music, the arts or business on cable channels. There is even greater segmentation within these television programming categories. For example, the Golf Channel is a new cable network devoted entirely to the sport. There are cable networks devoted to a variety of music genres, such as MTV, VH1 and Country Music Television, as well as to business and financial news (CNBC) and home decorating and gardening (HGTV). 14. Discuss how the growth of Spanish-language television networks in the United States such as Univision and Telemundo affects the media strategy of marketers targeting the Hispanic market. (LO 11-2) As discussed in the chapter, the Hispanic market is very large as there are now 52 million Hispanics living in the U.S., which is nearly 17 percent of the population. The availability of Spanish-language TV stations is important to marketers who want to reach this segment as there are over 11 million Hispanic-American television households in the U.S. and approximately 90 percent speak some Spanish at home. Language usage has an important impact on their impact of TV programs and a substantial amount of the TV viewing in these homes goes to Spanish language shows. Moreover, Hispanics tend to be younger, have larger families and watch nearly two hours more of television per day than non-Hispanics. Thus, television is a very important medium for reaching this market. A number of marketers have recognized the importance of the Hispanic market and have developed IMC programs specifically for this market. These companies recognize that Spanish language TV networks such as Univision and Telemundo are the best way to reach the Hispanic market as these networks have larger viewing audiences than network shows in a number of big city markets with large Hispanic populations such as New York, Los Angeles, Houston and Dallas. As more companies develop marketing programs and commercials specifically for the Hispanic market, Spanish language television networks will become increasingly important as a way to advertise to this market segment. Spanish-language networks are becoming increasingly popular among young bilingual Hispanics and are gaining on the four major networks (CBS, NBC, ABC and Fox). This is leading many marketers to allocate a greater portion of their media budget to Spanish language networks, as they have become an efficient and effective way to reach the growing Hispanic market. 15. The text discusses the Extended Home study conducted by Nielsen Market Research to measure the television viewing patterns of college students living away from home. Discuss why the results of this study are of value to televisions networks (including cable) as well as advertisers. What are some of the other away-from-home viewing audiences that are of importance to advertisers and show be measured? (LO 11-3) The results of this study are of value to television networks, including cable, for several reasons. First of all the results show that college students watch as much TV as other 18- to 24-year-olds which 11-19 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 11—Evaluation of Media: Television and Radio

refutes the notion that they are busing studying, socializing or doing other things that keep them from watching television. These results should not be surprising since many college dormitories, fraternity and sorority houses, and off-campus housing make cable television service available to residents. The study also provides insight into the particular shows that are popular among college students as well as the time periods during which they are watching television. This information is valuable to the cable networks such as ESPN, Comedy Central, MTV, and TBS, which carry the programs watched by college students. The information is also helpful to advertisers who want to reach college students as it provides them with insight into the cable channels and specific shows where they should be purchasing commercial time. Other away from home viewing audiences that are of importance to advertisers include those watching television in bars and restaurants, hotels rooms and at airports. A significant amount of television viewing occurs in these places and this information is valuable to the networks as well as advertisers who want to reach these viewers. Of course, some away from home venues such as bars and restaurants or airports are more conducive to watching a program such as a sporting event or news show rather than commercials. Thus, advertisers may discount the size of the viewing audiences for these venues and the amount they are willing to pay to reach consumers watching there. 16. Discuss how the concept of imagery transfer can be used in radio advertising. Find an example of a radio campaign that is using this concept and evaluate it. (LO 11-2) Imagery transfer refers to a technique whereby the images of a TV commercial are implanted into a radio spot. This can be done by establishing the video image of a TV commercial and then using the audio portion as the basis for the radio message so that consumers hearing the radio spot will make the connection to the television ad. Large national advertisers who are running integrated campaigns using both media often do coordination of radio and television commercials. Students should be encouraged to find and evaluate current examples of campaigns using image transfer techniques. 17. Discuss some of the factors that media buyers should take into consideration when buying advertising time on radio. (LO 11-3) Media buyers take a number of factors into consideration when buying advertising time on radio. First, they must decide whether they want to make a network, spot or local buy. National advertisers such as automobile companies or major business-to-business marketers are likely to purchase time on one of the three major radio networks since they are generally trying to reach a national audience. Companies who are interested in buying time in certain geographic markets would make a spot buy while local companies such as retailers will be the major purchasers of radio time on local stations. A second major factor to consider is the audience that can be reached through various radio stations. Radio allows companies to focus their advertising on certain demographic and lifestyle groups. As shown in Figure 11-7, various radio formats vary in popularity among different age groups. Radio stations also can appeal to listeners with various interests through programming that focuses on specific topics such as news, sports, finance and investments, computers, cars, and many other areas. Cost factors are also taken into consideration when buying radio time. As with any other type of media, media planners consider both the absolute and relative cost of advertising time on radio. Radio stations generally promote their ability to reach specific target audiences, which increases the efficiency of an advertiser’s budget.

Chapter 12—Evaluation of Media: Magazines and Newspapers

CHAPTER 12 EVALUATION OF MEDIA: MAGAZINES AND NEWSPAPERS Chapter Overview This chapter continues the analysis of the major media of advertising by examining the two primary types of print media—magazines and newspapers. The characteristics of each medium are examined including the different types of magazines and newspapers and their advantages and limitations as advertising media. Attention is given to audience measurement for magazines and newspapers, their rate structures, and the purchase of advertising space in each. The discussion of each medium concludes with a discussion of future developments that will influence their role and the nature of magazines and newspapers as advertising media.

Learning Objectives 1. Compare magazines and newspapers in terms of their value as advertising media. 2. Discuss magazine circulation and readership as well as audience information and research for magazines. 3. Describe how advertising space is purchased for magazines. 4. Discuss future trends and developments for magazines and how they influence their use as an advertising medium. 5. Describe the newspaper audience and audience information and research for newspapers. 6. Discuss how advertising space is purchased for newspapers and rates are determined. 7. Discuss future trends and developments for newspapers and how they will influence their use as advertising media.

Chapter and Lecture Outline I. INTRODUCTION NEWSPAPERS

AND

THE

ROLE

AND

VALUE

MAGAZINES

AND

Magazines and newspapers have been in existence as advertising media for more than two centuries and until the 1920s were the only major media available to advertisers. Despite the growth and competition of the broadcast media, newspapers and magazines have remained important to both their readers and advertisers. Magazines have become a highly specialized medium that reaches specific target audiences in both the consumer and business markets. Newspapers are still the largest advertising medium in terms of both ad revenue, as well as number of advertisers, and are particularly important to local advertisers. Advertising revenue is extremely important to magazines and newspapers as few, if any, could survive without it. The role of magazines and newspapers differs from broadcast media in that they are high-involvement media, which allow the presentation of detailed information that can be processed at the readers’ own pace. However, the characteristics of each medium, their advantages and limitations as advertising media vehicles, and their role in the media mix are quite different.

Chapter 12—Evaluation of Media: Magazines and Newspapers

Professor Notes

II.

MAGAZINES

Magazines serve the educational, informational, and entertainment needs and interests of a wide range of readers in both the consumer and business markets. Magazines rank second only to television as a medium for national advertisers. While some magazines are general mass-appeal publications, most target specific types of audiences in both the consumer and business markets. A.

Classifications of Magazines—A useful way of classifying magazines is provided by SRDS, the primary reference source on magazines for media planners, which divides the publications into three broad categories based on the audience to which they are directed. 1. Consumer magazines—Those bought by the general public for information and/or entertainment. Kantar Media SRDS divides more than 2,700 domestic consumer magazines into 80 classifications or groupings such as general interest, sports, travel, and women’s. Consumer magazines represent the major portion of the magazine industry in terms of advertising revenue. 2. Farm publications—The second major SRDS category consists of magazines direct to farmers. There are approximately 300 publications targeted to nearly every possible type of farming or agricultural interest. These are broken down into nine classifications ranging from general-interest magazines for all types of farmers to those in specialized agricultural areas. 3. Business publications—These are magazines or trade journals published for specific businesses, industries, or occupations. Major categories of business publications include those directed to specific professional groups, industrial magazines directed to various manufacturing and production industries, trade magazines, and general-business publications.

Advantages of Magazines 1. Selectivity—Magazines are the most selective of all media except direct mail. Most magazines are published for special interest groups or activities. Magazines also offer selectivity through specific demographic and geographic editions that they publish. Thus, magazines can play an important role in the media plan for companies that want to reach a specific target market. 2. Reproduction quality—Magazines are generally printed on high-quality paper stock and use printing processes that provide excellent reproduction, in black and white or color. The reproduction quality of magazines provides an opportunity for innovative creative work by advertising agencies, which is also being done in digital versions of magazines as well.

Chapter 12—Evaluation of Media: Magazines and Newspapers

3. Creative flexibility—Some magazines offer a variety of special options that can enhance the creative appeal of the ad and increase attention and readership. Examples include gatefolds, bleed pages, inserts, pop-ups, and creative space buys such as half or quarter page ads. 4. Permanence—Magazines are often kept for reference and/or read over several days. One benefit of the longer life of magazines is that reading occurs at a less hurried pace and there is more opportunity to examine ads in considerable detail. 5. Prestige—Companies whose products rely heavily on perceived quality, reputation, and/or image often buy space in prestigious publications with high-quality editorial content whose consumers have a high level of interest in the advertising pages. 6. Consumer receptivity and engagement—Magazines are generally purchased because the information they contain interests the reader, and ads provide additional information that may be of value in making a purchase decision. Consumers consider magazines to be the primary source of information for a variety of products and services and they are very receptive to advertising in magazines. Media planers recognize that one of the major advantages of advertising in magazines is the ability of the medium to engage readers and hold their attention. 7. Services—Some magazines have merchandising staff that call on trade intermediaries like retailers to let them know a product is being advertised. Magazines also offer such as split runs whereby two or more versions of an ad are printed in alternate copies of a particular issue of a magazine. C.

Disadvantages of Magazines 1. Costs—The absolute cost of advertising in large mass-circulation magazines like Reader’s Digest, Time, or People can be very expensive, particularly for popular positions such as back covers or inside front covers. However, like any medium, magazines are evaluated usually evaluated on a relative cost perspective using cost per thousand (CPM) or target CPM measures, which were discussed in Chapter 10. 2. Limited reach and frequency—The percentage of adults reading any individual publication tends to be much smaller, so magazines have a thin penetration of households. Thus, companies who want to reach mass markets have to buy space in a number of magazines. 3. Long lead time—Most major publications have a 30- to a 60-day lead time, which means space must be purchased and the ad must be prepared well in advance of the actual publication date. However, with improvements in technology such as the use of electronic images, some magazines will accept ads with a much shorter lead-time.

Chapter 12—Evaluation of Media: Magazines and Newspapers

4. Clutter and competition for readers’ attention—Clutter is a problem for magazines as the average consumer magazine contains ads on 47 percent of its pages. The clutter problem for magazines is something of a paradox: the more successful a magazine becomes, the more advertising pages it attracts, which leads to greater clutter. Clutter is often less of a problem for magazines versus other media since consumers tend to be more receptive and tolerant of ads. They also can control their exposure to a magazine ad simply by turning the page.

McGraw-Hill Connect ®: Differentiating Print Media Type of Activity: Click and Drag Activity Summary: In this activity, students will match the type of magazine or newspaper with the relevant description. Activity Learning Objective: 12-01 Compare magazines and newspapers in terms of their value as advertising media.

CONCEPT REVIEW: The role of magazines and newspapers in the advertiser's media plan differs from that of the broadcast media because they allow the presentation of detailed information that can be processed at the reader's own pace. There are several types of magazines and newspapers each with different values as an advertising medium. The media research company Kantar SRDS, the primary reference source on periodicals for media planners, divides magazines into three broad categories based on the audience to which they are directed: consumer (which include farm), health care, and business publications. The vast majority of newspapers are daily publications serving a local community. However, weekly, national, and special-audience newspapers have special characteristics that can be valuable to advertisers. The ads appearing in newspapers can also be divided into different categories. The major types of newspaper advertising are display and classified. Other special types of ads and preprinted inserts also appear in newspapers. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

Magazine Circulation and Readership—Two of the most important considerations in deciding whether to utilize a magazine in the media plan are the size and characteristics of the audience reached by the publication. Important considerations include the circulation of the publication as well as its total readership. 1. Circulation—Circulation figures represent the number of individuals who either receive a publication through subscription or store purchase. The number of copies distributed to original subscribers or purchasers is known as primary circulation and is used as the basis for the magazine’s rate structure. Many publications base their rates on guaranteed circulation and provide rebates if the number of delivered magazines fall below the guarantee. 12-4

Chapter 12—Evaluation of Media: Magazines and Newspapers

2. Circulation verification—These services are provided by several companies to ensure circulation figures for magazines are accurate. Consumer magazines and farm publications are audited by the Alliance for Audited Media (formerly known as the Audit Bureau of Circulations) while certain business publications are audited by the Business Publications Audit (BPA) of Circulation. Many business magazines are published on a controlledcirculation basis, which means that copies are sent (usually free) to individuals the publisher believes can help build an audience and have influence on a company’s purchase decisions. 3. Readership and total audience—In addition to primary circulation figures, advertisers may be interested in the number of people that a publication reaches as a result of secondary or passalong readership. Total audience or readership of a magazine can be determined by taking the readers per copy and multiplying this figure by the circulation of an average issue. E.

Audience Information and Research for Magazines—Media planners are interested in the match between a magazine’s readers and the advertiser’s target audience. Information on readers' demographic, lifestyle and product usage characteristics are available from studies conducted by the magazines themselves as well as from syndicated research studies. The primary sources of information concerning magazine audiences are: • SRDS • Experian Simmons • GfK Mediamark Research & Intelligence (GfK MRI) These studies provide a broad range of information on the audiences of major national and regional magazines including demographic, lifestyle characteristics, and product purchase and usage data. Audience information for business publications is generally more limited than for consumer magazines.

McGraw-Hill Connect ®: Characteristics of Print Media Type of Activity: Click and Drag Activity Summary: In this activity, students will match the print media, magazines or newspapers, with the advantages and limitations associated with advertising in each. Activity Learning Objective: 12-01 Compare magazines and newspapers in terms of their value as advertising media.

Chapter 12—Evaluation of Media: Magazines and Newspapers

CONCEPT REVIEW: Magazines and newspapers, the two major forms of print media, play an important role in the media plans and strategy of many advertisers. Trends toward market segmentation and regional marketing are prompting many advertisers to make more use of newspapers and magazines. Both magazines and newspapers are working to improve the quality of their circulation bases, offer database marketing services, and initiate cross-media deals. There are specific advantages and limitations unique to either magazine or newspaper advertising, which are important in helping marketers, decide which form of print media advertising to choose. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking F. Purchasing Magazine Advertising Space 1. Cost elements—While magazine rates are primarily a function of the circulation and readership of the publication, rates will vary in response to a number of other variables including size of the ad, position, particular editions chosen (geographic, demographic), any special mechanical or production requirements and the number and frequency of insertion. Advertising space is generally sold based on space units such as full page, half page and quarter page, although some publications quote rates based on column inches. Ads can be produced in black and white, black and white plus one color, or four colors. Magazine networks offer the advertiser the opportunity to buy space in a group of publications in a package deal. Exhibit 1214 shows an ad promoting the Ivy League Magazine Network, which is a consortium of alumni magazines for Ivy Leagues schools along with Stanford and the University of Chicago. Rate comparisons for magazines are generally made based on the cost per thousand (CPM) criterion along with targeted CPMs. G.

The Future of Magazines—The magazine industry continues to grow in terms of the number of both consumer and business publications. A continuation of the trend toward greater market segmentation and micro target marketing should mean greater use of magazines by advertisers because of their high selectivity. There are several problems facing the magazine industry including declines in readership and advertising pages and increasing postal rates and paper costs. The recession had a major impact on the magazine industry as many publications experienced reductions in revenue as advertisers cut back on spending. The rates readers pay for magazines have increased significantly over the past decade and it will be difficult to raise them any further. It also will be difficult to increase advertising space rates because of the competition magazines face digital media. Many magazines are facing pressure from advertisers to offer them more creative ways to advertise their products and services, including the use of native ads in their digital versions. Specific issues regarding the future of magazines that might be discussed include: 1. Stronger editorial platforms—Magazines with strong editorial platforms that appeal to the interests, lifestyles, and demographics of consumers and market trends will have the best chance of attracting readers and advertisers. Fashion magazines and lifestyle publications targeting women have been experiencing strong growth in circulation and advertising revenue, as are well-targeted men’s publications. 12-6

Chapter 12—Evaluation of Media: Magazines and Newspapers

2. Circulation management—Circulation is becoming the major source of revenue for many publications, and they must carefully consider the costs of attracting and maintaining additional readers or subscribers. 3. Digital magazines—Many magazines are keeping pace with the digital revolution and the continuing consumer interest in technology by making their publications available online. They can integrate animation, video, audio, graphics, and text to provide an interactive medium. As more magazines become available online, the industry will have to address important issues regarding audience measurement and readers’ exposure to and interactions with online advertising. Professor Notes

III.

NEWSPAPERS

Newspapers are the second major form of print media and represent the largest of all advertising media in terms of total advertising volume. In 2016, an estimated $20 billion was spent on newspapers advertising which represents about 14 percent of the total advertising expenditures in the United States. Newspapers are an especially important advertising medium to local advertisers such as retailers. However, newspapers can also be a valuable medium to national advertisers as well. A.

Types of Newspapers—The vast majority of newspapers are daily publications serving a local community. However, there are other types of newspapers with special characteristics that make them valuable to advertisers. Classifications of newspapers include: 1. Daily newspapers—published each weekday and found in larger cities and towns across the country. Daily newspapers can further be classified as morning (70%) and evening (30%). Many daily newspapers also publish Sunday editions. 2. Weekly newspapers—Most weekly newspapers originate in small towns or suburbs where the volume of news and advertising is not adequate to support a daily paper. Weeklies appeal primarily to local advertisers in the community because of their limited geographic focus. 3. National newspapers—Newspapers in this with national circulation including The Wall Street Journal, The New York Times, and USA Today. National newspapers appeal primarily to large national and regional advertisers who use specific geographic editions. 4. Special-audience newspapers—There are a variety of papers that offer specialized editorial content and target specific groups. Advertising Age is an example of a special audience newspaper as are college newspapers. 5. Newspaper supplements—Although not a category of newspapers per se, many papers include magazine type supplements, primarily in their Sunday editions. These include 12-7

Chapter 12—Evaluation of Media: Magazines and Newspapers

syndicated magazines such as Parade or USA Weekend as well as local supplements produced and distributed by the paper itself. B.

Types of Newspaper Advertising—Advertising in newspapers can be divided into different categories which include: 1. Display advertising—Display ads are found throughout the paper and generally use illustrations, headlines, white space and other visuals in addition to copy text. Display ads account for approximately 70 percent of the advertising revenue of the average newspaper. Display ads can be further classified as local or national/general advertising. 2. Classified advertising—Classified ads are those arranged under subheads according to the product, service, or offering being advertised and run in the classified section of the newspaper. Major categories include employment, real estate, and automotive. 3. Special ads and inserts—Special ads in newspapers include a variety of governmental and financial reports and notices and public notices. Preprinted inserts do not appear in the paper itself but are printed by the advertiser and then distributed with the newspaper. These include circulars, catalogs, brochures and free standing inserts (FSIs) which are popular for distributing coupons.

Advantages of Newspapers 1. Market penetration—In most areas, 40 percent or more of households read a daily newspaper, and the reach figure may exceed 50 percent among households with higher incomes and education levels. 2. Flexibility—Newspapers are flexible in terms of requirement for producing and running the ads and from the creative options they make available to advertisers. 3. Geographic selectivity—Advertisers can vary their coverage by choosing a paper that reaches the areas with the greatest sales potential. Most major newspapers offer advertisers various geographic or zone editions within their market. 4. Reader involvement and acceptance—An important feature of newspapers is consumers’ level of acceptance and involvement with the paper, including the ads it contains. Consumers are generally very familiar with the various sections of the newspaper and knowledgeable about the types of ads they contain. 5. Services offered—Many newspapers offer merchandising services and programs to manufacturers that make the trade aware of ads being run for the company’s product and help convince local retailers they should stock, display and promote the item.

Chapter 12—Evaluation of Media: Magazines and Newspapers

Limitations of Newspapers 1. Poor reproduction—The coarse paper used for newspapers, absence of color, and the lack of time papers has available to achieve high-quality reproduction limits the quality of most newspaper ads. Many newspapers are now offering four-color ads but advertisers must pay a premium for them. 2. Short life span—Because a newspaper is generally kept for less than a day, an ad is unlikely to have any impact beyond the day of publication and repeat exposure is unlikely. 3. Lack of selectivity—While newspapers can offer advertisers geographic selectivity, they are generally not a selective medium in terms of demographics or lifestyle characteristics. There is some selectivity available, however, with regard to the type of consumers who read various sections of the newspaper such as sports, business, entertainment, and travel. 4. Clutter—Many newspapers are now offering advertisers the opportunity to use innovative shape-based ads that use unconventional sizes and formats as those shown in Exhibit 12-24, which are offered by the Los Angeles Times.

The Newspaper Audience—As with any medium, the media planner must understand the size and characteristics of the audience reached by a newspaper. Basic sources of information concerning the audience size of newspapers come from circulation figures available on newspaper rate cards, on publisher’s statements, or through SRDS’s Newspaper Rates and Data. Newspaper circulation figures are generally reported for total circulation and three additional categories including city zone, the retail-trading zone, and all other areas. 1. Audience Information—Circulation figures provide basic data for assessing newspaper audience size and their ability to cover various market areas. Information on the circulation and ad rates are available from SRDS Newspaper Rates and Data. Information on audience size and characteristics are available from commercial research services such as Experian Simmons, Scarbough Research, and Mediamark Research, Inc., as well as through studies conducted by the papers themselves.

Purchasing Newspaper Space—The cost of advertising space in newspapers depends not only on the paper’s circulation but also on factors such as premium charges for color or special sections as well as discounts available. Rates paid for newspaper space also differ for national versus local advertisers. 1. General versus local rates— General advertising rates apply to display advertisers outside the newspapers designated market area or to any classification deemed by the publisher to be “general” in nature. The rates paid by general advertisers are, on average, 75 percent higher than those paid by local advertisers. Newspapers offer several reasons for the rate differential including added costs of serving general advertisers, the method by which general advertisers purchase ad space, and the inelastic nature of demand for national advertising space. National advertisers who constitute most of the companies paying general rates do not view these arguments as valid justification for the rate differential charged by newspapers. Many marketers sidestep the higher rates by channeling their newspaper ads through special category plans, cooperative advertising deals with retailers and local dealers and distributors. 2. Rate Structures—While the column inch and SAUs are used for determining basic newspaper advertising rates, there are other options and factors which must be considered. Mention should be made of flat rates versus open-rate structures, run-of-paper (ROP) versus preferred position rates, and combination rates for using several newspapers as a group. 12-9

Chapter 12—Evaluation of Media: Magazines and Newspapers

The Future of Newspapers—It is unlikely that newspapers’ importance as a local advertising medium will change in the near future. However, newspapers will continue to battle for advertising dollars from national advertisers as problems with reproduction quality and the rate differential continue. Newspapers are concerned with competition from other media and the increasing potential to lose advertising dollars to digital media including search advertising sites such as Google, Yahoo!, and Bing as well as social media. Local radio and television stations (particularly cable) are also pursuing local advertisers who traditionally relied heavily on newspaper advertising. The decline in readership of newspapers that has resulted from the fastpaced, time-poor lifestyle of the modern dual-income household and popularity of television is also a problem worth discussing. Some specific issues regarding the future of newspapers that should be discussed include: 1. Competition from other media 2. Circulation 3. Attracting and retaining readers Online Delivery and Multiple Platforms—As discussed in Digital and Social Media Perspective 12–1, the digital transformation of media has hit the newspaper industry particularly hard and resulted in newspaper publishers broadening their portfolios well beyond the traditional print editions. Nearly every major newspaper now has a website, and most make their papers available online and through apps for mobile devices. The number of daily and weekly U.S. newspapers available online increased from less than 100 in 1995 to more than 3,200 in 2016. The digital newspaper audience increased from 70 million unique users per month in 2007 to nearly 179 million in 2015, with half of the newspaper digital audience composed of those using mobile devices (smartphones and tablets) to access newspaper content.

Professor Notes

Teaching Suggestions This chapter is designed to provide the student with a general understanding of the two major types of print media, magazines and newspapers. As with television and radio, it is important for students to understand the general characteristics of magazines and newspapers including the different types or classifications of each medium, their specific advantages and limitations as advertising media, how readership is measured, and how rates are determined and advertising space is purchased. The instructor should call students’ attention to the wide variety of magazines available and their ability to reach nearly every consumer interest, lifestyle, and activity as well as most businesses. You might ask your students if there is any segment of the consumer or business market that does not have one or more magazines targeted towards it. One interesting point of discussion is whether there are too many magazines on the market and whether it is possible for the highly specialized publications to survive. A very interesting website that you may want to visit for some interesting information on magazines is that of the Association of Magazine media (formerly known as the Magazine Publishers of America [MPA]). Their site can be found at www.magazine.org.

Chapter 12—Evaluation of Media: Magazines and Newspapers

With regard to newspapers, it is important to cover the challenges facing the industry which has seen its total advertising revenue decline dramatically over the past several years. Circulation and readership of traditional newspapers continues to decline in most major markets and publishers are now making their papers available online to retain readers and ad revenue. Newspapers are likely to continue to be an important advertising medium for local advertisers and attention might be given to how national advertisers can be encouraged to allocate more of their budgets to newspapers. Attention should also be given to the problem of declining newspaper readership, particularly since young people spend more time online and are less likely to read a newspaper. You might ask students how many of them read a newspaper on a daily basis and what particular sections they read. It is likely that many of them do not read a newspaper regularly. The implications for advertisers can be discussed. The Newspaper Media Alliance also has an excellent website that contains a great deal of information that can be helpful in discussing trends and development affecting newspapers, both in general and as an advertising medium. The site can be found at https://www.newsmediaalliance.org/.

Answers to Discussion Questions 1. Discuss the digital disruption that is impacting the traditional print media of newspapers and magazines. Do you think magazine and newspaper publications can respond to these changes and attract and retain readers and in turn advertisers? (LO 12-1, LO 12-7) The increasing use of mobile devices such as smartphones and tablets to access the Internet has had a major impact on traditional print media. One of the major problems facing the print media is that more consumers are now going online to get their news and information as well as to read magazines and newspapers. Moreover, most are unwilling to pay for online subscriptions to digital versions of magazines and newspapers. Some major publications, such as The Wall Street Journal, The New York Times, and The Economist have been successful in creating paywalls that require subscriptions to access digital content. However, since many newspapers and magazines have been unable to get readers to pay for online subscription, they are not getting an important source of revenue. Moreover, the rates for banners and other forms of online advertising they sell to marketers cannot match what they can charge for traditional print advertising, which is also resulting in revenue reductions. It should be noted that online ad revenue is based on page views, which means that publishers attempting to charge for access run the risk of reducing web traffic, which would be self-defeating. Newspapers have also been impacted by online sites that have taken away much of their revenue from classified advertising in categories such as automobiles, real estate, rentals, and employment. The newspaper industry’s initial response to the digital disruption was to put their content online free which lead to an increase in the number of digital readers. However as noted above, revenue from online advertising has not been able to compensate for the decline in monies received for print ads as online advertising rates are significantly lower. Moreover, newspapers must compete against search advertising sites such as Google, Yahoo, and Bing as well as social media sites such as Facebook and YouTube that offer advertisers very sophisticated ad-targeting techniques. Many newspaper publishers are now implementing paywalls and charging for their digital editions as well as transforming their business models to generate revenue from new products and services. Magazines and newspapers still play an important role in the media strategy of many advertisers as they have a number of important characteristics, which they must continue to promote. Print media allow the presentation of detailed information that can be processed at the receiver’s own pace, whereas TV and radio are externally paced media which means the receiver cannot control the rate at which the information is processed. Magazines offer excellent reproduction quality and high selectivity as they reach very targeted audiences. Newspapers are important to both national and local advertisers. They are often used to reach consumers who are looking for information as to where they might purchase a product locally and when it might be on sale at a local retailer. They have a number 12-11 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 12—Evaluation of Media: Magazines and Newspapers

of advantages that make them popular among both local and national advertisers. These include their extensive penetration or market coverage, their flexibility in terms of production requirements and short closing times, the geographic or territorial selectivity of newspapers, the high level of involvement and acceptance consumers have with newspapers and the advertisements therein, and the valuable services many papers offer. However, both of the major print media may find it difficult to survive in the future unless they are able to adapt to the new digital world and find ways to charge for their content. 2. The chapter opener discusses the Print Magazine Sales Guarantee that is being used by a number of major magazine media companies to encourage advertisers to run ads in print editions of their publications. Evaluate the decision by magazine publishers to offer this guarantee. Do you think it will help increase the number of ad pages they can sell to advertisers? (LO 12-1, 12-2) In late 2015 the magazine industry began launched the Print Magazine Sales Guarantee, which is designed to counter years of declining ad page sales. Under this program, magazine publishers are guaranteeing that advertising in print magazines will increase advertisers' brand sales and provide a positive return on investment or they will get their money back. The primary goal of the sales guarantee program is to prove the value of print magazine advertising to marketers by showing them that it can move the sales needle for their brands. There are certain requirements an advertiser must meet to qualify for the guarantee. First, the products and brands being advertised in a print campaign must be sold by retailers whose sales results are measured by third-party research firms such as Nielsen Catalina Solutions, which tracks sales from grocery stores, supermarkets, drugstores, and mass merchants like Target and Walmart. A second requirement is that the advertiser must buy a minimum of 150 gross rating points (GRPs) within one magazine media company over 12 months. This means that a print campaign must reach about 125 million adults 18 years and over an average of three times during the 12-month period. To determine the print campaign’s impact on sales of the advertiser’s product, Nielsen matches magazine subscriber data to shopper loyalty cards and then links them to anonymous households. Magazine publishers compare product sales among a panel of households exposed to their ads to results from a similar control panel not exposed to them to determine if sales were increased by exposure to the print ads. The MPA and magazine publishers are hoping that the Print Magazine Sales Guarantee as well as the research studies and other initiatives they are pursuing will encourage marketers to spend more of their advertising budgets in print magazines. The trade group’s former chief executive, who led the development of the guarantee program, notes, “print is the heritage format of this industry and advertisers have pulled their business back disproportionately.” Magazine publishers will continue to expand their reach through digital versions of their publications. However, they are also hoping that they can get advertisers to realize that the digital versions of their magazines are rooted in print publications that still are valuable advertising platforms. 3. Discuss the role of magazines as part of an advertiser’s media strategy. What are the advantages and limitations of magazines? (LO 12-1, 12-2) Traditional print magazines play an important role as advertising media in an integrated marketing communications program. They allow the presentation of detailed information that can be processed at the receiver’s own pace whereas TV and radio are externally paced media, which means the receiver cannot control the rate at which the information is processed. Magazines are more suitable than the broadcast media for delivering detailed ads with a great deal of information or visuals that the reader needs time to study or examine. However, magazines are not as effective as television for 12-12 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 12—Evaluation of Media: Magazines and Newspapers

reaching mass audiences and they do not offer advertisers the same creative options that are available through TV commercials. There are numerous advantages of magazines as advertising media. These include their selectivity or ability to reach specific target audiences, their reproduction quality, creative flexibility in terms of the type, size and placement of advertising material, their permanence or long life span, the prestige associated with advertising in some publications, consumer receptivity to and involvement with magazine advertising, and the special services offered by some publications. Limitations of magazines include the high costs for advertising in some publications, the limited reach and frequency of magazines, the long lead-time required to place an ad, and the high clutter level in many magazines, which makes it difficult for an ad to be noticed and read. 4. What is meant by native advertising? Do you think it is appropriate for advertisers to run native ads that appear to be editorial content rather than sponsored advertising? Why or why not? (LO 12-4) Native advertising has been defined in various ways but generally refers to a form of paid media where the ad takes on the look and feel of the surrounding content and follows the natural form and function of the user experience in which it is placed. Advertorials in magazines and newspapers are a form of native advertising and have been around for many years. However, native advertising has become a major issue in recent years with the growing popularity of digital media as many marketers are using ad formats whereby they integrate their message seamlessly into the editorial content of a web site or an online publication. Thus, their ad takes on the look and feel of the surrounding content and its visual design, which makes it look less like an ad and more like editorial content. Concerns have been expressed over the use of native ads as critics argue that they are threating one of the most important assets of a magazine, which is its relationship with readers. The church-and-state divide of editorial versus advertising has always been important and the American Society of Magazine Editors (ASME) has maintained guidelines upholding that separation. ASME guidelines state that ad pages should not be related to editorial material in a manner that implies endorsement ad that advertiser-provided content should be clearly labeled as advertising. Readers of a web site or online magazine are likely to attribute more credibility to information that they view as editorial content rather than advertising. However, the ASME really has little power to enforce its guidelines and there is pressure on the magazines to find ways to increase revenue. However, the print media must be careful not to go too far with this practice as it may undermine the integrity of the publications, which could in turn lead to even fewer readers as well as advertisers. 5. If you were purchasing magazine advertising space for a marketer of running shoes such as Nike, Ascis or New Balance what factors would you consider? Would your media plan be limited to running magazines or would you run ads in other types of publications? Why or why not? (LO 12-3) In purchasing magazine space to advertise running shoes, the media planner would obviously want to know what publications are best suited for reaching runners and their advertising space rates. Consideration should also be given to the amount of advertising for running equipment that appears in these publications and the problem of getting the company’s ad noticed among all the competing ads. Many marketers of running shoes limit their advertising to publications that focus specifically on this market such as Runner’s World since virtually all of the readers of these publications are runners and there would be very little, if any, wasted circulation. They might also advertise in magazines that reach members of running associations. Consideration also must be given to the number of runners who may be viable prospects for running shoes but do not read any of these running publications. To broaden its reach, the company might want to look at other magazines that reach runners such as 12-13 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 12—Evaluation of Media: Magazines and Newspapers

general sports publications (e.g., Sports Illustrated or ESPN The Magazine), travel magazines, business magazines, or other publications that reach this age and lifestyle group. A problem marketers face in advertising in these general publications is that of wasted coverage as many of the readers may not be runners. Thus, advertising in general sports, business or travel magazines may not be as costeffective as the more narrowly targeted running publications. 6.

IMC Perspective 12-1 discusses how Playboy Enterprises is trying to rebrand Playboy magazine in order to attract male millennials and the advertisers trying to reach them. Do you think the company will be successful in rebranding Playboy? Why or why not? (LO 12-3) For several generations of American men, reading Playboy magazine was a cultural rite of passage that once held a forbidden fascination as well as an illicit thrill. Playboy thrived for several decades by showcasing the female physique and featuring pictures of unclothed women including many popular celebrities. The magazine also included interesting editorial and high-end journalism from many popular writers, as well as groundbreaking interviews of high profile people and newsmakers. However, Playboy’s circulation began declining in the 1980s as it faced competition from many other magazines such as Penthouse and Hustler, which bordered on hard-core pornography, as well as “lad mags” such as Maxim, FHM, and Details. However, one of the primary reasons for the decline of Playboy was the digital revolution and growth of the Internet as nudity and porn became virtually free and easily accessible online. As discussed in IMC Perspective 12-1, Playboy as tried to rebrand itself and position the magazine to be more appealing to millennial males. In 2015 it moved away from full-frontal nudity, although it does continue to show sexy and seductive pictorials of beautiful women. Playboy is hoping these changes will make the magazine more appealing to millennials as well as the advertisers trying to reach them. However, it remains to be seen if the new strategy will work as the magazine industry is struggling to compete against digital content. Many experts are very pessimistic regarding the chances of Playboy surviving, noting that it will be difficult to generate the subscription and advertising revenue needed to do so.

The Association for Magazine Media promotes the value of advertising in traditional print magazines by citing research showing that print advertising is superior to online ads with regard to its ability to deliver a reading experience that supports comprehension of and connection with an advertiser’s message. Discuss some of the reasons why print ads may be superior to online ads. (LO 12-4) Many print ads use strong visual images, catchy headlines, or some of the creative techniques discussed earlier to grab the interest of magazine readers. The reproduction quality of most magazines is far superior to that offered by the other major print medium of newspapers, particularly when color is needed. The use of color has become a virtual necessity in most product categories, and more than two-thirds of all magazine ads now use color. The excellent reproduction quality of magazines provides the opportunity for innovative creative work by agencies. Advertisers generally prefer color ads because they have greater visual impact and are superior for attracting and holding attention. Roper Starch Worldwide analyzed the effect of various factors on the readership of magazine ads. The “noted” scores (the percentage of readers who remember seeing the ad in a publication they read) are anywhere from 6 to 59 percent higher for a four-color full-page ad than for a black-and-white ad, depending on the product category. “Read-most” scores (the percentage who say they read more than half of the copy of an ad) are also higher for four-color versus black-andwhite ads, by about 25 percent on average. Other studies have examined the impact of size and color and found that a four-color spread (two facing pages) outperforms a one-page color ad by 30 percent and a black-and-white spread by 35 percent in terms of ad recall. Ads requiring special mechanical production such as bleed pages or inserts may also cost extra. 12-14

Chapter 12—Evaluation of Media: Magazines and Newspapers

Discuss some of the reasons why marketers advertise in college newspapers. Analyze the types of companies that advertise in the newspaper published by your university. (LO 12-1, LO 12-3) Many companies are now advertising in college newspapers because they view them as an excellent way to reach a very coveted but elusive target market. More than 17 million full- and part-time students (undergraduate and graduate) are enrolled in U.S. colleges and universities and they spend an estimated $200 billion a year on a variety of products and services. Moreover, studies show that students read college newspapers, as 76 percent of full-time students read at least one of the last five issues of their school paper and 38 percent of students regularly read the online edition. College students are a very attractive demographic group that spends a lot of money for various products and services including clothing, computers, mobile phones, iPads, and other electronic products as well as entertainment. Local merchants and retailers in college towns also find collegiate newspapers a very effective way to target students and attract their business. Students should be asked to analyze the companies that advertise in the newspaper published by their school and be encouraged to classify these advertisers by type of product or services and whether the advertiser is a local, regional, or national company.

What are the major challenges facing the newspaper industry and the use of newspapers as advertising medium? How can newspapers respond to these challenges? (LO 12-4) Newspapers face challenges from other media such as direct mail, television, and the Internet. Many advertisers are already spending more of their media budgets online as they can target their messages more precisely through digital media. Newspapers also face challenges from local cable stations, which are attracting more advertising revenue from local advertisers such as retailers. The growth of the Internet is a major concern for newspapers as consumers are spending more and more time online, which means they have less time available to read newspapers and magazines. The Internet has become an important source of information for many purchases, and competes directly against magazines and newspapers, which have traditionally played this role. More people are spending time surfing the Internet and on social media, which means they may be spending less time reading magazines and newspapers. People only have so much time available for leisure activities such as reading or watching TV and the Internet is likely to cannibalize some of the time that might have been spent reading a magazine or newspaper. Newspapers are responding to this challenge by making their publications available online. Newspapers are likely to remain an important advertising medium in the future, particularly for local advertisers. However, newspapers’ battle to win more ad dollars from national advertisers will continue to present a challenge. Newspapers must also continue to expand services and efforts to both local and national advertisers to encourage them to continue to use the paper as an advertising medium. Cross-media buys are another area where newspapers might focus their efforts to help increase their advertising revenue. Newspapers can also take advantage of their distribution system and the fact that they reach a large number of households. Many papers are collecting information from their readers and building databases that can be made available to marketers who want to target consumers with direct-marketing efforts. Newspapers are dealing with the problem of declining readership by making their papers more interesting as well as faster and easier to read. Many papers are using better graphics and shorter articles to attract readers and including special sections on travel, lifestyle, business and other topics that will appeal to their readers. The newspaper industry is also attacking the problem with ads such as those from the “Smart Is the New Sexy” integrated campaign that promotes the value of newspapers to current and prospective readers. The campaign also uses digital and social media to highlight the multiplatform experience provided by newspapers.

Chapter 12—Evaluation of Media: Magazines and Newspapers

10. Find a copy of a national newspaper such as USA TODAY or your local newspaper and analyze the types of companies that are advertising in it and how they vary by section. Why do you think these companies are advertising in this newspaper? (LO 12-5) Students should purchase a national newspaper such as USA TODAY or The Wall Street Journal as well as the local newspaper in your area and analyze the types of companies advertising in each publication. Obviously, national newspapers are going to contain ads primarily for large national advertisers who want to reach consumers across the country or in a particular region as national newspapers will offer regional editions in which companies can advertise. A publication such as The Wall Street Journal will have large number of ads targeting individuals of high socio-economic status such as ads for automobiles and luxury brands such as watches. There will also be a large number of business-to-business ads, particularly for financial services and technology products and services. Local newspapers will primarily contain ads from local merchants such as automotive dealers, retailers, merchants and service providers. Depending on the size of the market the local newspaper serves, there may be ads run by national advertisers, particularly if the newspaper serves one of the top 50 or 100 markets in the country. 11. What are some of the reasons there has been such a dramatic decline in the readership of newspapers? What might newspaper publishers do to address this problem? (LO 12-5, 12-7) Declining readership is also a serious problem for newspapers, particularly among certain groups such as young people and women. There are several reasons for the decline in circulation and readership including the fast-paced, time-poor lifestyle of the modern dual-income household and competition from the Internet. As noted in the answer to question 1, newspapers have been impacted by the Internet, as the content they provide has been unbundled with the explosion of news and information sources available online through various websites, as well as aggregation sites. There also has been a tremendous increase in the amount of news programming available on television through sources such as CNN, CNBC, MSNBC and many other cable networks. Many local stations are now offering 24-hour broadcasts of their news on local cable channels. There is also very thorough coverage of sports on television with programs such as ESPN’s SportsCenter, a one-hour sports news show aired numerous times throughout the day. In 2013 Fox launched Fox Sports 1, which is another major cable sports network that offers hourly coverage of sports, and a news show, Fox Sports Live, aired multiple times per day. Many young people are simply more likely to get their news online or through broadcast media rather than newspapers. Moreover, if they do not see their parents reading a newspaper regularly, it is less likely they will become regular readers. The obvious problem of the decline in readership is that newspapers must lower their advertising rates if they attract fewer readers. Young people and women are very important target audiences to advertisers since they are heavy users of many products and services. If newspapers cannot reach these audiences on a regular basis, advertisers will turn to other media vehicles that can such as radio or cable TV. There is no easy answer to the question of what newspaper publisher can do to address the problem of declining readership. The Newspaper Association of America, which is now part of the News Media Alliance, has developed a number of marketing campaigns in recent years that have targeted young people to encourage them to get into the habit of reading a newspaper and also have run campaigns such as the “Smart Is the New Sexy” campaign discussed in the text. The newspaper industry will continue to develop digital versions of their papers which a way to attract more readers. The industry’s efforts might focus on retaining the subscribers and readers they currently have and showing the value of these readers to advertisers.

Chapter 12—Evaluation of Media: Magazines and Newspapers

12. What are some of the advantages online newspapers have for advertisers? Find the online media kit of a newspaper and analyze how the publisher is promoting the digital edition to prospective advertisers. (LO 12-7) Many magazines and newspapers are keeping pace with the digital revolution by making their publications available online. They are doing so as consumers’ media consumption patterns show they are spending more time online than with traditional media. Younger consumers in particular spend a great deal of time surfing the Internet and are very comfortable reading magazines and newspapers online rather than in traditional print form. Some of these online readers are crossover users who read both the print and online versions, which expands the overall audience for the magazine or newspaper. However, in many cases, the online readers are choosing to read the publication online as they can get the same information as well as additional stories of interest to them. Magazine publishers in particular have to decide if they want the online version of their publication to mirror what is in print to build the overall brand or make the online version different. Many publishers are viewing the online version of their magazines and newspaper as an opportunity to attract more advertising as they can provide marketers with a variety of advertising options including video and banner ads, sponsorships and other interactive based tools. Magazine and newspaper publishers recognize more and more consumers prefer to consume media online and thus they are going to have to adapt their publications to the online environment if they are to survive.

Additional Discussion Questions (Not in text) 13. Discuss how advertisers deal with the clutter problem in both magazines and newspapers. Explain why advertisers of products such as cosmetics or women’s clothing would choose to advertise in a publication such as Vogue or Elle, which devote most of their pages to advertising rather than articles. (LO 12-1, LO 12-2) Clutter is a serious problem in both magazines and newspapers as the ratio of advertising to editorial content is very high in both. The main way for advertisers to deal with the clutter problem is through creative advertising and space buys. Ads with strong visual images, catchy headlines and copy or very creative approaches such as “pop-ups,” gatefolds, or special inserts are ways of breaking through the clutter. Creative space buys such as “island ads” or consecutive page space buys may also help ads be noticed. Of course, it is also important to remember the basic advertising principle of developing an ad that offers a benefit or promise to the readers and invites them to explore it further. The clutter level that results from the high number of advertising pages in magazines such as Vogue or Elle is clearly a problem for advertisers. However, they must weigh the clutter problem against the fact that women are very likely to be receptive to ads for cosmetics or clothes in these publications. In fact, one might argue that one of the reasons women buy fashion magazines such as Vogue or Elle is to see the ads. For example, clothing ads give provide some insight into new styles and fashions and will be of great interest to many of the magazines readers. Advertisers will tolerate the high number of ads in these publications because they create a very favorable environment that includes high quality photography and artwork as well as articles that are of interest to women. 14. Why are young males such a difficult market to reach through magazines? What types of magazines might be effective in reaching the young male market? (LO 12-1, LO 12-2) The teen male market is a very difficult market segment to reach through magazines, as this group spends a lot of their free time socializing with friends on social media, listening to music, watching television, and surfing the Internet. Many older teens also have a part-time job, which means they have less free time to devote to reading magazines. Another reason for the low readership of 12-17 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 12—Evaluation of Media: Magazines and Newspapers

magazines among young males is that there really are not that many publications that are of interest to this group. Older teens may be interested in some of the “lad mags” such as Maxim, as these publications do cover many of the things of interest to teenage boys. Several magazines published by TransWorld Media such as Skateboarding, Surf, Motocross, and ridebmx have also been successful in reaching young males as their editorial content deals with extreme sports which are of interest to many young males today. Advertisers would like to see more magazines that are successful in attracting young male readers and provide them with more media opportunities to reach this elusive market segment. 15. Choose a specific target market that an advertiser might want to reach. Discuss how magazines and/or newspapers could be used to reach this particular market segment in a cost-effective manner. (LO 12-1) First, it should be noted that selectivity is an inherent advantage of advertising in many magazines. Most magazines target special-interest groups and allow advertisers to target segments of the population that are of interest to them. In addition to selectivity based on interests or topic, magazines can also provide demographic and geographic selectivity. This is done through editorial content as well as through special demographic and geographic editions offered by many publications. Many magazines are also offering greater selectivity through processes such as selective binding and ink jet imaging. Readers can be targeted by zip code, metropolitan area, region or demographics. Students should be asked to choose a product or service targeted at a specific market and discuss how magazines are an effective way to reach this group. They might find an online media kit for a magazine, which usually provides very detailed information on how the magazine can reach specific target audiences and users of various products and services. Newspapers offer the advantage of offering advertisers geographic selectivity since they can reach areas or cities of specific interest to them. However, newspapers are not a selective medium in terms of demographics or lifestyle characteristics. One way advertisers can increase selectivity of newspapers is by advertising in certain sections of the paper such as the sports, food, entertainment or business section. Within a local market area advertising in specific geographic or zone editions of a paper can enhance selectivity. Many newspapers in large metropolitan areas offer zone editions so local retailers can reach readers in their trading area. Again, students might be encouraged to contact a local newspaper (even the college paper) and request information about advertising in the publication as well as information on advertising rates. They should analyze how effective the newspaper is at reaching a target market for a specific product or service 16. Discuss how circulation figures are used in evaluating magazines and newspapers as part of a media plan and setting advertising rates. (LO 12-3) Circulation figures represent the number of individuals that receive a publication, through either subscription or store/newsstand purchase. Total audience or readership refers to the total number of individuals who read a magazine or newspaper and is determined by taking the readers per copy and multiplying this figure by the circulation of the average issue. Magazines and newspapers use circulation figures and readership estimates to set their advertising rates. The greater the number of readers the publication can deliver, the more than can charge for advertising space. Media buyers often prefer to use circulation figures of a publication in making their purchases since they are more verifiable. Total audience or readership figures rely on estimates of pass-along readership, which occurs when the publication is read by individuals other than the primary subscriber or in places out of the home such as waiting rooms, airplanes, etc. Media buyers generally attach greater value to the primary in-home reader versus the out-of-home or pass-on reader as the former generally spends more time with the publication, picks it up more often and is thus more likely to be attentive and responsive to advertising. 12-18 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education

Chapter 12—Evaluation of Media: Magazines and Newspapers

17. Discuss how the role of newspapers as an advertising medium would differ for national versus local advertisers. Do you feel that the rate differential newspapers charge national versus local advertisers is justified? (LO 12-3) Newspapers have become primarily a local advertising medium as nearly 85 percent of newspaper revenue comes from local advertising. However, more several billion dollars are spent in newspapers each year by national advertisers. Much of this money is spent in national newspapers such as USA Today, The Wall Street Journal, and The New York Times. However, national advertisers advertise in local newspapers, particularly the larger metropolitan publications that reach the top 50 or 100 markets. Automobile companies, movie studios, and national retailing chains are heavy users of newspaper advertising as consumers rely on newspapers to get timely information about these product/service categories. Many national advertisers are using newspapers more since advancements have made it easier and less expensive to use four-color for newspaper ads. To attract more business from national advertisers, newspapers must sell them on the advantages of advertising in newspapers. They have to point out the various advantages of advertising in newspapers such as extensive penetration, geographic selectivity and reader involvement and acceptance. They also need to coordinate promotional programs between national advertisers and local retailers to encourage them to use newspapers more. Newspapers must convince them of the value of advertising in their publications and work to improve relations with national advertisers. Newspapers need to become more flexible to attract national advertisers. Some ideas may include guaranteeing specific positions in newspapers in multiple markets, offering creative space options such as “island ads” amidst stock tables, and making color more readily available and less expensive. Local advertisers account for the vast majority of newspaper advertising as the medium is used heavily by retailers in a variety of product and service categories. Local retailers know that consumers rely heavily on newspapers for information regarding sales, special promotions, and to determine availability of products and services. The value of newspapers as a source of information is a major reason why they are used so heavily by local advertisers. Students should be encouraged to find some ads used by a national advertiser such as an automobile company as well as some used by local advertisers and compare them with regard to factors such as the type of message used, the information provided and the use of price or other promotional incentives. The rate differential most newspapers have for national versus local advertising is a very controversial issue. Those supporting the differential argue that it is justified because the way newspaper ad space is purchased by national advertisers often requires the paper to pay commissions to both sales reps and agencies. They also argue that national advertisers are less dependable than local advertisers and that demand for national advertising is inelastic and thus will not increase if rates are lowered. National advertisers do not view these arguments as valid justification for the rate differential. They argue that the costs of handling their advertising business are not greater than that of local advertisers since their ads are prepared by agencies and they are less likely to request special services such as the design and preparation of their ads. They also note that many national advertisers do use newspapers on a regular basis.

Chapter 13—Support Media

CHAPTER 13 SUPPORT MEDIA Chapter Overview In addition to the broadcast and print media discussed in the two previous chapters, marketers have a variety of alternative media from which to choose. In fact, the number of support media continues to increase almost daily, with advertisements appearing almost everywhere. In addition to the familiar outdoor ads and transit ads, a number of new media have recently appeared. Parking meters, trash cans, restroom walls, parking garages, sidewalks, and shopping carts are just a few of the many places now carrying ads. These media, often referred to as support media, are assuming an increasing role in the media mix. In this chapter, we distinguish between traditional and nontraditional support media—the former having been around a lot longer than the new media now appearing. The purpose of this chapter is to familiarize the student with some of these media, and to discuss the advantages and disadvantages of each.

Learning Objectives 1. Describe the role of support media in an IMC program. 2. Identify traditional and nontraditional support media in the development of an IMC program. 3. Compare the advantages and disadvantages of support media. 4. Describe how audiences for support media are measured.

Chapter and Lecture Outline I.

THE SCOPE OF THE SUPPORT MEDIA INDUSTRY

Support media are referred to by several titles, among them alternative media, below-the-line media, nonmeasured media, and nontraditional media. Many advertisers, as well as the top 100 advertising agencies, have increased their use of both traditional and nontraditional support media, and as new alternatives are developed, this use will continue to grow. Professor Notes

II.

TRADITIONAL SUPPORT MEDIA

A variety of out of home (OOH) advertising media are available to the marketer. Outdoor billboards and signs, digital outdoor ads, transit ads, station posters, and skywriting are just a few of the alternatives that can be used. A.

Out of Home Advertising (OOH)—While one of the oldest advertising mediums, outdoor advertising has come under attack by environmentalists, city governments, and the public as a whole. The net result has been a decline in the number of billboards across the nation.

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Chapter 13—Support Media

At the same time, the outdoor advertising industry continues to grow and be successful as the amount of dollars billed in this medium has increased continuously since 1982. Much of the reason for this success can be attributed to the ability of the industry to become more creative and innovative through the design of billboards as well as new media such as inflatables, rolling boards, and point-of-purchase materials. In addition, an increasing focus on keeping the advertising message in front of the consumer has contributed to the increased adoption of this medium. As digital outdoor options increase, advertisers are finding this medium even more attractive. 1. Digital Out of Home (DOOH) takes three forms: •

•

Video advertising networks, which include digital video screens that appear in offices, stores, theaters, inside transit networks, and entertainment venues such as health clubs, sporting arenas, bars, and restaurants Digital billboards, or screens that transmit in LED (light-emitting diode) or LCD (liquid crystal display) technologies. Digital billboards include large boards found at sports and entertainment venues, retail locations (like malls), in transit locations (terminals, etc.), and at roadsides or large traffic locations. Digital and Social Media Perspective 13-1 discusses the enhanced creativity and pioneering innovations offered by digital billboards Place-based advertising, which is not a purely DOOH medium, often uses digital technology to send its messages. These typically include smaller signs that appear in restrooms, on stairs, on personal vehicles, and on specialty items. The global DOOH signage segment is expected to reach $20 billion by 2020 due to its ability to be creative, attract attention, and engage the consumer

Place-Based Out of Home Media—As noted, the outdoor advertising industry has been able to remain successful through the development of new outdoor media, as well as innovations in existing ones. Digital outdoor is one of the fastest growing areas in all outdoor advertising. 1. Aerial advertising—Airplanes pulling banners, skywriting (in letters as high as 1,200 feet), and blimps all constitute another form of outdoor advertising available to the marketer. 2. Mobile billboards—Some companies paint their cars with ads; others paint trucks and vans. Still others put ads on small billboards, mount them on trailers, and drive around and/or park in the geographic areas being targeted.

In-Store Media—Advertisers promote their products in supermarkets and other stores with atypical media like in-store ads, aisle displays, store leaflets, shopping cart signage, and in-store TV. These point of purchase materials include video displays on shopping carts, kiosks that provide recipes and coupons at counters and cash registers, LED boards, and ads that broadcast over in-house screens. Many advertisers are spending more of their dollars where decisions are made now that they can reach consumers at the point of purchase, providing additional product information while reducing their overall marketing efforts.

Miscellaneous Out of Home Media—Figure 13-4 lists a number of additional OOH media available.

Transit Advertising—Another form of out-of-home advertising is transit advertising. While similar to outdoor in the sense that signs and electronic billboards are often employed, transit

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differs in that these ads are oriented around transportation. Buses, taxis, commuter trains, airplanes, and subways are some of the transit forms employed. 1. Types of transit advertising—Three types of transit advertising are most commonly employed: a. inside cards are found on the insides of buses, taxis or commuter trains. b. outside posters are those found on the backs and tops of taxis, and/or on the backs, sides and fronts of buses. c. station, platform, and terminal posters are found in bus and train stations, airport terminals, and on train platforms. 2. Advantages and Disadvantages of Outdoor Advertising • Advantages of outdoor advertising: o wide coverage of local markets o frequency o geographical flexibility o creativity o ability to create awareness o efficiency o effectiveness o production capabilities o timeliness • Disadvantages include: o waste coverage o limited message capabilities o wearout o high cost o measurement problems o image problems 3. Advantages and disadvantages of transit advertising • Advantages include: o exposure o frequency o cost •

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Disadvantages include: o reach o mood of audience

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McGraw-Hill Connect ®: Support Media Advantages and Limitations Type of Activity: Click and Drag Activity Summary: Students will match the support media with the advantages and limitations associated with advertising in each. Activity Learning Objective: 13-03 Compare the advantages and disadvantages of support media. CONCEPT REVIEW: Support media are used to reach those people in the target market the primary media may not have effectively reached and to reinforce, or support, their messages. It is important to remember that some of these media are not used only for support, but for some companies may be the primary or sole medium used. Support media include out-of-home advertising (outdoor, in-store, and transit), promotional products, and in-flight advertising, among many others. The fastest growing area is that of branded entertainment including product placements, product integrations, and others. Support media offer a variety of advantages. Cost, ability to reach the target market, and flexibility are just a few. But each of these support media has disadvantages. Perhaps the major weakness with most is the lack of audience measurement and verification. As the number and variety of support media continue to grow, it is likely the major weaknesses will be overcome. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

F. Measurement in Out of Home Media—In 2010 the OAAA announced a new audience measurement system that had been in development for the previous five years. Eyes On is considered to be an improvement over the traditional measure of opportunity to see, with a “likely to see” metric that can also provide demographic and ethnographic data. The new data included a combination of eye tracking, circulation, and travel survey data all combined into one rating by a coalition of research companies. Professor Notes

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III.

PROMOTIONAL PRODUCTS MARKETING

The Promotional Products Association International defines promotional products marketing as: “The advertising or promotional medium or method that uses promotional products such as ad specialties, premiums, business gifts, awards, prizes or commemoratives” This definition succeeds the older definition of specialty advertising: “A medium of advertising, sales promotion, and motivational communication employing imprinted, useful, or decorative products called advertising specialties, a subset of promotional products. Unlike premiums, with which they are sometimes confused (called advertising specialties), these articles are always distributed free—recipients don’t have to earn the specialty by making a purchase or contribution.” There are thousands of advertising specialties such as ball-point pens, matchbook covers, mugs, or expensive gift items have been used to account for over $18.1 billion per year in expenditures in this medium. A. Advantages and Disadvantages of Promotional Products Marketing—Because of the wide variety of forms that this form of advertising might assume this medium offers advertisers a variety of advantages. Advantages include the following: • Selectivity • Flexibility • Frequency • Cost • Goodwill • High recall • Supplementing other media Disadvantages include: • • • •

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Image Saturation Lead time Reach

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Measurement in Promotional Products Marketing—the Promotional Products Association International (PPAI) is the trade organization of the industry. While no formal audience measurement organizations or effectiveness measures currently exist, this organization continues to originate and support research in these areas. Some of the findings of these studies are presented in the chapter.

Yellow Pages Advertising—As younger consumers turn to search and online directories like Yelp to seek information, fewer and fewer are using the Yellow Pages print editions. At the same time the use of the online Yellow Pages (YP.com) has been increasing. YP.com notes that over 80 million people visited its website in 2014 where there are more than 20 million listings. The opportunity for the Yellow Pages does still exist, since local media advertising is still expected to reach $148 billion by 2017—an increase of 2.3 percent from 2012. The Yellow Pages are often referred to as a directional medium because the ads do not create awareness or demand for products or services; rather, once consumers have decided to buy, the Yellow Pages point them in the direction where their purchases can be made.

Professor Notes

IV.

OTHER TRADITIONAL SUPPORT MEDIA

Almost everyday a new advertising medium seems to emerge. (The instructor might stimulate a lively discussion at this point by asking students where they have seen ads recently. All of those present for this discussion will be surprised!) Ads are appearing on restroom walls, in elevators, on movies and videotapes, and seemingly everywhere a message can be fit. Some of the more common and more pervasive ones are discussed here. A.

Advertising in Movie Theaters—One of the fastest growing advertising mediums is ads at the movies. While in the past the practice has come under fire from movie makers and consumers, they are being used more and more for the advertising of new movies as well as products and/or services. 1. Advantages of movie theater advertising—The text notes that the advantages associated with these forms of advertising include: • Exposure • Emotional attachment • Cost • Attention • Clutter • Proximity • Segmentation • Quality

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•

Integration

2. Disadvantages of movie theater advertising: • Irritation • Cost Professor Notes

V. NONTRADITIONAL SUPPORT MEDIA As advertisers attempt to find different ways to reach consumers when and where consumers want to be reached, they are turning to a variety of new media. In this section of the chapter we discuss some of these new media. A. Branded Entertainment—This form of advertising blends marketing and entertainment through television, film, music talent and technology. Branded entertainment takes on a variety of forms including: 1. Product Placements—Whether one considers product placements an advertising form or a form of promotion, no one can argue the fact that this means of getting exposure to a product is on the increase. Product placements are not a new phenomenon; placements are known to have existed as early as the 1930s and were commonly employed via soap operas in the 1950s. (Again, an interesting discussion can be stimulated by asking students to name products that have appeared in movies or on TV.) 2. Product Integration—Product placements are integrated throughout the program, and in some instances are a key part of the script 3. Advertainment—The creation of video or music content in an attempt to entertain viewers while advertising their products. 4. Content Sponsorship—Advertisers sponsor specific programs, receiving placements, integrations and/or promotions in return for content sponsorships. 5. Ad-supported Video on Demand (VOD)—content programs offered to cable operators for free with advertising included 6. Others—Various other forms of branded media also are increasing in use. 7. Advantages of Branded Entertainment • • • • • • • . Hill Education

exposure frequency support for other media source association cost recall bypassing regulations 13-7

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• advertising junk foods to kids through placements • acceptance • targeting Disadvantages of Branded Entertainment • high absolute cost • time of exposure • limited appeal • lack of control • public reaction • competition • negative placements • clutter

9. Measurement in Branded Entertainment—While there is no accepted standard of measurements in branded entertainment, a number of companies are now offering measurement services • Nielsen Media Research • Brandchannel Product Placement Watch • Rentrak

C. Guerilla Marketing—Often referred to as stealth, street, buzz, ambush or viral marketing, this form of promotion attempts to have the product or brand exposed through a variety of no or lower cost methods that attempt to capitalize on free exposures, benefit from competitors’ promotional efforts, etc. D. Miscellaneous Other Media—While the list is too extensive to include all here, some media increasing in usage include parking lot ads, gas station pump ads, and place-based media. 1. Advantages of these media may include • awareness and attention • cost-efficiencies • targeting 2. Disadvantages of these media may include • irritation • wearout

Professor Notes

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McGraw-Hill Connect ®: Measuring Support Media and Citynet Type of Activity: Decision Generator Activity Summary: Citynet is a West Virginia based provider of telecommunications services. They provide a host of Internet and phone services throughout the state and surrounding areas including Pittsburgh, PA. This activity will have the students select the best answer for each question related to their support media strategy. Activity Learning Objective: 13-04 Describe how audiences for support media are measured.

CONCEPT REVIEW: Perhaps the major weakness with most support media is the lack of audience measurement and verification that is done. Unlike many other types of media, most nontraditional or support media do not provide audience measurement figures. So the advertiser is forced to make decisions by finding and using the best available data. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

Teaching Suggestions As the instructor is no doubt aware, there is a lot of information that can be (and needs to be) conveyed regarding support media. When students think about advertising, they usually think about broadcast and print media. In fact, there is a great deal of money spent to advertise in these alternative support media— both traditional and nontraditional. More and more advertisers are shifting their monies previously spent on traditional media like TV and newspapers, to the various forms of support media and the Internet. Some of these media will also readily come to mind—for example, outdoor—while others are less likely to do so. Coverage of the characteristics of some of the media presented in this chapter can lead to interesting discussions. As indicated, discussions of product placements and integrations, advertising in movie theaters, and new places where ads are appearing generally get students involved, and may lead to heated discussions. Students may be encouraged to engage in a debate over the merits and/or ethics of some of these advertising forms. Our lectures generally follow the outline set forth in the text. We discuss the characteristics of the various media, the advantages and disadvantages, and some of the sources of information that are available. We then tie these materials back to the media strategy chapter and the communications models chapter to demonstrate how and when such media might be employed. It is also possible to integrate films, videos, and guest speakers into this coverage. The Yellow Pages Advertising Association, the PPAI and many outdoor advertising agencies offer guest speaker programs and/or a variety of videotapes that can be effectively used.

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Finally, outside sources such as Ad Age, and Adweek write extensively about these media, and are a great place to acquire information. The YPPA and PPAI also offer print media directed to the trade and professors who teach these topics in their classes to keep them up to date.

Answers to Discussion Questions

Discuss some recent examples of product placements and/or integrations. Describe the context in which they were used, and how they intended to reach their target markets. Explain where these placements and/or integrations would fit on Hudson's branded entertainment continuum. (LO 13-4) Today, product placements are used to gain exposure by numerous companies large and small (Exhibit 13–9) and are a very important part of the IMC strategy for companies like Under Armour, adidas, Triumph Motorcycles, and Anheuser-Busch (just to name a few in addition to those mentioned in the chapter lead-in). Much of the logic behind product placement is that since the placement is embedded in the script or program setting, it cannot be avoided, thereby increasing exposure. Given the lack of intrusiveness of the placement, consumers may not have the same negative reactions to it as they may have to a commercial. Further, research has demonstrated that association with a program or movie—or particularly with a celebrity—may enhance the image of the product and, in some instances, lead to increased engagement and sales. As noted by Simon Hudson, there exists a continuum of product placement branded entertainment types ranging from a verbal- or visual-only placement to product integration, where the brand is woven into the plot of the film. On one end of the continuum are product placements, which Hudson describes as only a visual or verbal passive placement of the brand, with no integration into the program, movie, and so on. At the other end is branded entertainment, in which the brand is woven into the story line at a much higher level of integration. At the same time the effectiveness of the strategy chosen (placement vs. branded entertainment) will be impacted by the media used, the brand characteristics, consumer attitudes toward brand placements, and other factors, including regulations.

Place-based advertising has continued to expand to a variety of locations. Discuss some of the advantages and disadvantages of this medium. (LO 13-3) Advantages of outdoor advertising: o wide coverage of local markets o frequency o geographical flexibility o creativity o ability to create awareness o efficiency o effectiveness o production capabilities o timeliness

•

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Disadvantages include: o o o o o o 3.

waste coverage limited message capabilities wearout high cost measurement problems image problems

What is in store for the Yellow Pages? Will this medium continue to survive in the future? Explain what the Yellow Pages must do to continue to exist. (LO 13-1) There is little doubt that the Yellow Pages as we know them will need to undergo significant changes to continue to exist. Changing media habits and lifestyles have affected all print media, and the YP are no exception. A quick glance through your local YP will indicate some of the problems. Notice the number of empty spaces on each page, where there could be ads. Many of these are due to space constraints, others due to advertisers pulling their ads. Long lead time, production limitations, etc. are also contributing to the decline of this medium. The online Yellow Pages are also an issue. As more and more people go online to conduct their activities, including search, they are less likely to turn to the print versions. Stanley Steemer the carpet cleaner, recently announced in San Diego that they will no longer advertiser in the print YP, as most of their customers come from online—should this be the rule rather than the exception, it will not bode well for the print pages. At this point, the Yellow Pages are still a viable print medium. However, there is little doubt that they are facing a crossroads, and that changes in their existing practices will have to occur for them to survive.

Discuss some of the advantages and disadvantages of branded entertainment and give examples of both good and bad uses of this medium. (LO 13-3) • Advantages of Branded Entertainment

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o exposure o frequency o support for other media o source association o cost o recall o bypassing regulations o advertising junk foods to kids through placements o acceptance o targeting Disadvantages of Branded Entertainment 13-11

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o o o o o o o o

high absolute cost time of exposure limited appeal lack of control public reaction competition negative placements clutter

There are some who predict that traditional outdoor ads like billboards may soon cease to exist, in part due to the rapid growth of digital signage. Take a position in support or opposition to this prediction supporting your argument with examples. (LO 13-1) Clearly, digital billboards are experiencing rapid growth, usually replacing traditional forms. While they may account for the majority of outdoor forms in the near future, all traditional forms will not be gone. One very good reason is that there are still various communities that have regulations that do not permit digital, and may never will. Also, the variety of forms of boards may not be suited to digital, particularly the larger sized boards. Then there is the fact that not everyone wants a digital board as their message may not be suited to it—for example a beach scene. Then, depending on how you define boards, forms like wall murals or signs on barns, etc are not likely to evolve into a digital format.

Content sponsorship has been on the increase in a variety of mediums. Give examples of sponsorships in different media and explain why their use is increasing. (LO 13-3) Content sponsorship, in which advertisers sponsor specific content or even create it, for example, on the Internet or in magazines, has been on the increase due in large part to the advertisers’ fascination with engagement as a measure of effectiveness. Many advertisers believe that by getting consumers engaged they are moving them one step closer to purchase. The logic is that if someone is reading specific content, then they must be interested in it. For example, if I am reading about new cameras, then I must be interested in them. So advertisers figure that by placing an ad for their camera, or even creating an advertorial, they are more likely to reach the target audience they want to reach. Why else would one be reading about cameras? Where this becomes a problem is when the advertiser does not make clear that the content is being influenced by—or even provided by—them. This is when potential deception may occur. There are many agencies now examining the use of content sponsorships and there will soon be guidelines as to when an advertiser crosses the legal limits.

Explain why marketers have increased their use of product placements and integrations. Do you think that product placements and integrations are effective? Explain your answer. (LO 13-2) While product placements are really nothing new, their recent increase in use is somewhat amazing. Some companies like Apple and BMW have extensively increased their placements, and likely will continue to do so. Others have just entered the game, and are finding placements an inexpensive way to get product exposure.

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Product placements offer the client a number of positive aspects. The exposure is not obtrusive, it is usually inexpensive, and the product and or brand can benefit from source association. To this point, the placements are not considered as intrusive as commercials, and thus have not met with too much negative feedback (though there is evidence that this may be changing). The fact that many segments are getting more difficult to reach (for example, teens) through traditional media, has also led to the increased adoption of placements—particularly in the movies. For now, it appears that product placements will continue to be a darling of many companies. At the same time, increasing irritation, clutter resulting from too many placements, and blatant placements may lead to consumer backlash and decrease the attractiveness of this form of marketing. Once considered forbidden turf, placements in television programs have become much more common. The text discusses the Apple iPad placement (actually an integration) in Modern Family. Watch NCIS-Los Angeles and you will see NCIS agents driving a Cadillac. Programs have become very popular places to place one’s products. 8. Digital advertising media seem to be more and more effective, but at the same time, more and more controversial. Explain why both of these situations have arisen. (LO 13-2)

This question will be based only on the digital media discussed in the chapter. Chapter 15 will discuss additional digital media. Digital outdoor like boards, shelters, etc. are one form of digital media. In addition, digital media in office buildings, stores and other locations have also become much more common. Because they can be more eye catching, and interesting than traditional media, digital outdoor media have become more popular among advertisers. The numerous advantages associated with these media including visibility, the ability to change messages quickly, and the ability of utilizing GPS to strategically locate ads offers advertisers options not previously available. When done well, these media can be much more effective than their traditional counterparts. At the same time, digital media have their pitfalls. Many people are not enamored with the glitz and glare of the lighted digital displays—particularly when in non-urban settings. Imagine driving on a road with no lights, outside of the city, and all of a sudden a brightly lit neon sign appears. Such an event could well be perceived as offensive. Privacy is another issue. The Las Vegas outdoor kiosk that can read your profile while you stand in front of it and recommend products or places to go; the outdoor billboard that recognizes your demographic as you go by and calls out to you; or other types of similar media are considered by many to infringe on one’s privacy, and thus may be less effective than desired. Many people are just tired of the intrusiveness of ads. Digital ads are appearing in so many more places—subways, transit stops, buses, sports venues, elevators—the list goes on. The result is an increase in clutter that is increased through digital capabilities. 9. Why has the use of guerrilla marketing been on the increase? Take a position as to whether or not this form of marketing has become controversial, and explain whether or not this criticism is warranted. (LO 13-2) . Hill Education

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Guerilla marketers have attempted everything from giving out free hats at sporting events to gain free exposure to paying tolls at the Lincoln Tunnel to painting sidewalks with ads. While many of these may be harmless (they can pay my toll anytime!) others have led to defaced property, potential for injury, and other negative possibilities. In the chapter on publicity we discuss one such effort gone awry which led to the closing down of traffic in Boston for hours, and hundreds of thousands of dollars in emergency equipment deployment. While all ended well, it could have been worse. The involved company had to pay a million-dollar compensation fine. The Dead Man Down example in the chapter provides another good example. Frightening people, or catching them off guard is not only inconsiderate, it could be rude and dangerous. While many guerrilla tactics may be cute and possibly beneficial to the consumer, others may be unfair to the advertisers, products or even audiences they are trying to reach and/or take advantage of. While guerilla tactics may be harmless in some instances, in others they are—at the very least— unethical and potentially illegal. Marketers seem to be continuing to push the limits as to when we cross over that line. The net result is likely to be laws passed limiting such practices. The reason underlying some of these tactics seems to be the over anxious quest for publicity. Many marketing stunts are designed specifically to get in the news at free o minimal costs. In addition, some marketers believe that any publicity is good publicity (not true) and will push the envelope to get in the news and in front of potential consumers. Their over zealous acts will eventually make it more difficult for everyone to engage n guerilla marketing. In chapter 15 we will see the attempt to go viral as a guerilla tactic and the advantages and disadvantages of this strategy. 10. What are some of the advantages and disadvantages of promotional products? What are some of the situations in which promotional products may be most valuable to marketers? (LO 13-2)

The text discusses the advantages and disadvantages of promotional products. These include: 1. Selectivity. Because specialty advertising items are generally distributed directly to target customers, the medium offers a high degree of selectivity. The communication is distributed to the desired recipient, reducing waste coverage. 2. Flexibility. As the variety of specialty items in Figure 13–5 demonstrates, this medium offers a high degree of flexibility. A message as simple as a logo or as long as is necessary can be distributed through a number of means. Both small and large companies can employ this medium for a variety of objectives limited only by their own creativity. 3. Frequency. Most forms of specialty advertising are designed for retention. Key chains, calendars, and pens remain with the potential customer for a long time, providing repeat exposures to the advertising message at no additional cost. 4. Cost. Some specialty items are rather expensive (for example, leather goods), but most are affordable to almost any size organization. While they are costly on a CPM basis when compared with other media, the high number of repeat exposures drives down the relative cost per exposure of this advertising medium. 5. Goodwill. Promotional products are perhaps the only medium that generates goodwill in the receiver. Because people like to receive gifts and many of the products are functional (key chains, calendars, etc.), consumers are grateful to receive them. The products also lead to a favorable impression of the advertiser. . Hill Education

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6. High recall. Specialties lead to high recall of both the advertisers’ name and message. Some disadvantages may include: 1. Image. While most forms of specialty advertising are received as friendly reminders of the store or company name, the firm must be careful choosing the specialty item. The company image may be cheapened by a chintzy or poorly designed advertising form. 2. Saturation. With so many organizations now using this advertising medium, the marketplace may become saturated. While you can always use another ballpoint pen or scratch pad, the value to the receiver declines if replacement is too easy, and the likelihood that you will retain the item or even notice the message is reduced. The more unusual the specialty, the more value it is likely to have to the receiver. 3. Lead time. The lead time required to put together a promotional products message is significantly longer than that for most other media. 4. Reach. Use of other media—such as television—leads to greater reach.

Additional Discussion Questions (Not in text)

11.

Advertising in video games is becoming more popular. Discuss some of the reasons this medium is attractive. Do you see any downside to advertising through video games? (LO 133) Once again, it all comes down to the target market. The size of the videogame target market continues to increase. Likewise, the video gamers’ lifestyles make the advertising of certain products a natural for this medium. Finally, the gamers obviously have money, or they wouldn’t be buying games. In addition to the advertising, product placements in video games is on the increase. Like movies and TV, advertisers claim that the placements add a touch of a more natural environment. The placements actually enhance the atmosphere, they say. The potential downside, is the same as product placements and/or movie ads. Some gamers may not like the fact that ads appear and the backlash may be negative for the marketer. Over a period of time, these ads and placements—like product placements in movies or on TV—will become so routine as to lose all effectiveness.

12. Discuss some of the various means of measuring effectiveness in branded entertainment, and their advantages and disadvantages. Given the emphasis by marketers on ROI, discuss how these measures fit in with this attempt to determine return on investment. (LO 13-4) A review of the measures provided in the chapter will indicate the paucity of available effectiveness measures for branded entertainment. The companies listed there—while highly respected companies—are new at measuring these new media. As can easily be seen, they mostly discuss their future plans. Many of these will necessarily involve more traditional measures such as tracking, etc. As noted in later chapters in the text, measures that involve tracking, recall, etc. have been around for quite some time, and are generally accepted practices in the advertising world. Media equivalencies are wrought with problems and are less valid and reliable. . Hill Education

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When considering the branded entertainment media in light of the discussion in Chapter 7, one finds somewhat of a contradiction. On the one hand, there is increased pressure for accountability being placed on traditional media. On the other hand, monies are being transferred into the new nontraditional media even though audience measures and measures of effectiveness are not proven or do not exist. This speaks to the sophistication (or lack thereof) of media buyers. There has been a rush to get involved in these media, yet no one truly knows who, or how many are being reached, and the effects of these buys. 13.

Transit advertising takes a variety of forms, and many advertisers may be reluctant to use these media. Discuss some of the various forms of transit advertising and their relative advantages and disadvantages. Give examples of which products and/or services might effectively utilize this medium. (LO 13-3) As noted in the text, there are a variety of types of transit advertising including (1). inside cards (ads inside of busses, subways, etc); (2) outside posters (those that appear on the sides of busses, trains, trolleys, etc., and on the tops of taxis; and (3). Station, platform and terminal posters (those appearing in the terminals of trains, subways, etc. The advantages of transit advertising include many of those associated with out of home advertising in general. In addition, transit offers the advantages of: • •

long length of exposure frequency of exposure

The disadvantages of transit advertising include:

14.

poor reach

audience mood

Describe what is meant by “guerilla marketing.” Give examples of products and/or services that you know have employed this strategy. Then describe some of the characteristics of companies that might most benefit from stealth marketing. (LO 13-3) A variety of terms, including stealth marketing, viral marketing, guerilla marketing and ambush marketing, all have been used to describe a strategy of attaining free or very low cost exposure to one’s products and/or services. Akin to guerilla warfare, in which the warrior is not large enough or strong enough to compete in traditional combat, these forms of marketing attempt to market the brand through less conventional and/or traditional techniques. Rather than mass advertising, these companies may get their products exposed in a variety of methods including product placements, on-campus opinion leaders, through appearances at events, etc. The book discusses a variety of companies that have explored these methods, including Target, Panasonic, and Amnesty International. In the heyday of the dotcoms, guerilla marketing was even more rampant as these start-up companies employed a variety of methods to get their names noticed. Initially, guerilla marketing tactics were the domain of small companies with limited budgets and marketing capabilities who were being creative in getting their name out. (One particularly interesting example was a dot.com that paid drivers’ tolls at the Lincoln Tunnel if they would accept a bumper sticker with the company’s name on it.) Due in part to some of these early success stories, and the cost efficiencies involved, larger companies have employed these methods as well.

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IMC Exercise Have students find examples of branded entertainments, including product placement and product integrations used by marketers. They should explain the objectives they believe are being sought through the use of these techniques, who they are targeting, and whether they feel these techniques will be effective.

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Chapter 14—Direct Marketing

CHAPTER 14 DIRECT MARKETING Chapter Overview One of the most rapidly growing areas in marketing is direct marketing. A variety of direct response media are used to convey the communications message. In this chapter we examine the role of direct marketing in the promotional mix. We discuss the objectives sought in direct marketing programs (noting that these may often differ from the communications objectives discussed earlier). We also discuss direct marketing strategies, direct selling, and evaluation of the direct marketing program. We conclude the direct marketing discussion with a discussion of its advantages and disadvantages. In Chapter 15 we discuss two additional direct marketing media, the Internet and interactive media. Since both of these include more than direct response, they warrant a separate chapter.

Learning Objectives 1.

Define direct marketing.

Discuss the role of direct marketing in an IMC program.

Identify strategies and tactics in the use of direct marketing.

Compare the advantages and disadvantages of direct marketing.

Chapter and Lecture Outline I.

DIRECT MARKETING A. Defining Direct Marketing—Direct marketing involves a total set of activities by which the seller attempts to elicit a direct-action response—for example, a purchase. As such, it employs many aspects of marketing, including marketing research, segmentation, advertising, evaluation, etc. A distinction is made between direct marketing and direct marketing media. The former includes the total set of marketing activities involved in obtaining a direct response. Direct marketing media are the tools that direct marketers use in the communications process. B. The Growth of Direct Marketing—Direct marketing has grown tremendously in the past few years as a result of a number of contributing factors: • • • •

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consumer credit cards the changing structure of the American market technological advances miscellaneous factors.

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C. The Role of Direct Marketing in the IMC Program—Direct marketing activities support and are supported by other elements of the promotional mix. 1. Combining direct marketing with advertising—Direct marketing is in itself a form of advertising. Whether through mail, print, or TV, the direct-response offer is an ad. Sometimes the ad supports the direct selling effort (i.e. Victoria Secret runs image ads to support its store and catalog sales.) 2. Combining direct marketing with public relations—Private companies may use telemarketing activities to solicit funds for charities or cosponsor charities that use these and other direct response techniques to solicit funds. 3. Combining direct marketing with personal selling—Nonprofit organizations often use telemarketing to solicit funds. Companies use telemarketing to screen and qualify potential prospects. 4.

Combining direct marketing with sales promotions—For example, many local merchants send out mailers announcing sales and promotional offers. 5. Combining direct marketing with support media—Adding a promotional product to a direct mailer has proven to increase response rates. Promotional products like refrigerator magnets, bookmarkers, and other items that can be easily inserted into the mailer are commonly used.

D. Direct-Marketing Objectives—Direct marketers most often seek a direct response. This response need not necessarily be a behavioral response, as direct marketing is now used for other purposes: to build an image, maintain customer satisfaction, and inform and/or educate customers in an attempt to lead to future actions.

Direct Marketing Strategies and Media—Direct marketers generally pursue either a (1) one-step approach or a (2) two-step approach in developing media strategies. In the one-step approach, the medium is used to directly obtain an order (for example, direct response television ads). In the two-step approach, more than one medium may be used, with the first effort designed to screen or qualify buyers and the second designed to generate the response. A number of direct response media are available to the marketer including: 1. Direct mail—Mail order sales were $46 billion in 2014, meaning that more monies have been spent in this medium than any other. Keys to the success of direct mail are the mailing list and the ability to segment markets. 2. Catalogs—Over 11.1 billon catalogs were mailed in the year 2014. The text lists some interesting examples of articles available through catalogs. 3. Email—Direct mail on the Internet (e-mail) is essentially an electronic version of regular mail. Like regular mail it is highly targeted, relies heavily on lists, and attempts to reach consumers

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with specific needs through targeted messages. The use of e-mail marketing by both businessto-business and business-to-consumer marketers continues to grow; both the low cost and the higher effectiveness than traditional direct mail appeal to marketers. The electronic equivalent of junk mail, these messages are referred to as spam. 4. Broadcast media—Two broadcast media are available to direct marketers: TV and radio. The majority of direct marketing broadcast advertising now occurs on TV, which receives the bulk of our attention in the text. 5. TV spots—Referred to in the direct-marketing industry as short-form programs, these spots include direct-response commercials commonly seen on television for products such as drugs and toiletries, audio and video supplies, household products, and more. 6. Infomercials—The lower cost of commercials on cable and satellite channels has led advertisers to a new and very effective form of advertising. IMC Perspective 14-1 discusses some of the many companies employing this medium. 7. Home shopping—The major shopping channels in the United States are QVC and the Home Shopping Network. QVC has also purchased Zulily—a leading e-commerce site that targets millennial moms. 8. Print media—Magazines and newspapers are difficult media to use for direct marketing because of clutter and the relative expense. In addition, the benefit of an immediate response is not as apparent. 9. Telemarketing— While business-to-business companies continue to employ this strategy with some success, in recent years the telemarketing industry has suffered from a decline due to a number of factors. Problems associated with telemarketing include its potential for fraud and deception and its potential for annoyance. These developments have led to the development of a Do Not Call list for both landline and cell phones and the resulting decline in sales in the consumer market.

Professor Notes

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McGraw-Hill Connect ®: Direct Marketing Objectives Type of Activity: Timeline Activity Summary: Acura and Pinehurst resort partnered to offer consumers a special three hour use of an Acura—the “Preferred Vehicle of Pinehurst”—and a special package price for their vacation getaway. The two companies believe that they share a common target market profile and similar business philosophies. Students will place the seven steps involved in the Acura–Pinehurst direct marketing partnership in the correct order. Activity Learning Objective: 14-02 Discuss the role of direct marketing in an IMC program.

CONCEPT REVIEW: The direct marketer usually seeks a direct response. The objectives of the program are normally behaviors—for example, test drives, votes, contributions, and/or sales. A typical objective is defined through a set response, perhaps a 2 to 3 percent response rate. Not all direct marketing seeks a behavioral response, however. Many organizations use direct marketing to build an image, maintain customer satisfaction, and inform and/or educate customers in an attempt to lead to future actions. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

McGraw-Hill Connect ®: Direct Marketing Strategies Type of Activity: Click and Drag Activity Summary: In this activity, students will match the direct marketing media option with the characteristics of each strategy. Activity Learning Objective: 14-03 Identify strategies and tactics in the use of direct marketing.

CONCEPT REVIEW: Direct marketing continues to outpace other advertising and promotional areas in growth; many of the Fortune 500 companies now use sophisticated direct-marketing strategies. As with all other communications programs, marketers must decide the message to be conveyed, the size of the budget, and so on. Perhaps the major difference between direct-marketing programs and other promotional mix programs regards the use of media. Direct marketing employs a number of media, including direct mail, telemarketing, direct-response broadcasting, the Internet, and print. Each medium is used to perform specific functions, although they all generally follow a one- or two-step approach. Difficulty: Medium . Hill Education

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Bloom’s: Understand AASCD: Analytical Thinking

II.

DIRECT SELLING

Direct selling involves the direct, personal presentation, demonstration and sales of products and services to consumers in their homes. The text discusses three forms of direct selling including: 1. Repetitive person-to-person selling—Amway/Mary Kay 2. Non-repetitive person-to-person selling – Cutco 3. Party plans—Tupperware/PartyLite Gifts A demographic profile of the direct salesperson is provided in the chapter. Professor Notes

III.

EVALUATING THE EFFECTIVENESS OF THE DIRECT MARKETING PROGRAM

In addition to some of the effectiveness measures employed by other marketers, direct marketers also employ a measure based on cost per order (CPO). Using CPO the marketer knows almost instantly whether or not the advertisement is working. Another commonly employed measure of effectiveness is Customer Lifetime Value (CLTV). CLTV is a simple formula that is used to assist marketers in determining the dollar value associated with a long-term relationship with a customer, thus evaluating his or her worth. Many companies use an RFM analysis (recency, frequency, monetary), a marketing technique used to determine quantitatively which customers are the most profitable by examining how recently a customer has purchased (recency), how often he or she purchases (frequency), and how much the customer spends (monetary). IV.

ADVANTAGES AND DISADVANTAGES OF DIECT MARKETING

Advantages of direct marketing are cited including: 1. selective reach 2. segmentation capabilities 3. frequency 4. testing 5. timing 6. personalization 7. costs 8. (8) measures of effectiveness.

Disadvantages include: 1. image factors 2. accuracy 3. content support;

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4. rising costs 5. Do Not Call lists

Professor Notes

McGraw-Hill Connect ®: The New Home Shopping Network Type of Activity: Video Case Activity Summary: The Home Shopping Network, a major shopping channel in the United States offers over 1,000 products a week for sale, broadcasting 24 hours/day. While Internet e-commerce sales have hurt the TV home shopping channels, in the first quarter of 2010 HSN realized significant growth. Part of this is due to a change in programming focus and overall strategy. Students will watch a short video and then answer the questions that follow. Activity Learning Objectives: 14-03 Identify strategies and tactics in the use of direct marketing. 14-04 Compare the advantages and disadvantages of direct marketing. CONCEPT REVIEW: The development of toll-free telephone numbers, combined with the widespread use of credit cards, has led to a dramatic increase in the number of people who shop via their TV sets through home shopping channels. Jewelry, kitchenware, fitness products, insurance, household products, and a variety of items are now promoted (and sold) this way. The success of home shopping networks has led to a proliferation of shopping channels including Shop@homeTV, Shop NBC, and the Liquidation Channel to name just a few. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

Teaching Suggestions As noted, direct marketing is a rapidly growing field. Students typically think of this area in terms of direct mail, and sometimes the 800 and 888 number ads that appear on television. It is a helpful and interesting exercise to start the class with a discussion as to what direct responses students are familiar with, and to point out the fact that some very large firms are engaging in this form of marketing (not just the George Foreman Grill, Snuggies, and the Magic Bullet). Students are no doubt familiar with online buying (Amazon, etc.) and home shopping channels, but are probably not as informed about the size and growth of these industries. Direct response TV still accounts for billions of dollars of sales revenue.

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Answers to Discussion Questions

1. What is an infomercial? What are some of the reasons that infomercials have been so successful? Which types of products and services do you think are likely to be candidates for successful infomercials? (LO 14-3) Infomercials—often referred to as long-form commercials—typically range from 30 to 60 minutes, and are often made to appear as television programs. Infomercials have continued to increase in popularity sine their inception in the 1980’s, to now include a wide variety of products and services. Once despised by retailers, the infomercial has become a partner in the selling effort. While the infomercial once was used non-Fortune 500 companies, now companies like BMW, Volvo, Coca Cola and Disney are just a few of the many big companies now employing this form of communication. Infomercials are effective for the advertiser as the media cost is minimal. The infomercial is usually shown late at night, early in the morning, or other hard to sell time slots. As a result, the rates are very low, and the breakeven can be easily met. In regard to why they are successful with consumers, IMC Perspective 14-1 provides very good insight as to what makes for a successful infomercial. 2. Explain the role that direct marketing can play in the IMC program. Can direct marketing be used for anything other than a behavioral response? If so, give examples. (LO 14-4) While some organizations rely on direct marketing solely to generate a behavioral response, for many others direct marketing is an integral part of the IMC program. They use direct marketing to achieve other than sales goals and integrate it with other program elements. We first examine the role of direct marketing in the IMC program and then consider its more traditional role. a. Combine direct marketing with advertising b. Combine direct marketing with public relations c. Combine direct marketing with personal selling d. Combine direct marketing with sales promotions e. Combine direct marketing with support media Of course, the Internet is a direct marketer’s nirvana. Ecommerce on the internet is seemingly taking over shopping as retail stores lose business. Honda now sells as much a large percentage of cars on the internet as do other dealers, particularly in urban areas. Direct marketing is now being used to achieve other communications objectives such as awareness, trial, etc. 3. What is the future of the traditional home shopping channels like QVC and HSN? Given the decline in television viewership, what will these channels have to do to survive? (LO 143) The major shopping channel in the United States (QVC) broadcasts on TV 24 hours a day and online. While Internet e-commerce sales have hurt the TV home shopping channels, they have succeeded through adaptation: Both QVC and Home Shopping Network (HSN) have upgraded . Hill Education

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their product lines to include designer brand names and luxury goods at a lower price point. QVC has also purchased Zulily—a leading e-commerce site that targets millennial moms. Zulily, according to The Wall Street Journal, is "the web's version of QVC." The success of home shopping networks has led to a proliferation of shopping channels, including the Gem Shopping Network, America's Auction Network, and the Liquidation Channel, to name just a few. As the demographics of shopping channel buyers continue to move younger and more upscale, the products offered on these channels continue to change as well. It is now possible to shop on QVC on one's Apple Watch. 4. Some marketers believe that traditional catalogs are on the way out and that they will be replaced by digital catalogs. Explain why digital catalogs will or will not drive the traditional catalog into extinction. Cite some of the advantages of maintaining a traditional print catalog. (LO 14-3) Although some predicted that catalogs would cease to exist with more use of the Internet and the number of catalogs mailed continues to decrease, traditional catalogs are still an effective way to reach consumers. The emotional appeal of the traditional catalog exceeds that of online catalogs and ultimately is one of the best ways to drive consumers online. The convenience of using printed catalogs everywhere and anywhere.cannot be matched by digital, thus insuring its future success. Many companies use catalogs in conjunction with their more traditional sales and promotional strategies. For example, companies like Pottery Barn, Bloomingdale's, Nordstrom, and Illuminations sell directly through catalogs but also use them to inform consumers of product offerings available in the stores. Some companies (for example, Oriental Trading Company) rely solely on catalog sales. Others that started out exclusively as catalog companies have branched into retail outlets, among them Road Runner Sports, Eddie Bauer, Banana Republic, and Illuminations. The products being offered through this medium have reached new heights as well.

5. To many consumers, shopping through direct channels offers a number of distinct advantages over traditional shopping methods. At the same time, there are distinct disadvantages to this form of shopping. Give examples of the advantages and disadvantages of each form of shopping. (LO 14-4) Advantages of direct marketing are cited including: • selective reach • segmentation capabilities • frequency • testing • timing • personalization • costs • measures of effectiveness. Disadvantages include: • image factors . Hill Education

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• • • •

accuracy content support rising costs Do Not Call lists

6. Explain what is meant by Customer Lifetime Value. How does this formula benefit the direct marketer? (LO 14-4) CLTV is a formula used by direct marketers to determine the dollar value associated with a longterm relationship with a customer, thus evaluating her or her net worth. Direct marketers will use this formula in an attempt to determine whether or not a customer should be acquired, and how much attention they should receive. By estimating the potential return they will receive from a customer, direct marketers can determine how much attention they should dedicate to the customer, what kinds of deals they should offer, etc. Obviously, the more potential sales and profits they see, the more attention the customer will get.

7. A study by the Harvard Business School has shown that e-mail marketing is much more effective than traditional direct mail in that it provides a much greater return on investment (ROI) Explain some of the reasons this would be. (LO 14-4) While the cost of direct mail is not that expensive, the cost of sending an e-mail is ridiculously low. While both of these methods have very low response rates, the fact that e-mail messages cost so little makes it more profitable. Secondly, the younger generation clearly disregards direct mail pieces. The message goes directly from the mailbox to the trash, never to be seen. While click-throughs on emails are only slightly better, they are essentially better than nothing. 8. Direct marketing has been an effective tool for marketers for a long time. Provide some reasons why direct marketing has been so effective. Do you think this trend will continue? (LO 14-1) There are a number of reasons why direct marketing has been successful. Many of these bode well for its future success as well. Reasons for the rising success of direct marketing can be attributed to a number of factors: • •

• • . Hill Education

The changing marketing environment. The increased use of credit cards, lack of time, and acceptance of mail-order products by consumers have all increased the effectiveness of the direct marketing medium. Cost efficiencies. The continued high cost of mass media, and the lack of availability of time and space in some of these media have forced advertisers to consider alternative ways of advertising. Likewise, the increasing costs of personal selling directly favor the use of telemarketing and direct mail. Target marketing. As marketers more narrowly define their markets, direct marketing media offer a more effective way of reaching them through the reduction of waste circulation. Database technologies. More effective database marketing techniques also promote more specific targeting. Companies are now able to know more and more about their 14-9

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•

customers (and potential customers) by building more effective databases. Kimberly Clark can literally track babies through childhood, changing the products advertised and the appeals as the child gets older. Advances in technology. Direct marketing no longer means just catalogs and direct mail. Home shopping channels, the Internet and other innovations have allowed for more successful direct marketing efforts. Even the success of cable television has aided the direct marketer, who now has a more specific target audience at which to target direct marketing efforts. Advances in technology have also increased the value of the databases, as names can be added and purged, and information can be updated much more quickly. Effectiveness measures. Perhaps the greatest value of direct marketing is the ability to measure the effectiveness of the program. As noted in the text, direct marketers have very sophisticated measures of effectiveness which can tell them almost immediately how their programs are working.

There is little doubt that direct marketing has achieved acceptance. At the same time, many marketers are still bothered by the image of the industry. While companies such as Porsche and American Express benefit the industry through direct marketing participation, negative stereotypes of “rip-off” artists still persist. Every time such a rip-off occurs, the industry takes a step backward.

9. Direct marketers are very good at determining the effectiveness of their programs. Many direct marketers now measure the impact of the program on the consumer funnel. Explain how direct marketers measure effectiveness, and how they now use the consumer funnel for this purpose. (LO14-4) Direct marketing provides one of those rare instances where we can measure the impact of advertising on sales. By definition, direct response asks for an immediate behavioral action. Effectiveness is measured by sales, or as one expert put it "if you continue to see the ad on TV then it works". More specifically, the effectiveness is measured using a formula called cost per order (CPO), in which the advertiser calculates the cost per ad (production and medial costs), the return sought and a break even. As long as the ad continues to generate profit, it continues to run. Direct marketers have also been successful in isolating the effectiveness of certain elements of their programs. Through research, they have been able to show that in a specific market, one TV channel may be more effective than another, one model and/or one message may be more effective, etc. Direct marketers are constantly evaluating various print alternatives to test effectiveness. Some direct marketers understand the value of direct marketing in impacting the movement through the consumer funnel as well. Direct marketing can be used to create awareness and interest in the product or brand. It is also effective in helping the consumer to evaluate products and services and stimulate trial. Marketers know that it is not uncommon for a consumer to find out about a product or service through direct mail, or an infomercial, and then go to the store to find out more about it or make a purchase.

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10. While a very effective medium, direct marketing also has a number of distinct disadvantages. Discuss some of these, and what marketers could do to decrease them. (LO 14-4) Perhaps the major problem associated with direct marketing is its image. Putting aside all of its other advantages, image problems continue to plague the industry, making it difficult to shed the “junk mail” role. These problems stem from all direct media. In direct mail, one’s mailbox is full of unwanted catalogs, ads and solicitations. The very mention of telemarketers evokes negative images, and around election time are still incredibly intrusive and annoying. Infomercials, despite their advances in sophistication, are still offering “psychics,” “amazing discoveries,” and other offerings that many perceive as being questionable if not deceptive. The industry still suffers fallout from, and the potential for fraud. While the vast majority of direct marketers are not guilty of such actions, it is the few that reflect negatively on the image of the many. Each news story of fraud and/or deceit associated with direct marketing hurts the overall image. A number of steps have been taken to improve upon this image. The DMA--the direct marketing trade association--has established guidelines for appropriate actions, and has worked closely with academia and industry as well as the government to help eliminate many of the problems. Recent legislation such as the do not call list goes a long way in solving some of the problems, but obviously will not solve all. As more and more large companies become involved, the costs of infomercials will be beyond the reach of many, and this, too will help. But like any other medium, there will always be those that will attempt to make money in a less than honest fashion. They will never be eliminated, they can only be reduced in numbers. Until these numbers are under control, additional legislative steps are likely, and the industry will suffer.

Additional Discussion Questions (not in text)

11. The number of telemarketing centers in the United States has decreased in the past few years. Why has this occurred? (LO 14-3) To cut down on the intrusion of telemarketers, the FTC started a Do Not Call list in which consumers could register to have telemarketers stop calling them. With all of its good intentions, not everyone is happy with the Do Not Call list. The law allows consumers to place their name on a list that telemarketers, with some exceptions, may not call. Companies that call someone whose name is on the list face penalties, including fines, for each occurrence. A Do Not Call list for cell phones is also available for those who wish to avoid telemarketers. One for e-mails is currently under consideration. Politicians, political parties, and most nonprofits are exempt. Over 148 million people have already signed up for the Do Not Call list, and the cell phone list continues to grow. Telemarketers in violation have been prosecuted and fined—making many consumers happy. At the same time, many businesses and organizations alike are not pleased with the lists. They contend that lost sales and the inability to call prospects will result in the loss of millions of jobs and revenues and that they will be driven out of business. As a result they filed a suit in court challenging the legality of the lists. As noted in the chapter, the legality of the system was upheld, as were the penalties doled out to those in violation. . Hill Education

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The net result of these actions is that the number of people employed in the telemarketing industry has declined significantly. Of course, so too has the number of call centers. As to what will happen to the telemarketing industry, it is too early to tell.

12.

Describe the various forms of direct response advertising. Discuss some of the reasons for the success of direct response advertising. (LO 14-3) The text discusses the various direct response media. Without repeating this discussion here, a. Direct mail—everything from postcards to mailers for supermarkets detailing weekly sale items b. Catalogs—traditional print and online varieties c. Broadcast—direct response TV spots, infomercials, home shopping channels and radio ads d. Print—direct response ads in magazines, newspapers, etc. e. Telemarketing—direct response solicitations through the telephone f.

Online—direct response ads on the Internet, interactive and wireless

There are a number of reasons for the growth and success of direct response media, including: Consumer credit cards—the use of consumer credit cards continues to increase, reaching all time highs. The ease of use of these cards increases the ability to conduct direct marketing activities. So long as this use remains high, and there are no indications that it will change, direct marketing will continue to thrive. Syndicates—companies that specialize in direct marketing activities also continue to increase, particularly with the advent of the Internet. As these syndicates become more effective, direct marketing will reap the rewards. The changing structure of American society—Consumers are better off than perhaps any time in history. At the same time, they continue to be “time poor.” The combination of these factors is very positive for the continued growth of direct marketing. Technological advances—the Internet is an excellent example of how technology benefits direct marketing. Direct marketers are delighted that the Internet has come along, as it provides a new and very effective medium for direct marketing activities. Interactive TV will do the same. Miscellaneous factors—all of the miscellaneous factors discussed in the chapter continue to hold true in regard to their impact on direct marketing. No less important is the image of direct marketing itself. Unfortunately, the industry still has image problems, and the Internet has contributed to these problems through fraud and deception. 13. Direct marketers are some of the most successful when it comes to measuring the effectiveness of their programs. Give reasons why this may be true. (LO 14-4)

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Because most direct marketing seeks a behavioral response, it is easier for direct marketers to determine if their messages are working or not. Simply put, direct marketers figure out what it costs for the product, add in the commercial message cost and media and the put it in the marketplace. If the sale orders exceed the costs, the campaign has been successful. Many direct marketers test all aspects of their programs. They will track the response from different stations, different time slots and different spokespersons. They will also track the response to different offers to see which works best. Adjustments to the programs are constantly made to insure the optimal results. 14. What is the difference between direct marketing and direct selling? Describe the various forms of direct selling and some of the characteristics of the industry that make it unique. (LO 14-3) Direct selling might best be considered as a form (or subset) of direct marketing. Both deal directly with the customer, seeking a response. However, direct marketing assumes a broader variety of media rather than just sales. (Keep in mind, direct sales people may still use promotions, leave behinds, etc.) Direct marketing includes direct mail, telemarketing, direct response print, etc. Direct selling deals specifically with the selling effort. There are three forms of direct selling including: Repetitive person-to-person selling—The salesperson visits the buyer’s home, job site or other location to sell frequently purchased products or services (for example, Amway). Non-repetitive person-to-person selling—The salesperson visits the buyer’s home, job site or other location to sell infrequently purchased products or services (for example, World Book Encyclopedia). Party plans—The salesperson offers products or services to groups of people through home or office parties and demonstrations (for example, Tupperware). The chapter reveals that the direct selling sales force is quite unique. Almost eighty percent of the sales force are females, almost 100% are independent contractors and for most of them it is not a full-time job. Over one half of the direct selling sales force spends less than 10 hours a week at their job—treating it as an opportunity to earn extra money rather than a career. For them, it is as much a hobby as a job. 15. What are the characteristics of the infomercial watcher? In viewing this profile, does it surprise you? Explain why or why not. (LO 14-1) Typically, when we think of the infomercial watcher, we think of someone with a lot of time on his or her hands, insomniacs, or very heavy TV watchers. Given the times of day infomercials are shown (early morning, very late at night, Sunday morning, etc.), this would seem to make sense. Interestingly, the infomercial buyer may be none of the above. Those who watch (and buy from) infomercials tend to be a bit more upscale, homeowner, and white-collar workers. They are most often female. Overall, the infomercial shopper represents a broad demographic base. This really should not come of much of a surprise. While it may be true that people who buy from infomercials watch TV more, the fact is that they are not necessarily couch potatoes or shut-ins. Many people who work find them selves “money rich and time poor”, and the infomercial is a means of learning about products and purchasing without having to go to the store. Secondly, . Hill Education

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many products advertised through this medium may not be available in stores, while still satisfying a need or want of the buyer. Finally, with the profile of the infomercial advertiser changing—with more large companies like Volvo, Mercedes, AT& T, etc., advertising this way, the infomercial has become a good medium for providing information to prospective buyers in the comfort of their living rooms. The infomercial has come a long way. Some advertisers claim that virtual ads are bad for the advertising industry in general. Explain some of the reasons they feel this way. Are these reasons valid?

IMC Exercise Infomercials can be extremely effective or extremely obnoxious. Have students identify a number of infomercials which they feel fit in either category. Show the infomercials in class, then discuss why students feel the way they do.

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Chapter 15 - The Internet: Digital and Social Media

CHAPTER 15 THE INTERNET: DIGITAL AND SOCIAL MEDIA Chapter Overview Perhaps the most intriguing of all media—at least to students—are the Internet and digital media— particularly social media. Since the inception of the World Wide Web, the Internet has created quite a stir in Marketing. Likewise, in the advertising and promotions area, the Internet has been hyped as the “be all and end all” for communications, the end of traditional media as a means of communications and even as a replacement for all brick and mortar stores. While there has been astronomical growth in advertising on the Internet, the predictions of the demise of traditional stores, etc. has not come to pass. We see the Internet as an extremely valuable tool for marketers and an important part of the IMC program. There are advantages and disadvantages of the Internet just as there are for other media, and the astute marketer will know when to employ this medium. The chapter starts off with an insight as to why the Internet has been adopted so quickly. The objectives for using the Internet in an IMC program are then discussed. The chapter explores Web 1.0 and Web 2.0 strategies, and the role of the Internet in the IMC program. Web strategies such as search, various advertising forms and behavioral targeting are defined. A discussion of Web 2.0 including a section on who uses social media and why, and how marketers use media such as Facebook, Twitter and YouTube and Google + and their value to the IMC program are considered, as are other popular tools including Instragram, Pinterest, etc. Current methods of measuring effectiveness are discussed (we say current, because by the time you read this, they may be gone!) Advantages and disadvantages of the Internet and sources of information follow.

Learning Objectives 1. To understand the role of the Internet and digital and social media in an IMC program. 2. To understand the use of Web 1.0 and Web 2.0 platforms in the IMC process. 3. To understand how to evaluate the effectiveness of communications through the Internet. 4. To know the advantages and disadvantages of the Internet and Interactive media. 5. To examine the role of additional online media.

Chapter and Lecture Outline I.

DEFINING AND UNDERSTANDING THE INTERNET

The growth and relevance of the Internet begins the chapter. In addition, insight into the rapid adoption of the Internet is presented.

Chapter 15 - The Internet: Digital and Social Media

II. WEB OBJECTIVES Objectives sought in using the Internet include communications and sales objectives, as well as the development and maintenance of the website. A. Developing and Maintaining a Website—The Website is the home of the information the company wishes to provide over the Internet. Exhibit 15-1 provides an example of how even a small company can develop an effective website. B. Communications Objectives—the Internet and digital can be used in an attempt to attain a number of communications objectives. These include: 1. Generating interest 2. Creating awareness 3. Disseminating information 4. Creating an image 5. Stimulating trial 6. Creating a strong brand 7. Create buzz 8. Gain consideration C. e-Commerce—the transaction of sales over the Internet has been given the designation of ecommerce. This sales objective is applicable to both the consumer and business to business markets. III. THE INTERNET AND INTEGRATED MARKETING COMMUNICATIONS The role of the Internet in the IMC program is discussed. The Internet both supports and is supported by an IMC program. A distinction between Web 1.0 and Web 2.0 is introduced. A. Advertising—a variety of forms of advertising on the Internet are available 1. Banner ads—the most common form of advertising 2. Sponsorships—both regular and content sponsorships are available 3. Pop-ups/pop-unders—small message boxes that appear on ones screen 4. Interstitials—ads that appear on the screen while content is downloading 5. Paid search—ads are placed near the content searched for, and the advertiser pays only when the consumer clicks on their ad. 6. Behavioral Targeting—targeting consumers with ads based on their website surfing behaviors. 7. Contextual ads—ads placed to take advantage of the surrounding content of the site 8. Rich Media—a broad range of interactive digital media that exhibit dynamic motion and employing features such as video, audio, and animation. 9. Additional Forms—rapidly growing new forms of advertising include rich media ads, expandable ads, etc..

Chapter 15 - The Internet: Digital and Social Media

B. A discussion as to who uses Web 2.0 and why is presented. Strategies that take advantage of the interactive capabilities of the internet include: 1. Social Networks—sites that allow the user to share information with others within their network. The big four (Facebook, Twitter, YouTube and Google+ are discussed. 2. Additional social media such as Instagram, Pinterest and Linked-In are presented. 3. Podcasting—a medium that uses the Internet to distribute radio-like files for downloading onto iPod or MP3 players. 4. RSS—Really Simple Syndication is a specification that uses SML to organize and distribute web based content in a standard format. 5. Blog—a web-based publication consisting of articles, writings, opinions, etc. of an individual or organization to be distributed to others. 6. Others—augmented reality, and QR codes are discussed. C. Sales Promotions— sweepstakes, contests and other forms of sales promotions are commonly used on the Internet. In addition, a number of companies are now offering online coupons. D. Personal Selling—the Internet has a number of ways of being combined with personal selling. Many business to business companies are using the net to prospect for new customers, qualify potential customers and provide product information. Others have used it effectively to assist the sales force, by removing many of the more mundane tasks such as reordering, etc. Consumer markets have used the internet to stimulate trial, provide information and assist personal selling through e-mails, samples, and the like. E. Public Relations—as discussed in this chapter and chapter 17, the Internet has become a very valuable tool for disseminating public relations information, and achieving pr objectives. F. Direct Marketing—early on many considered the Internet to be a direct marketing medium. The broader perspective notes that a number of direct media are employed with and for the Internet. 1. Direct mail 2. Infomercials 3. e-Commerce 4. Home Shopping Channels

Chapter 15 - The Internet: Digital and Social Media

IV. INTERNET METRICS The Internet has used its own methods for measuring effectiveness as well as some traditional methods. In an attempt to respond to criticisms and to adopt a standard basis for measurement, the Internet Advertising Bureau (IAB) created voluntary guidelines for Internet metrics. More traditional methods of measurement are now being adopted including recall and retention measures, surveys, tracking and sales measures. A. Audience Measures and Measures of Effectiveness • Internet Specific Measures—pages 521-522 (Figure 15-7 and Figure 15-8) show some of the more commonly employed Internet and social media specific measures employed. • Traditional Measures—some of the same measures employed in traditional media such as recall and retention have been used. •

Recall and retention—more traditional in nature, these measures are now being offered by companies like Ipsos-ASI and others.

•

Surveys—conducted through traditional methods as well as online, these surveys track attitudes toward the site, responses to e-mails, etc.

•

Sales—the primary measure employed for e-commerce sites

•

Tracking—another traditional measure, tracking is employed to gather information regarding rand awareness, recall, message association and purchase intent.

B. Sources of Measurement Data—a number of sources of measurement data are discussed in the chapter. As the reader will note, some of these are providers of traditional information as well.

ADVANTAGES AND DISADVANTAGES OF THE INTERNET , DIGITAL AND SOCIAL MEDIA Advantages of the Internet include: a. Targeting b. Message tailoring c. Interactive capabilities d. Information access e. Sales potential f. Creativity g. Exposure h. Speed i. Complement to the IMC program 15-4

Chapter 15 - The Internet: Digital and Social Media

Disadvantages of the Internet include: a. Measurement problems b. Clutter c. Potential for deception d. Privacy e. Irritation Professor’s Notes

Teaching Suggestions This chapter may be one of the most interesting in the text for students. At the same time, it may be one of the more difficult for instructors to teach. Much of the difficulty will come from the fact that the Internet 2.0 world is changing so rapidly, that by the time something is committed to print, it has changed. Many of the companies we discuss in this chapter may no longer be in existence by the time the text comes out. Others will have merged or changed their names. Even more will be added. Another factor that makes the chapter difficult to teach is the high level of knowledge and interest of the students. Many of them will know more about the working of the Internet than we do. We recommend getting the students involved in the discussion from the beginning. Showing examples of effective websites—as defined by the communications and sales objectives—is a good starting point. Then a discussion of some of the uses of both old and new Internet media could follow—particularly the use of social networks, content sharing sites and mobile. Of particular value is to discuss role of the Internet in the IMC program. Students will quickly see the value of this medium as a complement to the IMC program rather than a stand-alone medium. The large number of companies providing information and/or measuring effectiveness offer excellent examples to bring to classroom.

Answers to Discussion Questions

Many marketers and policy makers believe the Internet and social media may constitute a “web of deceit”. Explain what they mean by this comment. Provide examples as to why they have this feeling. (LO4) Ever since its inception, the web has been considered to be the “wild, wild west”, referring to the fact that it had and wanted few rules, guidelines and law, and that virtually anything goes. In the initial days of the Internet, traditional metrics, practices and tactics were often ignored, as the digital generation believed that they had created their own new world. That changed reasonably quickly as companies used to traditional media strategies literally forced the use of more traditional practices.

Chapter 15 - The Internet: Digital and Social Media

Nevertheless, the Internet of today is fraught with practices that traditional media could never get away with. Of major concern is that of privacy, and the use of personal data, often without the consumer knowing it. The use of behavioral targeting and retargeting are two practices that are not only irritating, but potentially deceptive. Digital marketers are also now heavily involved with native ads, essentially advertorials under a different name. While advertorials must be identified as ads in print media, so far there are no such guidelines on the web. So the unsuspecting reader may be led to believe that the ads are actual content. The interactivity of Web 2.0 has made the Internet a dangerous place. Given that virtually anyone can post information—truthful or not, dangerous or not, private or not—reputations have been ruined, companies have been falsely maligned, and much negative publicity has been generated. 2.

The drive to go viral has resulted in some major marketing mistakes. Explain why marketers are seemingly obsessed with going viral. Then explain some of the consequences that might occur should these efforts fail. (LO5) Ethical Perspective 15-1 provides some excellent examples of marketing mistakes made in an attempt to go viral. The example of Mt. Dew employing rappers in an attempt to enter urban markets through YouTube videos is a classic example of the pitfalls of such attempts. Others such as GM, Hyundai and Ford have also had their problems as noted in this perspective. On a less obvious note, one can see the impact of this obsession with going viral even in traditional advertising. For example, for decades the Super Bowl was considered as exciting for the commercials as it was for the game itself. In recent years, particularly with the 2014 game, the commercials have declined in quality and viewer interest. The attempt to be creative for purposes of going viral has led to commercials that are not only less interesting, but in some cases bizarre, as advertisers try to create buzz while losing direction as to what ads are supposed to do. The fascination with going viral is no different than the traditional desire to create word of mouth. Marketers know that word of mouth is free, and more often more effective than paid for ads. If one can get people talking and promoting the message for free—whether through word of mouth or going viral, it is a good way to promote one’s product or service.

The new media discussed in this chapter have some distinct advantages over traditional media, but also have some disadvantages. Discuss some of the advantages and disadvantages of traditional and new media. (LO4) While the Internet certainly has its advantages over other media, it also has some disadvantage relatively speaking. Consider, for example TV. At this point, there is perhaps no better medium for reaching audiences and creating interest than television. Recent research has shown that as many as 38% of purchasers from Internet sites began their search as a result of seeing the product through a TV commercial. Other studies show that the majority of visits to a brand’s website are driven by exposure to a traditional medium. Whether it be through an ad, a product placement, or other means of exposure, these media have a distinct advantage over the Internet for this objective.

Chapter 15 - The Internet: Digital and Social Media

Additional research has shown that a high percentage of users of search on the internet start the search with a brand name rather than a generic product category. Given the weaker capabilities of the Internet to build strong brands, again, an advantage goes to traditional. Other media, like outdoor which is more likely to gain exposure, magazines which target people with very specific interest and are easier to read, and catalogs all have some advantages not associated with the Internet. Of course, personal selling has its own distinct advantages. Dyadic communications, immediate feedback, ability to alter the message are all capabilities that the Internet does not offer as well. Where digital media may have its greatest impact is lower in the funnel. For example, nothing comes close to the speed and timeliness of dissemination of information as the Internet and particularly social media. Marketers can update information almost instantly. In addition, social media often leads to dissemination for free (good or bad), allowing for exposure to potentially millions at little or no cost. 4.

Discuss the role of social media in an IMC program. What can these media contribute in regard to helping marketers achieve communications objectives? (LO2) The primary offering of social media to marketers is exposure. When positive, this can be of great benefit to the marketer. The passing on of information is essentially digital word of mouth, which can lead to many positive benefits. Of course, negative “going viral” can also result in bad publicity to the marketer, which can destroy a product or brand. If it is deserved, this is a direct benefit to the consumer, but not necessarily the marketer. Social media is now in the process of changing. While most were initially free, almost all are now selling advertising time and space. The bad news is the media are changing themselves. The good news for marketers is that they are likely reaching segments that share similar values, lifestyles, etc. Consider Facebook for example. One could argue that my “friends” are very likely to be similar to me, and may be interested in the same things. In addition, social media have information on consumers that marketers may not have, but find useful. Facebook has become another VALS or MRI+ in many ways by offering information regarding demographics and lifestyles that might aid marketers in segmentation. If in the lower stages of the consumer funnel, the marketer can find social media particularly effective in communicating information to consumers, offering specials and/or promotions, etc.

Policy makers are concerned that some bloggers may not be disclosing the fact that they are being compensated for product or brand endorsements. Explain why they may be concerned about this and how it may lead to negative impacts on the consumer. (LO5) At the time of writing of this text, there were an estimated 100 million bloggers sending out over 44 billion posts per year. Obviously, they are reaching a number of people in a myriad of areas of interest. Political blogs, advertising blogs, auto repair blogs and just about anything you can think of is now available on a blog.

Chapter 15 - The Internet: Digital and Social Media

While this information may be very helpful and relied upon by consumers, it can also be deceptive and misleading. Take mommy bloggers, for example. Many of these bloggers are discussing products and services of interest to consumers, ranging from diapers to automobiles. In some instances these bloggers are provided free products, vacations or even direct pay from companies to speak positively about their brands. One might argue that this compensation leads to bias for or against brands. If the fact that these favors are not disclosed, the unwary consumer may be mislead into placing more credibility into the blogs than is warranted. Haul videos are of the same ilk. Teenage girls going on shopping sprees sponsored by Penney’s or other retailers and then showing and promoting the items purchased without disclosure of sponsorship must be considered misleading. The teens who watch these videos may not recognize that payments are being made, and trust the blogger as just another peer. To this date, there are few restrictions on blogging and haul videos. Now you know why it is often called the “web of deceit”. 6.

The growth of Facebook has had a major impact on the way advertisers attempt to reach their customers. Discuss how Facebook has changed the media environment, citing examples. (LO2) The social networking site has changed , and continues to change the media environment. With over 500,000 members, the mere size of the members provides a significant audience. However, Facebook continues to change and grow (Facebook has more monthly unique visitors than MySpace, Twitter and Linkedin combined), becoming an advertising medium in and of itself. Besides allowing advertisers to place their ads on the site, individual members can also promote their own causes and businesses. Facebook also offers the viral component due to the frequent interaction of its members. New ideas, including product launches and information are passed along to other members in a speed that almost defies imagination. Unfortunately, so too does negative information. Facebook continues to offer new services, such as email, and new tools to continue to improve. It has already become a “must” for marketers to have a presence on the site, and with the capability to now buy media time on the site, it continues to offer potential.

Discuss why mobile has become an attractive medium for advertisers. Provide examples of how companies have used mobile.(LO2) One of the fastest growing of the of the new digital media is mobile—though estimates are that we are still years behind some foreign companies. The fact that over 80% of Americans now have cell phones, and the rapid growth of smart phones with an array of apps is a boon to all types of advertisers. Perhaps most important is the fact that ones mobile device is always with them, allowing for full time exposure. An attractive aspect of mobile is its target marketing capabilities. Advertisers can tell by the apps used what the owner’s interests are, and target them directly. (For example, travel apps and sports apps. Lead to the use of travel and sports related products.) A consumer looking for a store or a type of restaurant can receive directions to the closest location, and even get a coupon sent for use when they get there.

Chapter 15 - The Internet: Digital and Social Media

The development of new sites like Foursquare in which users tell others where they are, receive “inside” information on menu items, earn points for purchases and a variety of other features have created yet another medium for advertisers to reach consumers and attempt to create sales and loyalty. 8.

There are indications that the popularity of blogs may have already reached the maturity stage. Take a position as to whether this is true or not, providing examples to support your opinion. (L)1) In 2009 there were an estimated 126 million blogs on the Internet. These blogs range from providing information about news, politics, and products, amid a myriad of other topics. There are beer blogs, cupcake blogs, car blogs—just about anything that you can imagine someone having an interest in. Blogs have value to marketers in that they can target the blog readers through the websites. For example, do it yourself mechanics are very likely to read auto repair blogs. Makers of cupcake jewelry would reach potential consumers through cupcake blogs, etc. Blogs also provide useful information about products and services that might be hard to find elsewhere, and, if the marketer has a good product or service to offer, they may gain exposure at a minimal cost. Companies have also used blogs for marketing research purposes, watching what subscribers say about their and competitive products. Like other Internet media, blogs are viral. There is some indication that the value of blogs may be diminishing, however. Reports in the media about deceptive and/or unethical practices has eroded the public’s trust in the blogosphere. The bloggers have not helped themselves, by contributing or even sponsoring these practices. (See ethical perspective 15-1.) While blogs are estimated to reach hundreds of millions of people (the exact umbers cannot be determined), each year the number of active blogs decreases. It does appear that blog readers are abandoning the sites, and the bloggers themselves are writing less.

A trend among advertisers is to make more use of consumer generated commercials to be placed on You-Tube and similar sites. Discuss some of the advantages and disadvantages of employing this strategy.(LO4) One hundred and eighty three million viewers viewed over 14.6 billion videos on YouTube in 2010. That is a lot of reach, and an attractive audience for consumer product companies—which is just one of the reasons why consumer generated videos are a potentially popular tool for marketers. Add to that the fact that the cost of these videos is almost non-existent, and another advantage is offered. Marketers have become quite enamored with having consumers create videos for them. They run contests and sweepstakes to developers, offering to place their ads in such extremely popular places as the Super Bowl. Sometimes (but rarely) the videos are completely the work of the consumer, though in more occasions they are enhanced and/or edited. Nevertheless, they generate interest both on the part of the developer and the viewing audience. In addition, they often generate free and valued publicity when the media reports on them. Some companies now offer competitions in colleges and universities for video development.

Chapter 15 - The Internet: Digital and Social Media

One of the drawbacks of these videos is that they are not always professionally developed, and the quality is less than what might be achieved by an agency or boutique. Many of these fail to attract attention or interest by viewers. In addition, like blogs, consumers are seeing through these “original” videos, recognizing that they are not always what they are made out to be.

10.

Some marketers have argued that the strength of the Internet in an IMC program is at the mid stage of the consumer funnel (knowledge, consideration, etc.) Discuss whether you agree or disagree with this position, and support your position with examples. (LO1) As more and more research on the Internet surfaces, it seems to indicate that the Internet is a viable communications tool in an IMC program, but is not the be all and end all some expected. As Internet popularity continues to grow as an advertising medium, so too does evidence of its limited capabilities. Much of the growth of the net as an advertising medium is in search, with the impact of banner ads and other advertising forms still minimal. Some of the studies now reveal that traditional media like TV and magazines (as well as direct mail and product placements) are the source for visits to the web. Products and brands are seen in these media, and the consumer then visits the Internet for information and evaluation. The exposure on TV, for example, is unrivaled with other media, and has strong effectiveness at the early stages of the consumer funnel. It is also true that the Internet is unrivaled as a source of information. If there is something a consumer wishes to know about a product or service, s/he can find it faster, easier and in more currency than in any other medium. Likewise, other consumers’ experiences with the product, satisfaction or dissatisfaction, and price comparisons are much easier to access. In summary, the Internet is a valuable marketing tool—particularly with the advent of social media. However, at this time, it appears to be of mot value to marketers in the middle or bottom of the consumer funnel.

Additional Discussion Questions (not in text) 11.

The chapter opener discusses the DEWmocracy social media campaign used by PepsiCo to select a new flavor to add to the Mountain Dew product line. Discuss the pros and cons of using social media and consumer generated content to select an addition to the Mountain Dew product line. How might Mountain Dew’s ad agency react to having them do the creative work for the brand? (L01, 2) The DEWmocracy campaign is an excellent example of how marketers can make effective use of social media and user-generated content to get consumers engaged with their brands. The first DEWmocracy initiative opened up the product development process to loyal fans of the soft drink and more than 1 million people participated in various aspects of developing three alternatives for the line extension including flavor, the name, graphics and color. DEWmocracy 2 took this process even further by taking advantage of the growing power of social media such as YouTube, Facebook, 12seconds.tv. Consumers were asked to participate in various aspects of the product development and marketing process by joining “Flavor Nations” which were charged with developing names, package designs and colors. Fans were also engaged by participating in the 15-10

Chapter 15 - The Internet: Digital and Social Media

selection of advertising agencies who worked closely with the DEW brand team and the Flavor Nations to create television sports for each flavor. The DEWmocracy initiatives worked well because the Mountain Dew brand franchise has a very loyal and passionate fan base that enjoyed having the opportunity to become more engaged with the brand. This is a very different approach that using traditional media advertising which really does not offer consumers the opportunity to become involved with the brand. One might argue that PepsiCo took somewhat of a risk by turning so much of the brand development process over to consumers rather that doing it themselves. However, it should be noted that the Mountain Dew brand team worked closely with the Flavor Nations throughout the process and was able to maintain some control and input. Regarding the reactions of the advertising agency it is unlikely that they would be excited about the DEWmocracy initiatives as virtually no agency created media advertising was used during the campaign. However, it is to their benefit to strengthen the Mountain Dew product line as it is likely that PepsiCo will include media advertising in future IMC efforts.

12.

One of the fastest growing mediums in regard to advertising expenditures is mobile. Explain why mobile has become so attractive to advertisers. (LO5) All you have to do is look around to understand why mobile is so attractive to advertisers. Whether you are on campus, driving in your car, or just about anywhere, people are glued to their wireless devices-- particularly the younger generation. The need to be in constant touch is a tremendous boon for advertisers, who can now reach consumers everywhere and seemingly all of the time. In addition, the wireless devices are like an electronic yellow pages. Potential customers looking for a store, restaurant, or whatever now need only to go to their wireless devices to pull up information instantly. As the U.S. catches up with some of the more advanced countries in regard to wireless devices (Japan, Korea, and others), even more capabilities will be available. Along with these new capabilities will be even more communications options and capabilities.

13.

Explain how the Internet has changed the practice of public relations. Pick a Web site as an example of this change.(LO1) Traditional tools for public relations include press conferences, exclusives, press releases, etc. In addition, other media are employed in times of crises, for example, disasters, product recalls, etc. While these activities still are employed, given the Internet, they have taken on more or less importance, or have changed in respect to formatting. For example, think about a product recall. In the past, the announcement might be made on television, an 800 number would be set up, and frequent updates might be provided to the print and broadcast media. Now the same thing might happen, but real time updates would occur online, information would be posted in regard to what to do, and updates would be posted as they happen. All of the same tools, but with a higher level of frequency and more timeliness. In addition to the above example, websites are quite effective for publishing information about philanthropic efforts, events, and just general news about the company or organization that might never get seen or only appear in a company’s annual report or newsletters. One visit to a site demonstrates the value of this capability. 15-11

Chapter 15 - The Internet: Digital and Social Media

For example, visit the Ford.com website. Once there, one can find information about Ford’s corporate governance, events, projects, philanthropy, etc. For public relations people, the Internet has become a major tool to go along with the traditional public relations mix.

14.

The chapter discusses a variety of new Internet advertising forms including Podcasting, RSS and blogs. Explain what each of these are. What are some of the potential advantages and disadvantages associated with the use of each? (LO1) The chapter provides a number of new advertising forms that have are now common on the Internet. Without listing all of these here, it is possible to discuss their advantages and disadvantages, as they are pretty consistent across all. Given their novelty, there will no doubt be more to add to these lists over time. The primary advantage to these forms probably lies in the fact that they are consumer driven—i.e, that they can be accessed by the receiver wherever and whenever they want. One can access a Podcast that appeared earlier in the day, yesterday, or at some other time when and where they want to hear it. Likewise, access to a blog and the information provided therein is also up to the receiver. The new forms are also useful in reaching younger consumers, many of whom are less tuned in to traditional media forms. The penetration of iPods among younger age groups makes the information provided through podcasts available to this market segment at any time. All of these forms also provide information and insights that may not be available through traditional media. For example, blogs may carry information not known to some media, or provide very different perspectives on a subject. RSS allows access to a variety of sources addressing the same subject or material, at the click of a mouse. Additional insights and credibility (maybe!) are additional advantages offered through these media. Blogs—if credible—can offer the consumers point of view on products and/or services— not just the view of advertisers. At the same time, there are some problems associated with these media. One is the issue of credibility. There seems to be some underlying assumption that if the information appears on a blog it is credible. Yet, blogs are often not monitored, and to date, not regulated. Thus the information that appears there may not always be correct or unbiased. Some companies—like McDonalds—have been accused of creating blogs for purely advertising purposes, without identifying the fact that they are the sponsors. Many other companies create blogs talking about the great aspects of their products, when, in fact, they are nothing more than advertising messages. There is also concern about the monitoring of blogs for research purposes by large companies. While blogs are supposedly free speech, companies can learn a lot about what people think about them and their products, plant writers on the blogs, and denigrate the competition. To date, these new advertising forms have shown great promise. The number of people participating in the use of Podcasts, blogs, etc. is still relatively small, but surely on the increase.

Chapter 15 - The Internet: Digital and Social Media

15.

One of the problems slowing the rate of adoption of the Internet as an advertising medium is the fact that this medium has been slow to adopt traditional advertising metrics. Discuss why this has been the case, and what must be done to overcome the problem. (LO3) When the Internet was in its boom era, many of those involved in the medium felt that it was a completely unique and novel way of conducting business. Since most of them were “techies”, they adopted their own methodologies and terminologies—most of which were technical in nature. As a result, traditional marketers were faced with having to determine what was meant by these new terms such as hits, clicks, unique visitors, etc. In many cases, because they did not understand them—or believe in their validity—these traditional media buyers stayed away from purchasing on the Internet. Over time, these same buyers started to call for more traditional measures to be provided by the websites. Procter & Gamble was one of the first—and most powerful—to demand traditional measures like CPM be used. While reluctant, at first, it became obvious that if they wanted to sell advertising space, the websites would have to adopt traditional measures. In recognition of the problem, the Internet Advertising Bureau (IAB)—the Internet’s largest and most influential trade organization—combined with eight prominent Web publishers and two technology firms to research the methods being used in determining Internet metrics. In 2002 their report was completed and a series of voluntary guidelines was established, providing consistency in terminology and credibility to the measures. In addition, more traditional measures such as CPM were provided. The combination of these acts has resulted in a higher degree of confidence among traditional advertisers, and less reluctance to purchase advertising on the Web.

IMC Exercise If they are willing, have students discuss their social media usage. Have them report on which media they now receive ads on, what type of ads they are, and what they think of this practice.

Chapter 16—Sales Promotion

CHAPTER 16 SALES PROMOTION Chapter Overview In this chapter, we turn our attention to sales promotion and its role in a company’s integrated marketing communications program. We examine how marketers use both consumer- and trade-oriented promotions to influence the purchase behavior of consumers as well as wholesalers and retailers. The chapter begins with a discussion of the scope and role of sales promotion and a discussion of the reasons for its increasing importance. Attention is also given to sales promotion objectives including a discussion of consumer franchise-building versus nonfranchise-building promotions and specific promotional objectives. Much of the chapter is devoted to an examination of the various consumer- and trade-oriented sales promotion techniques used by marketers and considerations involved in their use. The chapter concludes with a discussion of how sales promotion and advertising can be integrated with other elements of the promotional mix as well as problems involving marketers’ over-reliance and even abuse of sale promotion.

Learning Objectives 1. Describe the role of sales promotion in the IMC program. 2. Identify the objectives of sales promotion programs. 3. Explain how to choose consumer- and trade-oriented sales promotion tools. 4. Explain how to coordinate sales promotion with advertising. 5. Discuss potential problems in the use of sales promotion tools.

Chapter and Lecture Outline I.

THE SCOPE AND ROLE OF SALES PROMOTION

For many years, advertising constituted the major part of the promotional budget of most consumer product companies. Over the past decade, however, many marketers have come to the realization that advertising alone often is not enough to stimulate demand for their products and are increasingly turning to sales promotion methods targeted at both consumers and the trade. Many companies are developing fully integrated marketing programs that include consumer and trade promotions that are coordinated with advertising, publicity/public relations, and Internet marketing programs as well as sales force efforts. It is important to note these trends and emphasize to students the important role sales promotion plays in the marketing of most consumer products. The opening vignette shows how important sales promotion can be in the marketing program of many companies as well as what happens when marketers become too reliant on promotional discounts and then try to cut back on their use.

Chapter 16—Sales Promotion

Sales Promotion is defined as “a direct inducement that offers an extra value or incentive for the product to the sales force, distributors or the ultimate consumer with the primary objective of creating an immediate sale.” There are several important aspects to sales promotion to note: • •

Sales promotion involves some type of inducement that provides an extra incentive to buy. Sales promotion is essentially an acceleration tool, designed to speed up the selling process and maximize sales volume.

•

Sales promotion activities can be targeted to different parties in the marketing channel.

Sales promotion can be broken into two major categories: •

Consumer-oriented sales promotion, which are promotions directed at the consumers who are final purchasers of goods and services.

•

Trade-oriented sales promotion, which includes promotional programs and activities designed to motivate distributors and retailers to stock and promote a manufacturer’s products

The various activities included under each sales promotional category are shown in Figure 16-1 of the text. This chapter focuses on both consumer- and trade-oriented promotions. Professor Notes

II.

THE GROWTH OF SALES PROMOTION The role and importance of sales promotion in companies’ integrated marketing communications programs have increased dramatically over the past decade. In 2016, spending on various forms of sales promotion exceeded $300 billion while another $150 is spent each year on trade promotions targeted at retailers and wholesalers.

Reasons for the Increase in Sales Promotion—The increases in the percentage of the IMC budget allocated to sales promotion over the years concerned many marketers who still viewed media advertising as the primary tool for brand building and saw sales promotion programs as little more than gimmicks that contributed little to brand equity. There are a number of reasons for the increases spending on sales promotion. These include:

Chapter 16—Sales Promotion

1. The growing power of retailers—In recent years several developments have helped to transfer power from the manufacturers to the retailers. With the advent of optical checkout scanners and sophisticated in-store computer systems, retailers gained access to data concerning how quickly products turn over, which sales promotions are working and which products make money. Retailers use this information to analyze sales of manufacturers’ products and then demand discounts and other promotional support from manufacturers of lagging brands. Consolidation of the grocery store industry has also resulted in larger and more powerful retailers who can use their purchasing power to demand more trade promotion deals. We discuss how Wal-Mart has become such a powerful retailer and the challenges this creates for marketers who must often develop account specific promotions for the retailing giant. 2. Declining brand loyalty—Consumers have become less brand loyal and are purchasing more based on price, value, and convenience. They are also looking for more deals and will buy whatever brand is on sale or for which they can use a coupon. 3. Increased promotional sensitivity—The percentage of purchases made in conjunction with some sort of promotional offer has increased sharply over the past decade. A recent IRI Market Pulse Survey found that 25 percent of consumer are buying packaged-goods brands that are on sale over their preferred brands and 23 percent are making product selections based on loyalty card discounts. 4. Brand proliferation— Research shows that about 75 percent of consumer packaged goods and retail products fail in their first year—in large part because of ingrained consumer shopping habits. Marketers are relying more on samples, coupons, rebates, premiums, and other innovative promotional tools to achieve trial usage of their new brands and encourage repeat purchase. Supermarkets carry an average of 30,000 SKUs compared to 13,000 in the early ‘80s 5. Short-term focus—The increase in sales promotion in motivated by marketing plans and reward systems geared to short-term performance and the immediate generation of sales volume. Marketing and brand managers use sales promotions routinely, not only to introduce new products or defend against the competition, but also to meet quarterly or yearly sales and market share goals. The opening vignette to the chapter discusses how many marketing managers have become enamored with the short-term increases in sales, which are generated by promotional discounts, and often results in them becoming overly dependent upon them, which in turn results in less money being allocated to advertising or new product development. 6. Increased accountability—Many companies are demanding to know what they are getting for their promotional expenditures. Many companies feel that sales promotion programs are more economically accountable than advertising since they often generate a quick and easily measured jump in sales.

Chapter 16—Sales Promotion

8. Competition—Many marketers are turning to sales promotion to gain or maintain a competitive advantage. A major development in recent years is the use of account-specific marketing (also referred to as comarketing) whereby a marketer collaborates with customizes promotions for individual retailers. Exhibit 16-6 provides an example of an account specific promotion used by WD-40. 9. Growth of Digital Marketing—Many marketers now use the various forms of digital marketing to implement sales promotion programs as well as measure their effectiveness. Promotional offers such as coupons and discounts as well as entry forms for contests and sweepstakes appear on marketers’ websites as well as their media pages. Discounts and promotional offers are important reasons why people follow brands on social media sites such as Facebook and Twitter. B.

Concerns about the Increased Role of Sales Promotion—It is important to note that the increased use of sales promotion is coming at the expense of media advertising. This has led to concern that the increased use of sales promotion is having a negative effect on brand equity. As was noted in the Chapter 2, brand equity refers to a type of intangible asset of added value or “goodwill” those results from the favorable image or differentiation that a brand has achieved. Another term used synonymously with brand equity is consumer franchise. There are many examples of situations where marketers have hurt the brand equity of their products by placing more emphasis on consumer and trade promotions than advertising.

Consumer Franchise-Building versus Nonfranchise-Building Promotions—It is important to make the distinction between consumer-franchise building sales promotions and non-franchise building efforts. Consumer franchise-building promotions are designed to communicate distinctive brand attributes and contribute to the development and reinforcement of brand image and identity. Nonfranchise-building promotions are designed to accelerate the purchase decision process and generate immediate increases in sales. They do very little, if any, to contribute to the brand identity and image. The chapter discusses concerns over marketers becoming too dependent upon sales promotion and how this is undermining their brand building efforts. The chapter opener provides an excellent example of the challenges marketers face in attempting to wean consumers off of promotional offers. IMC Perspective 16-1 discusses how retailer JC Penney found it difficult to cut back on the use of promotions. Professor Notes

Chapter 16—Sales Promotion

III.

CONSUMER-ORIENTED SALES PROMOTION Marketers make extensive use of sales promotion, particularly those marketing to consumers and have found a variety of ways to give consumers an extra incentive to purchase their products and services.

Objectives for consumer-oriented sales promotion—As the use of sales promotion techniques continues to increase, companies must consider what they hope to accomplish through their promotions and set clearly defined objectives and measurable goals for their sales promotional programs. While the basic goal of most sales promotion activities is to induce purchase of a brand, there are a number of other objectives a marketer might have for both new and established brands. These include: 1. Obtaining trial and repurchase 2. Increasing consumption of an established brand 3. Defending current customers 4. Targeting a specific market segment 5. Enhancing integrated marketing communications and building brand equity

Professor Notes

IV.

CONSUMER-ORIENTED SALES PROMOTION TECHNIQUES

The various consumer-oriented sales promotion techniques used by marketers should be discussed along with their advantages and limitations and the role they play in meeting various promotional objectives. A. Sampling—Sampling involves a variety of procedures whereby consumers are given some quantity of a product for no charge to induce trial. Sampling is often used as a way of introducing a new brand to the market although it is also used for established products. •

The products are of relatively low unit value, so samples do not cost too much.

•

The products are divisible, which means they can be broken into small sample sizes that are adequate for demonstrating the brand’s features and benefits to the user.

•

The purchase cycle is relatively short, so the consumer will consider an immediate purchase or will not forget about the brand before the next purchase occasion.

1. Benefits and limitations of sampling • • • •

Samples are an excellent way of inducing trial. Sampling allows consumers to experience a product directly and gain an appreciation for its benefits and characteristics. Costs of sampling programs can be very high. The benefits of a brand may be difficult to gauge from a sample.

Chapter 16—Sales Promotion

2. Sampling Methods—Decisions must be made concerning the method by which the sample will be distributed. The sampling method is important not only in terms of costs, but also in terms of influencing the type of consumer who receives the sample. Some of the more widely used sampling methods include: • Door-to-door sampling • Sampling through the mail • In-store sampling • On-package sampling • Event sampling 3. Other Methods of Sampling—There are other sampling methods available such as inserts in magazines and newspapers, requesting samples by phone, and the use of specialized sample distribution services. The Internet is yet another way companies are making it possible for consumers to sample their products. There are several online sampling services, such as MyTownOffers. B.

Couponing—Couponing is the oldest, yet most widely used and effective sales promotions tool. The number of coupons distributed to consumers in the United States has increased dramatically, going from 16 billion in 1968 to 332 billion in 2010 during the great recession, with 3.3 billion being redeemed. As the economy recovered, the number of coupons distributed declined to 307 billion in 2015 with 2.4 billion redeemed. The average face value of coupons distributed in 2015 was $1.79 while the average value for the 2.4 billion redeemed was $1.42.was $1.72 in 2014. 1. Advantages and limitations of coupons Pros: • Coupons make it possible to offer a price reduction to those consumers who are price sensitive without having to reduce the price for everyone. • Coupons allow the offering of a price reduction without having to rely on retailers. • Couponing can be an effective promotional device for generating trial of a new brand. • Coupons can be used to encourage trial and increase consumption of established brands. Cons: • It can be difficult to estimate how many consumers will redeem a coupon and when they will do so. • • •

Coupons intended to attract new users of established brands are often redeemed by already loyal users. Couponing programs can be expensive. Problems of coupon misredemption and fraud exist.

2. Coupon Distribution—Coupons can be distributed in a variety of ways including: • • •

media delivery in newspapers and magazines and as free-standing inserts (FSIs) through direct mail in or on packages 16-6

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• • •

in stores and at points-of-purchase over the Internet through online promotion sites through mobile marketing by sending coupons directly to smartphones and other mobile devices Couponing Trends—Coupons continue to be the most effective sales promotion tool for influencing consumers purchase behavior. Some companies have tried to cut back on their use of coupons because of concerns over costs and effectiveness. Marketers also continue to search for new and more effective couponing techniques to get around the problem of “coupon clutter.” In-store coupon distribution techniques are becoming more popular and many companies are attempting to more precisely target consumers when distributing their coupons. Several companies now offer online couponing services. Consumers can access coupons for their local area online through the Valpak.com website. Another form of online couponing that has become very popular over the past decade is through deals and discounts offered by companies such as Groupon and Living Social. The best-known company competing in this promotional space is Groupon, which was founded in 2008 in Chicago and is rapidly expanding throughout the world. A rapidly growing method of distribution is mobile couponing whereby coupons are sent directly to mobile phones. Digital and Social Media Perspective 16-1 discusses the growing popularity of mobile coupons. Consumers seek out coupons from a number of different digital channels including retailer, manufacturer, and coupon websites as well as search engines, coupon-specific apps, e-mails from retailers and coupon companies, push notifications, and QR codes on digital signage or catalogs and through search engines such as Google, Bing, and Yahoo!. Companies such as ScanLife, ShopSavvy, and RedLaser provide shopping apps that allow consumers to scan the UPC bar code with their phone to get a coupon for that product or a related one.

Premiums—A premium is an offer of an extra item of merchandise or service either free or at allow price that is used as an incentive for purchase. The two basic types of premiums are: 1. Free Premiums—usually inexpensive gifts or items that are included in the product package, distributed with a purchase, or sent to consumers who make mail-in-requests along with a proof of purchase. One of the fastest-growing types of premiums or incentive offers being used by marketers is airline miles which have become a type of promotional currency 2. Self-liquidating premiums—those that require the consumer to pay some or all of the cost of the premium plus handling and mailing costs. Self-liquidating premiums can be used to create interest in a brand as well as generate goodwill that enhances the image of a brand. Advantages and Limitations of Premiums Pros: • Premiums have high impulse value and can provide consumers with extra incentives to purchase a product. • Premiums are consumers most preferred types of promotions.

Chapter 16—Sales Promotion

•

Premiums can be used to create interest in a brand as well as goodwill that may enhance the brand’s image. • Premiums can be a way of generating trade interest and support. Cons: • Premiums can have high costs. • There may be restrictions on the use of premiums. • Redemption rates of mail in premiums are low. • Consumers may not perceive the premium offer as a value D.

Contests and Sweepstakes—A contest is a promotion whereby consumers compete for prizes or money based on skills or ability and winners are determined by judging entries against some predetermined criteria. Contests often provide a purchase incentive by requiring a proof of purchase to enter or to obtain an entry form from a dealer or advertisement. A sweepstakes is a promotion whereby winners are determined purely by chance and cannot require a proof of purchase as a condition for entry. Another form of a sweepstakes is a game, which also has a chance element associated with winning. 1. Problems with contests and sweepstakes • A contest or sweepstakes promotion may overwhelm the ad or brand and may do little to contribute to the brand franchise or image. • The presence of professionals or hobbyists who submit large numbers of entries but have no interest in the product can detract from the effectiveness of contests and sweepstakes. There are many websites on the Internet that inform consumers of all the contest and sweepstakes being held, the entry dates, entry requirements, and other information needed to enter. • Numerous legal problems and considerations affect the design and administration of contests and sweepstakes.

Refunds and Rebates—Refunds or rebates are offers to return some portion of the product purchase price after supplying some sort of proof or purchase. Consumers are generally responsive to refund or rebate offers, particularly as the size of the savings offer increases. Marketers are using rebates extensively, particularly in products categories such as consumer electronics. However, as discussed in the chapter, many consumers have become frustrated with rebates and many marketers, as well as retailers, are taking steps to deal with consumer dissatisfaction and problem created by them. 1. Evaluating refunds and rebates—The advantages and disadvantages of refunds and rebates are: Pros: • Refunds and rebates can be effective sales promotional tools for creating new users and for encouraging brand switching. • Refunds and rebates are often perceived as offering immediate savings or value even though the money is not received until the offer is redeemed and many consumers never follow through on the offer.

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•

Refunds and rebates can allow a marketer to achieve a price reduction for much less than if a direct price deal were utilized.

Cons: • Many consumers do not like the delay and effort required to redeem refund and rebate offers. • • •

The terms of some rebate offers are inconvenient or even unrealistic. Consumers may have a negative perception of brands that use rebates. Many retailers do not want to become involved with the administration of rebate programs.

Bonus Packs—Bonus packs offer the consumer an extra amount of a product at the regular price by providing larger containers or extra units. Here are some of the advantages and limitations of bonus packs: Pros: • They provide extra value to consumers without having to get involved with things such as coupons or rebate offers. • They can be an effective maneuver against a competitor’s promotion or introduction of a new brand by loading consumers with the product and making them less susceptible to competitors’ promotional efforts. • Bonus packs often receive favorable response from retailers. Cons: • They may require additional shelf space and do not provide extra profit margins to the retailer. • They may appeal primarily to current users who may have purchased the brand anyway.

Price-off Deals—price-off deals provide a reduction in the regular price of the brand, typically right on the package through specially marked price packs. Here are some of the advantages and limitations of price-off promotions: Pros: • • •

They are controlled by the manufacturer, which enables them to ensure that the promotional discount reaches the consumer rather than being kept by the trade. Price-off deals usually present a readily apparent value to consumers, particularly when they have a reference price point for the brand and recognize the value of the discount. Price-offs can provide a strong influence when point-of-purchase comparisons are being made.

• They can encourage consumers to buy larger sizes. Cons: • They can create pricing and inventory problems for consumers. • They may appeal primarily to regular users rather than attracting nonusers.

Chapter 16—Sales Promotion

Loyalty programs—Loyalty programs (also referred to as continuity or frequency programs) are promotional programs that reward customers for continuing to purchase the same brand of a product or service over time. Loyalty programs have become commonplace in a number of product and service categories, particularly travel and hospitality, as well as among retailers. Many consumer packaged goods companies are also developing frequency programs that offer consumers an opportunity to accumulate points for continuing to purchase their brands. The points can be redeemed for gifts such as merchandise or for discounts. Reasons for the popularity of loyalty programs include: • • •

Marketers view these programs as ways of encouraging consumers to use their products or services on a continual basis and as a way of developing customer loyalty. Many companies are realizing the importance customer retention and frequency programs help them build relationships with customers. Frequency programs provide marketers with the opportunity to develop databases containing valuable information on their customers and which can be used for direct marketing purposes.

Challenges associated with frequency programs include: • Finding ways to make them true loyalty programs rather than just frequent-buyer programs • Using frequency programs to effectively differentiate a product, service, or retail store, particularly when they are being used by competitors I. Event Marketing—Event marketing is a form of promotion where a company or brand is linked to a specific event or a themed activity developed for the purpose of creating experiences for consumers and promoting a product or service. Marketers often do event marketing by associating their product with a popular activity such as a sporting event, concert, fair, or festival. It is important to make a distinction between event marketing and event sponsorships, as the two are often used interchangeably yet refer to different activities. Event sponsorships are promotions whereby a company develops sponsorship relations with a particular event and provides financial support in return for the right to display a brand name, logo, or advertising message and be identified as a sponsor of the event. Event marketing often takes place as part of a company’s sponsorship of activities such as concerts, the arts, social causes, and sporting events. Event sponsorship is discussed in Chapter 17. Event marketing has become very popular in recent years for several reasons: • Events can be used as to create experiences for consumers and associate a company’s brand with certain lifestyles and activities. • Events can be used to distribute samples as well as information about a marketer’s product or service or to allow consumers to experience the product. •

Events often provide marketers with access to large numbers of consumers at a relatively low cost and can be an effective part of a grass roots marketing program.

Summary of Consumer-Oriented Promotions and Marketer Objectives—the discussion of the various consumer-oriented promotion techniques shows that marketers use these tools to accomplish a variety of objectives. These techniques provide consumers with an extra incentive or reward for engaging in a certain form of behavior such as purchasing a brand. These incentives or rewards can be either immediate or delayed. Figure 16-5 in the text outlines which sales 16-10

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promotional tools can be used to accomplish various objectives of marketers (such as inducing trial, customer retention/loading, and supporting the IMC program and/or building brand equity) and whether the incentive is immediate or delayed. This chart is a useful way of summarizing the discussion of consumer-oriented sales promotion tools. Professor Notes

TRADE-ORIENTED SALES PROMOTION

Objectives of Trade-Oriented Sales Promotion—As with consumer oriented promotions, sales promotion programs targeted to the trade should be based on well-defined objectives and a consideration of what the marketer wants to accomplish by using trade promotions. Objectives for trade-oriented promotions include: 1. Obtain distribution for new products 2. Maintain trade support for established brands 3. Encourage retailers to display and promote established brands 4. Build retail inventories

Types of Trade-Oriented Promotions—There are a variety of trade promotion tools that manufacturers can use as inducements for wholesalers and retailers. These include: 1. Contests and incentives—Manufacturers use contests and special incentive programs to stimulate greater selling effort from resellers management or sales personnel. An important target of contests or special incentives is the sales personnel of the middlemen. In addition to using contests, programs targeted to sales personnel may include push money or spiffs. 2. Trade allowances—Probably the most commonly used trade promotion is some form of trade allowance, which is a discount or deal offered to the retailer or wholesaler to encourage them to stock, promote, or display a manufacturer’s products. There are several types of trade allowances including: • buying allowances—a deal or discount offered to resellers in the form of a price reduction on product ordered during a fixed time period • •

promotional allowances—discounts provided to retailers for performing certain promotional or merchandising activities in support of a manufacturer’s brand slotting allowances—rather than a discount, these are special fees that retailers charge manufacturers for agreeing to handle a new product and providing a slot or position in their store to accommodate the new product. Some retailers have even been demanding failure fees if a new product does not hit a minimum sales level within a certain time. 16-11

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3. Displays and point-of-purchase materials—Marketers use a variety of point-of-purchase materials including end-of-aisle displays, posters, banners, shelf cards, motion pieces, standup racks and other material. Point-of-purchase displays are an important promotional tool because they can help a manufacturer obtain more effective in-store merchandising of their products. Products often sell better when they are on display as they are more likely to be noticed by consumers and displays also are often accompanied by price deals. 4. Sales training programs—Another important form of manufactured sponsored promotional assistance is sales training programs for reseller sales personnel. Manufacturers provide sales training assistance to retail salespeople in a number of ways including having formal classes, having their sale reps work with resellers and providing sales manuals, brochures, videos and other selling aids. 5. Trade shows—A trade show is a type of exhibition or forum where manufacturers display their products to current as well as prospective buyers. Trade shows provide a major opportunity to display and demonstrate products, interact with customers, identify new prospects, gather customer and competitive information and even write new orders. The social aspects of trade show are also important as many customers use them to entertain key customers and to develop and maintain relationships. 6. Cooperative advertising—Cooperative advertising, whereby the cost of advertising is shared by more than one party, is another important form of trade promotion. Actually there are three types of cooperative advertising including: • Horizontal cooperative advertising—refers to advertising sponsored in common by a group of retailers, companies or other organizations providing products or services to a market. Automobile dealerships that are concentrated in a specific location in many large metropolitan areas often use this form of cooperative advertising. • Ingredient sponsored cooperative advertising—refers to advertising supported by a raw materials or component manufacturer to help establish end products using the company’s materials or ingredients. The popular “Intel Inside” campaign is an example of this form of cooperative advertising. Intel provides cooperative advertising funds to personal computer manufacturers which totals five percent of the total dollar amount of microprocessors they purchase from the company. • Vertical cooperative advertising—Vertical cooperative advertising is the most common type of co-op ad program used as part of a trade-oriented promotional program. Under a vertical co-op program, the manufacturer pays for a portion of the advertising a retailer runts to promote its product and its availability in the retailer’s place of business. The limit or amount of co-op funds the manufacturer provides to the retailer is usually based on a percentage of dollar purchases made from the manufacturer. Professor Notes

Chapter 16—Sales Promotion

McGraw-Hill Connect ®: Shifting Role of the Promotion Agency Type of Activity: Click and Drag Activity Summary: In this activity, students will read about a marketing manager who is redesigning how her firm works with promotional agencies. She is trying to demonstrate the shifting role of the promotion agency by identifying traditional strategies and comparing those with new and improved strategies. Students will then match the characteristic to either traditional promotional agencies or new and improved promotional agencies. Activity Learning Objectives: 16-02 Identify the objectives of sales promotion programs. 16-03 Explain how to choose consumer- and trade-oriented sales promotion tools. CONCEPT REVIEW: To coordinate their advertising and sales promotion programs more effectively, many companies are getting their sales promotion agencies more involved in the advertising and promotional planning process. Rather than hiring agencies to develop individual, nonfranchise-building types of promotions with shortterm goals and tactics, many firms are having their sales promotion and advertising agencies work together to develop integrated promotional strategies and programs. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

McGraw-Hill Connect ®: Sales Promotion Tools for Various Objectives Type of Activity: Click and Drag Activity Summary: In this activity, students will read about a marketing manager who must decide which consumer sales promotion tools will best help his firm achieve each of their desired objectives. Students will then match each sales promotion tool with its correct marketing objective. Activity Learning Objective: 16-03 Explain how to choose consumer- and trade-oriented sales promotion tools.

CONCEPT REVIEW: Over the past two decades, marketers have been allocating more of their promotional dollars to sales promotion. There has been a steady increase in the use of sales promotion techniques to influence consumers' purchase behavior. The growing power of retailers, erosion of brand loyalty, increase in consumers' sensitivity to promotions, increase in new product introductions, fragmentation of the consumer market, short-term focus of marketing and brand managers, and increase in advertising clutter are some of the reasons for this increase. Difficulty: Medium Bloom’s: Understand 16-13 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 16—Sales Promotion

AASCD: Analytical Thinking

McGraw-Hill Connect ®: Mazzio’s Cost per Coupon Redeemed Type of Activity: Case Analysis Activity Summary: Mazzio's Italian Eatery is a network of fast-casual Italian food restaurants– offering award-winning pizzas, made-to-order pastas, hot toasted sandwiches, fresh specialty salads, appetizers and desserts. With 165 restaurants in nine states, Mazzio's is rapidly growing and gaining popularity. This activity will have the students select the best answer for each question related to their marketing strategy. Activity Learning Objective: 16-03 Explain how to choose consumer- and trade-oriented sales promotion tools.

CONCEPT REVIEW: Couponing program expenses include the face value of the coupon redeemed plus costs for production, distribution, and handling of the coupons. Former Procter & Gamble chairman Durk Jager, who led efforts to rein in the company's use of coupons in the late 90s, has argued that they are extremely inefficient. He contends that it may cost as much as $50 to move a case of goods with coupons that may generate only $10 to $12 in gross profit. Marketers should track coupon costs very carefully to ensure their use is economically feasible. Difficulty: Medium Bloom’s: Analyze AASCD: Analytical Thinking VI. COORDINATING SALES PROMOTION WITH ADVERTISING AND OTHER IMC TOOLS Sales promotion techniques usually work best when used in conjunction with advertising. Conversely, a consumer sales promotion program can enhance the effectiveness of an ad campaign. When properly planned and executed to work together, sales promotion can provide a synergistic effect that is much greater than the response that would be generated from either promotional mix element used alone. Proper integration of advertising and sales promotion requires the coordination of several decision areas including: A.

Budget Allocation—this allocation depends on a number of factors: • the promotional objectives of the campaign • the market and competitive situation • the brand’s stage in its life cycle

Coordination of Ad and Promotion Themes—To integrate the advertising and sales promotion programs successfully, the theme of consumer promotions should be tied in with the advertising and positioning themes wherever possible. The MasterCard “Win 500 Flights” sweepstakes, which was promoted using the ad shown in Exhibit 16-35, is a good example of this. 16-14

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Media Support and Timing—Media support for a sales promotion program is critical as promotions and should be coordinated with the media schedule used for the advertising campaign. Using a promotion without prior or concurrent advertising can limit its effectiveness and risk damaging the brand’s image. Conversely, the effectiveness of media advertising can be enhanced by a coupon, a premium offer, or an opportunity to enter a sweepstakes or contest.

Professor Notes

VI.

SALES PROMOTION ABUSE

The increasing use of sales promotion in the marketing program represents a change in IMC strategy regarding how companies market their products and services. However, many experts have questioned the logic of this increased emphasis on sales promotion. Concerns include the following: • • •

Marketers becoming too dependent on using sales promotion to produce short-term or immediate increases in sales Investing in sales promotion at the expense of advertising and thus not building the long-term value of the brand franchise Brands losing their perceived value from the perspective of consumers when they are purchased because of a promotional offer

In many situations, there is the potential for companies to fall into a sales promotion trap or spiral whereby all competitors are making extensive use of promotions. Figure 16-8 shows this dilemma and how the only way out of it is for both parties to cooperate by cutting back on promotions. Professor Notes

Teaching Suggestions In this chapter, we examine the very important area of sales promotion including the promotional activities directed at consumers as well as trade. This is a very long chapter as it covers both consumerand trade-oriented sales promotion very thoroughly. We strongly suggest that this material be covered over a two-class period. The first lecture can provide an overview of the sales promotion area, and reasons for the shift in marketing dollars to sales promotion and consumer-oriented sales promotion. The second lecture can cover trade promotion, the coordination of sales promotion with advertising and other promotional mix elements, and the problems of sales promotion abuse. In covering sales promotion, you may want to refer students back to Chapter 4 and the discussion of behavioral learning theory. The discussion of shaping procedures is particularly relevant to the use of sales promotion. A discussion of the shaping process is particularly helpful in showing how sales promotion techniques can be valuable in leading a consumer from trial of a new brand to regular purchase through the use of samples and coupons. 16-15 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 16—Sales Promotion

It is very important to discuss the increasing emphasis many companies are placing on sales promotions targeted to both consumers and trade and how it has come at the expense of media advertising. The instructor should point out the fact that sales promotion accounts for anywhere from 60 to 75 percent of the promotional budget of many consumer-product companies. It is also helpful to review some of the reasons for the increase in sales promotion and discuss whether this trend will continue. The instructor should review the various consumer- and trade-oriented sales promotion techniques along with their advantages and limitations. Students should be encouraged to evaluate these techniques as strategic and tactical promotional tools and to consider the reasons why marketers use them. We also feel that it is very important to discuss how sales promotion can and should be coordinated with the advertising program. Figure 16-7 shows how the role of sales promotional agencies is changing and provides insight into how many firms are attempting to coordinate their advertising and promotional efforts. It is important to clarify the differences between event marketing and event sponsorship, as the two are often confused. We discuss event marketing as a form of sales promotion, while event sponsorships are discussed in Chapter 17 as part of the public relations program. You might also want to review the information in Figure 16-5, which shows how sales promotion tools can be used to accomplish various marketing objectives and whether the extra consumer reward or incentive is immediate or delayed. Some attention should be given to the problem of sale promotion abuse and the number of companies that are becoming over-reliant on sales promotion for a short-term “sales fix” rather than investing in the longterm image of the brand. Time should also be spent discussing the sales promotional trap shown in Figure 16-8. To keep abreast of development in the sales promotion area you might refer to sources such as the Brand Activation Association, which is now part of the Association of National Advertisers (ANA) and has a very informative website (http://www.ana.net/content/show/id/brand-activation-info). Also available on their website is a link to the current years Reggie Awards winners, which provide a detailed analysis of these award-winning promotions including a marketing overview, objectives, strategy and tactics, results achieved, and a summary. They also contain examples of many of the ads and other types of promotional materials used in the promotion, and thus are an excellent source of information.

Answers to Discussion Questions 1. The chapter opener discusses how many retailers have become overly dependent on discounts and promotions and the problems this has created for them. Discuss some of the reasons retailers have increased their use of discounts and promotions. How might they reduce their dependency on them to drive store traffic and sales? (LO 16-1, LO 16-5) Surveys have shown that more than 40 percent of the items American consumers buy today were bought on sales versus only 10 percent in the 1990s. Most consumers have become more disciplined in their spending and are carefully scrutinizing their purchases, rethinking their brand loyalties, and looking for ways to save money by doing comparison shopping, clipping coupons, or downloading offers from Groupon or other sites. Many consumers are always on the lookout for discounts and deals, while many marketers are all too happy to give them one; they are creating a discount trap from which there is no easy escape. Some retailers who have become overly dependent on promotions and discounts have tried to reduce their dependence on them and more toward more of an “everyday low pricing approach.” Retailers are not the only companies affected by the discounting trend; the vendors who supply them with merchandise are also being impacted. Many marketers have turned to coupons, rebates, and other forms of discounts to appeal to promotion-sensitive consumers. A number of the major hotel chains are turning to promotions to woo travelers away from third-party booking sites such 16-16 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 16—Sales Promotion

as Expedia and Priceline that offer discounted rooms by either matching their prices or giving them perks such as room upgrades or extra reward points. For example, Hilton Worldwide launched one of the largest marketing campaigns ever to let its loyalty program members know they would receive discounts on rooms if they booked directly. Many marketers and retailers have created a dilemma from which there is no easy escape. They know that discounts will increase sales in the short term, but the more marketers use these promotions, the more consumers become conditioned to purchase an item only when it is on sale or they have a coupon. Moreover, many consumers love to shop for deals and view it like playing a game; the money they save is how they keep score. The temptation for marketers to play the game and look for the quick fix and sales spike from a promotion will always be there as well. It is likely that many will continue to yield to the temptation and offer a discount rather than try to sell their brands at full price. 2. Discuss the difference between consumer-oriented promotions and trade-oriented promotions and the role each plays in a marketers IMC program. What are the various objectives for each category of sales promotion? (LO 16-1, 16-2, 16-3) Consumer-oriented sales promotions are those targeted directly to consumers who are the ultimate buyers of products and services and are designed to provide them with an extra incentive to buy. Trade-oriented promotions target marketing channel members such as distributors and retailers and are designed to motivate them to stock, display, and promote a product. Both consumer- and trade-oriented promotions are an important part of a firm’s IMC program. In a very competitive market, consumers must often be provided with an extra incentive such as a coupon, bonus pack, premium, or price reduction to encourage them to choose one brand over another. Consumer-oriented promotions, along with advertising, are a very important part of marketers’ “pull strategy” which creates demand for their brands. With the increasing amount of advertising clutter and many purchase decisions being made in the store, marketers must do more than just advertise to gain and hold market share. Trade-oriented promotions are also very important, as marketers must give attention to getting the channel members to stock, display and promote their brands. Much of the power in channels of distribution has shifted to the retailer and competition as limited amounts of shelf space have intensified. Thus, marketers must focus attention and effort on “pushing” their products through the channels of distribution. Tradeoriented promotions are an important part of this strategy. The text discusses objectives for both consumer and trade-oriented promotions and provides examples of specific sales promotion tools for achieving them. 3.

What are some of the reasons brand managers are allocating more of their promotional budgets to sales promotion rather than media advertising? Do you agree with the critics who argue that the increased use of sale promotion is undermining brand equity for many once-powerful brands? (LO 16-1) There are many reasons why sales promotion has become so important and is receiving a great deal of marketers’ promotional budgets. These include the growing power of retailers; the decline in consumers’ brand loyalty and their increasing sensitivity to sale promotion offers; brand proliferation in the consumer market as many product categories have experienced a flurry of new brand introductions; fragmentation of the consumer market and trend toward increased market segmentation and regional marketing; pressure for increased accountability for promotional expenditures from companies and the resulting focus on short-term sales results; reliance on sales promotion as a way of gaining competitive advantage; and finally the increasing problem of advertising clutter which has led many advertisers to turn to consumer promotions as a way of attracting attention and interest to their advertisements. 16-17

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Many brand managers are allocating more of their promotional budgets to sales promotion because they become enamored by the sales spike that often results from some type of promotion such as a sale, discount coupon or some other form of promotion. The impact of media advertising, on the other hand, is rarely immediate and plays out over a longer time period. Since many brand managers stay in their positions for a short time and often end up using promotional tactics that can have more of an immediate impact. In addition, the investment community is very focused on short-term results as publicly traded companies are judged on quarterly sales results. Thus, it is easy for brand managers to turn to sales promotion tools that can generate a more immediate impact rather than patiently waiting for the long-term results that come from media advertising or other programs such as new product development or building channel stronger channel relations. Critics argue that a reliance on short-term sales promotion can undermine the equity of a brand as consumers will become dependent on these promotions and may decide that they will only purchase a brand if it is on sale, they have a coupon for it, or some other type of promotion is available. Consumers are much more price sensitive than they were years ago as they have come to recognize that many marketers will offer some type of promotion or discount for their brand and they will not purchase it until it becomes available. The temptation to look for the quick fix and sales spike generated by using some form of sales promotion will always be there. However, marketing managers must be very careful with regard to the use of sales promotion tactics, as it does not take long to find that the brand can no longer be sold at full price. Once brand equity has been lost through the overuse of sales promotion, it can be very difficult to regain. Marketers are also concerned that the large sums of money they are spending on trade promotions are not being passed on to consumers and thus they are attempting to cut back in this area. Some experts argue that the reallocation of marketing budgets from media advertising to sales promotion is reasonable as many companies are now using the various promotional tools in a more strategic way that contribute to brand equity. The allocation trend toward sales promotion is unlikely to go too much further as many marketers recognize that they are sacrificing brand equity by spending promotional dollars on sales promotion rather than advertising. It is unlikely, however, that we will see a return to the good old days when media advertising accounted for the largest portion of the promotional budget. The sales promotion area is becoming very sophisticated and consumers have learned to expect some type of promotional deal when making a purchase. Thus marketers are likely to continue to provide them with sales promotion incentives in one form or another. 4.

IMC Perspective 16-1 discusses the problems JC Penney encountered when it tried to cut back on the use of promotions and move to a “fair and square” pricing and promotion model. Why do you think JCP customers reacted so negatively to the retailer's reduction in promotional offers? Do you think JCP should have given the new strategy more time to take effect before abandoning it? The problem JC Penney encountered when it tried to abandon the use of coupons and other types of promotional discounts was more than likely a result of doing so too quickly rather than slowly weaning consumers off of them. Consumers had become accustomed to getting huge discounts from the retailer as JCP had been running nearly 600 sales and promotional events per year and nearly 75 percent of the company’s revenue came from merchandise that was discounted by at least 50 percent, more than double the industry average. JCP‘s heavy reliance on promotions made consumers very dependent upon them. Thus, they were very upset when JCP tried to change its promotional program and move to a new pricing and promotion model that was being promoted as ‘fair and square” and designed to provide them with lower every day prices rather utilizing so many promotions. The failure of JC Penney’s effort to cut back on promotions is yet another example of the challenge retailers face when they try to wean consumers off promotions 16-18

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and discounts. Another problem to note with JCP’s failed strategy is that it may have been too complex for consumers to understand the three-tiered pricing and promotion model the company was trying to implement. Consumers do not want to keep track of all of the promotion schedules for retailers and may have been upset when they were not receiving promotional offers and/or went to the store and learned that they were not getting the usual discounts they expected. It is difficult to estimate how long it might have taken the new pricing and promotion strategy to take hold and make JCP shopper less reliant on promotions and more responsive to the everyday low pricing model. Some retailers such as Nordstrom’s only run a few sales a year and thus consumers know that if they want to purchase an item sold there, they are going to have to pay full price or wait several months for it to go on sale, and of course run the risk that it may no longer be available. JC Penney was still offering consumers a number of promotions and felt that the new strategy would actually benefits most consumers by offering lower prices on a regular basis. JCP executives defended the new strategy and responded to investor concerns by arguing that it would take time for consumer to adjust to the changes as they had been conditioned to purchase merchandise that was on sale, offered at a discount or for which they had a coupon. Students might argue that JCP needed to give the new strategy more than a few months and that the company pulled the plug on it too quickly. However, it should be noted that JCP sales declined by 23 percent in 2012 while same-store sales (which is a very important metric for assessing retailer performance) declined by 25 percent. Thus, the company really had no choice but to terminate the “fair and square” pricing strategy and to back to using more promotions and discounts. The company has continued to struggle even after going back to the heavy use of promotions and many analysts question whether JCP will be able to survive. JCP hired a new CEO in 2016 and his goal is to make the retailer smarter and more efficient at keeping customers loyal and selling more merchandise to each one. His strategy includes getting JCP’s 87 million active customers to spent more time shopping in its stores, building on its in-house brands and overhauling its websites and shopping app to make it easier for in-store customers to fine discounts and deals. 5. Discuss how mobile marketing is impacting marketers’ use of sales promotion. (LO 16-1, LO 16-2) Marketers have been bombarding consumers with promotional offers for years, with most of the coupons and promotional offers being made through traditional methods such as FSIs in Sunday newspapers, media advertising, and direct-mail packets sent directly to consumers’ homes. However, with the growth on the Internet most companies are integrating their sales promotion efforts with their digital marketing efforts and using the Internet and social media to make various promotional offers available to consumers. Marketers promote contests and sweepstakes on their websites, as well as through their Facebook and Twitter pages, and consumers can enter them online. These companies promote their contests and sweepstakes offline through traditional media and encourage consumers to visit their websites or social media pages to learn more about these promotions and to enter. Many companies also include premium offers on their websites and consumers can order merchandise online. Some companies such as airlines, car rental companies and hotel/motel chains run special offers that are only available online and provide consumers with extra incentives to make reservations or purchases through the Internet. Marketers also use sales promotion offers as a way to encourage consumers to like their company and/or brands on Facebook or follow them on Twitter. Studies have shown that a high percentage of consumers like a company or brand on Facebook or follow them on Twitter to receive discounts and promotions. As discussed in Digital and Social Media Perspective 16-1, many marketers are now sending promotional offers such as coupons and discount codes directly to mobile devices such as smartphones. They recognize that consumers have become very reliant upon their smartphones to assist them in the shopping process and will seek out coupons and discounts from a number of 16-19 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 16—Sales Promotion

sites, often while in a store. Mobile marketing also relies heavily on sales promotion by providing consumers with discounts or deals based on their location. Mobile marketing will become an even more important part of marketers’ IMC programs because they recognize that mobile now represents nearly two-third of all digital media time for people online, with mobile apps dominating that usage. 6.

What is the difference between a consumer franchise-building and a nonfranchise-building promotion? Find an example of a promotional offer you believe contributes to the equity of a brand and explain how it does so. (LO 16-2) Consumer franchise-building promotions are those that are designed to communicate distinctive brand attributes and contribute to the development and reinforcement of brand identity and image. They build long-term brand loyalty or preference and help the marketer achieve the ultimate goal of full-price purchase. Nonfranchise-building promotions are those that are designed to accelerate the purchase decision process and generate an immediate increase in sales. These promotions do little or nothing to communicate information about a brand’s unique features or benefits and contribute very little, if any, to the building of brand identity and image. Sales promotion has traditionally been viewed as an IMC tool that used to generate short-term sales increases, while brand building was viewed as the exclusive domain of media advertising. In fact, sales promotion was often criticized as undermining brand-building efforts as various tools such as coupons, price-off deals, and refunds or rebates were seen as encouraging consumers to buy based on price. Moreover, many marketers shifted their marketing dollars from media advertising to trade promotion over the past two decades. Much of these trade promotion discounts and allowances were never passed on to consumers while those that did were generally in the form of lower prices or special deals that again encouraged them to buy on the basis of price rather than brand equity. Marketers have been changing the way they view sales promotion and realize that various forms of consumer promotion in particular can be used as a part of their brand-building efforts. As more marketers approach brand building from an IMC perspective, they are recognizing that sales promotion techniques can be used to help create and maintain brand equity. Marketers are developing contests and sweepstakes with themes that are consistent with the image of the brand. Premium offers are now designed to tie into the theme of an advertising campaign and the positioning strategy for a brand. Many marketers are now using frequency or loyalty programs that encourage repeat purchase but also provide opportunities to develop long-term relationships with customers. Event marketing is another form of promotion that has become very popular and provides marketers with the opportunity to associate their brands with certain lifestyle, activities and experiences. As noted in the chapter, sales promotion specialists are now becoming an integral part of the brand-building team and work alongside the advertising group rather than being brought into the process after key strategic branding decisions have been made. Students should find promotional offers that they feel are examples of each type and explain why. Examples of nonfranchise-building promotions are not difficult to find as price-off deals, coupons, and refund offers usually fall into this category. Examples of franchise-building efforts might include a contest or sweepstakes that helps develop and strengthen a brand’s image or position or promotional programs that encourage repeat purchase.

The chapter discusses the contest Unilever and its ad agency developed to launch the new Axe Apollo men’s personal care product line. Evaluate this contest as a consumer franchisebuilding promotion for the Axe Apollo brand. (LO 16-2)

Chapter 16—Sales Promotion

Building and/or maintaining brand equity is an important goal for marketers as they develop their sales promotion strategies and many companies are finding that contests are an excellent way to accomplish these objectives. Contests are a very good way to engage consumers with about a brand and get them to think about how it might be of value to them or to pay attention to specific features and benefits. They also can be a way of creating interest and excitement in a brand and get them to focus on the brand and what it represents or can do rather than just the prize they might win. One way a contest can be used to build brand equity is by developing a theme that is consistent with the image of the brand and helps reinforce the positioning or branding message. The contest developed for the launch of Unilever’s new Axe Apollo line of men’s grooming products is a very good example of a consumer franchise building promotion as it played a central role in the branding and positioning of the new product. The branding strategy behind the new Axe Apollo line was built around the emerging reality of space tourism and the traditional perception many people have of astronauts as heroes. The advertising and promotion for the Axe line has always been about giving young men confidence and showing how using the brand can make them more attractive to women. Unilever took this idea even further by aligning the new Axe brand with the space theme and branding it as Apollo, which is the name for the third American human spaceflight program sponsored by NASA. The global IMC campaign used to introduce the Apollo product line included a contest offering consumers a chance to win a flight on the Lynx suborbital plane which will last about one hour, reach an altitude of 64 miles, and provide a weightlessness experience of about five minutes before descending back to Earth This promotion is an excellent example of how marketers can develop a sales promotion such as a contest that contributes to the development of brand identity and reinforces the positioning theme for a product. 8.

Evaluate the effectiveness of coupons as a sales promotion tool. How would you respond to critics who argue that they are inefficient since less than 2 percent of coupons are redeemed? (LO 16-3) Coupons are one of the most popular and most effective sales promotion tools used by marketers However, their efficiency is often criticized as the redemption rates for coupons is very low and there are significant costs associated with their use. There are a number of reasons why marketers have been questioning the economic feasibility of coupons. Coupons have become very expensive to print, distribute and process and a number of marketers have begun taking a very close look at their efficiency. As shown in Figure 16-3, the costs of a couponing program is very high as it may cost as much as $1.90 per product moved. Many marketers also feel that consumers are less willing to take time to clip and save coupons and during good economic times, they are even less likely to use them. Many companies only use coupons because their competitors do so. Companies may continue to cut back on coupons as their competitors do the same. Another important factor is the reactions of the trade. Many supermarkets are on board with companies who are cutting back on the use of coupons and are interested in eliminating the costly operational aspect of processing coupons in exchange for other types of programs that better meet their needs. Many marketers feel they can compete without coupons by shifting their promotional dollars to other areas such as sampling or in-store distribution or by offering consumers every day lower prices. It is unlikely that marketers will totally eliminate their use of coupons, as they are still very important in generating new-product trial and brand conversion. In fact, during the recent recession coupons became very popular with consumers as 332 billion were distributed and 3.3 billion redeemed in 2010. The number of coupons distributed and redeemed has declined with the economic recovery as in 2015 307 billion were distributed and consumers redeemed 2.4 billion. However, there is still a large segment of consumers who are regular coupon users and might 16-21

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switch to another brand that offers coupons. Marketers must continue to strive to improve the efficiency of their couponing programs by using techniques such as universal coupons, shorter expiration periods and more effective targeting when distributing coupons. They are also likely to use coupons more as part of account specific marketing programs developed in conjunction with a particular retailer. 9.

Discuss the type of company that would be likely to offer discounts to consumers using Groupon. What are the pros and cons of a company using Groupon to make promotional offers to consumers? (LO 16-3) Many businesses use Groupon and other services such as Living Social as a way to attract first time customers in hope that they will return and become loyal customers who purchase at full price. For a deal to be profitable for a business, it must result in additional spending by consumers or repeat business and/or referrals. Groupon is moving from a demand fulfillment model, such as where it might try to increase a low level of demand for a product or service by pushing deals to consumers, to a demand-generation model where consumers go to its website, Facebook page or mobile app to search for deals. The model is particularly popular among local businesses as it provides an incentive to consumers who might not otherwise purchase from them. Companies that have high profit margins can still make money as long as they cover the variable costs associated with the offer. Local retailers, restaurants, health and beauty clubs and services, and entertainment companies can benefit from using Groupon as it can help drive traffic to a business and many of these customers will make additional purchases (such as alcoholic beverages in a restaurant). The downside of using Groupon is that it is expensive, as businesses that participate in the program must pay a percentage of their sales generated by the promotional deal, which can range from 30 to 50 percent. Many retailers and restaurants also are concerned over the type of consumers that use deals found on Groupon or Living Social, as they are often deal-prone consumers who do not spend additional money and do not make additional purchases at full price.

10.

What are some of the problems marketers face in using contests and sweepstakes? Discuss steps they can take to avoid these problems. (LO 16-3) While the use of contests and sweepstakes continues to increase, there are some problems associated with these types of promotions. Many sweepstakes and/or contest promotions do little to contribute to consumer franchise building for a product or service and may even detract from it. The sweepstakes or contest often becomes the dominant focus rather than the brand, and little is accomplished other than giving away substantial amounts of money and/or prizes. Many promotional experts question the effectiveness of contests and sweepstakes. Some companies have cut back or even stopped using them because of concern over their effectiveness and fears that consumers might become dependent on them. Another problem with contests and sweepstakes is the participation in them by hobbyists who submit entries but have no real interest in the product or service. Because most states make it illegal to require a purchase as a qualification for a sweepstakes entry, consumers can enter as many times as they wish. Entrants may enter a sweepstakes numerous times, depending on the nature of the prizes and the number of entries allowed. There are numerous websites on the Internet such as sweepsadvantage.com that inform consumers of all of the contests and sweepstakes being held, the entry dates, estimated probabilities of winning, how to enter, and solutions to any puzzles or other information that might be needed. The presence of the professional entrants not only defeats the purpose of the promotion but also may discourage entries from consumers who feel that their chances of winning are limited. Numerous legal considerations affect the design and administration of contests and sweepstakes. These promotions are regulated by several federal agencies, and each of the 50 states has its own 16-22

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rules. The regulation of contests and sweepstakes has helped clean up the abuses that plagued the industry for many years and has improved consumers’ perceptions of these promotions. However, companies must still be careful in designing a contest or sweepstakes and awarding prizes. 11.

A report by a rebate fulfillment service showed that the average redemption rate for a $50 rebate on a product that costs $200 is only 35 percent. Why do you think redemption rates for rebates are so low? How might these low redemption rates affect a marketer’s decision regarding the use of rebates as a promotional tool? (LO 16-3) Redemption rates for rebates are low for a number of reasons. The primary reason is that many consumers simply do not submit the rebate forms as they view the process as a hassle. Most rebates require consumers to submit UPC codes printed on the packaging along with receipts (sometimes originals) by a certain time period. Consumers may lose their receipts, toss out the package with the UPC code or forget about the rebate. Some consumers simply decide they do not want to through the process of filing for a rebate, even when the amount is large. In some situations, consumer rebate applications may be denied because the forms were not filled out properly or there are problems with the receipt or UPC code. Rather continuing to pursue the rebate, they give up and do apply for it again. Finally, many rebate checks are never cashed as they may be lost or mistaken for junk mail and never opened. The low redemption rates for rebates is encouraging more marketers to use them as they recognize that they can get consumers to focus on the discounted price for a product, but pay the full price. Since a high percentage of rebates are not redeemed, this is essentially free money for the marketers. Marketers recognize that many consumers never file for rebates and many rebate checks will not be cashed. Thus, a marketer who offers a $50 rebate for which the redemption rate is only 35 percent can achieve this price reduction for only $17.50 with the remaining $32.50 being extra profit. Marketers are now working with rebate fulfillment companies to estimate redemption rates and consider them in pricing their products and determining the amount of rebate offers.

12.

Discuss the various types of trade promotions used by marketers giving attention to the objectives as well as the pros and cons of each. (LO 16-3) Marketers use a variety of trade promotion tools to encourage channel members to carry and promote their products. These include contests and incentives, trade allowances, in-store and point-of-purchase displays, sales training programs, trade shows and cooperative advertising programs. The use of the various types of trade promotions depends on the objectives of the marketer. These might include obtaining distribution for new products, maintaining distribution and trade support for established brands, encouraging retailers to display their brands at the retail level through in-store and point-of-purchase displays, and building wholesaler and retailer inventories which will encourage them to promote or push a brand to reduce inventory levels. The chapter discusses how the various trade promotion tools can be used to achieve these objectives.

13.

What is meant by a sales promotion trap or spiral? Find an example of an industry or market where a promotional battle is taking place. What are the options for companies in deciding whether to participate in the promotional war? (LO 16-5) A sales promotion trap or spiral occurs when competitors in an industry are making extensive use of sales promotions and an individual firm receives no differential advantage from doing so, but cannot stop because its competitive position will be affected. When firms are caught in a sales promotional trap, no one company gains from the use of promotions but the sales of an individual firm may decline if it does not continue to offer the promotional incentive. The fast food industry is a good example of an industry where promotional wars often occur. Nearly all fast-food chains now have dollar menus or 99 cent specials on items such as Whoppers (Burger King), Double 16-23

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Cheeseburgers or Chicken Sandwiches, (McDonald’s), Jumbo Jacks (Jack in the Box), and tacos (Taco Bell). Since the fast-food chains have lowered their prices on these items, they have found it difficult to raise them back to normal levels. One of the competitors is always trying to use low priced specialty items as a draw for customers and as a way to increase market share. Companies involved in a sales promotion trap have two basic options—cut back on promotions or maintain them. As shown in the matrix in Figure 16-8, if the company cuts back on promotions and other firms follow, the result should be higher profits for all. However, if the company cuts back on promotions and competitors maintain them, the company risks losing sales and market share to the other firms. If the company maintains promotions and other companies cut back, it may see a gain in sales or market share (assuming the market is promotionally sensitive). If all competitors maintain their promotions, market shares should stay constant and profits may be negatively impacted by the costs all companies are incurring to offer the promotional incentive.

Additional Discussion Questions (not discussed in text)

14.

Discuss how sales promotion can be used as an acceleration tool to speed up the selling and/or purchasing process and maximize a company’s sales volume. (LO 16-1) There are several ways sales promotion can be used as an acceleration tool to speed up the sales process and maximize sales volume. Consumer promotion tools such as premiums, bonus packs, and price-off deals provide an extra incentive that may motivate consumers to take more immediate action. Coupons usually have expiration dates that require consumers to use them during a specific time period, which is another way of accelerating the purchase process. Marketers often use techniques such as in-store sampling programs that may be accompanied by a discount coupon and thus encourage immediate purchase. Trade promotions can also accelerate the selling process with retailers. For example, retailers who take advantage of an off-invoice allowance often pass the savings on to consumers in the form of a price reduction, which encourages them to purchase the brand. Promotional allowances are given to retailers for performing certain promotional or merchandising activities such as providing special displays, running in-store promotional programs or including the marketer’s brand in an ad. These activities will help generate sales volume and encourage immediate purchases by consumers.

15.

Discuss how samples and coupons can be used to generate trial of a new product or increase consumption of an established brand. (LO 16-3) Both samples and coupons are very effective for generating trial of a new brand of a product or service. Samples are obviously effective as the majority of consumers who receive one either use it immediately or save it to use sometime later. Samples of a new brand provide consumers a riskfree opportunity to use and experience the benefits and outcomes of the product. This can be very important when product’s features and benefits are difficult to describe through advertising. Coupons are also an effective way to generate trial of a new brand and are second only to sampling for this purpose. Coupons are effective because they lower the price of a product, thus reducing the consumers’ perceived risk associated with trial of the product. Samples and coupons are often used together to encourage trial and repeat purchase as coupons are often included with samples delivered to consumers. The free sample provides consumers with an opportunity to try a brand with no obligation while a coupon encourages them to purchase the brand at a reduced cost, which provides even more opportunity to experience the benefits associated with it.

Chapter 16—Sales Promotion

Samples can also be a way to increase consumption of an established brand. Marketers are often interested in attracting nonusers or users of a competitive brand and getting them to try their products. This is often done if a significant modification and/or improvement is made to the brand such as improving its taste, performance, efficacy and the like. Samples are an effective way of getting consumers to try a brand and compare it against the one they currently use. Coupons can also be a way to increase consumption of an established brand. They can be used to encourage nonusers to tray a brand, encourage repeat purchase among current users, and get consumer to try an improved version of a brand. They can also be an effective way to encourage consumers to trade up to more expensive brands. 16.

What is a slotting allowance or fee? Evaluate the arguments for and against retailers charging slotting fees to manufacturers. (LO 16-3) A slotting allowance is a fee that must be paid to retailers to provide a “slot” or position to accommodate a new product in their stores. Retailers argue slotting fees are justified because there are costs associated with taking on a new product such as redesigning store shelves, entering the product into their computers, finding warehouse space, and informing store employees of the new item. They also argue that they are assuming some risk in taking on a new product since a high percentage of new product introductions fail. Manufacturers argue that slotting fees are not justified, as it really does not cost manufacturers that much money to take on a new product. Critics argue that these fees are excessive and end up going to the bottom line of the retailers. They argue that these fees are another way retailers are extracting money from manufacturers and really are a form of bribery or blackmail that has to be paid to get a new brand on the retailer’s shelves.

17.

Describe the various forms of cooperative advertising and the reasons they are used by marketers. (LO 16-3) There are three types of cooperative advertising. Horizontal cooperative advertising is advertising sponsored by a common group of retailers or other organizations providing products or services to the market. For example, automobile dealers who are all located in an auto park may allocate some of their ad budget to a cooperative fund that will encourage consumers to come to the park to shop. This form of cooperative advertising is used to achieve economies of scale in advertising as the retailers or companies can share the costs of advertising and encourage consumers to come to their market area. A second form is ingredient-sponsored cooperative advertising, which is supported by a company that makes a component or raw materials that go into a final product. The objective of this form of coop advertising is to help promote the products that contain the company’s components or ingredients. For example, DuPont provides cooperative ad funds to companies who use many of its materials in their end products such as Teflon and Kevlar. Qualcomm also provides cooperative advertising funds to manufacturers of smartphones to encourage them to encourage them to use its Snapdragon processor as well as to wireless companies such as AT&T, T-Mobile, and Verizon to get them to promote it. The third form is vertical cooperative advertising whereby a manufacturer pays for a portion of the advertising a retailer does to promote the manufacturer’s product at the retail level. This form of cooperative advertising has many advantages for manufacturers. It gives them the capability of extending their advertising resources through the purchase of newspaper advertising at local rates. It also allows them to tailor their advertising to local market conditions and to indicate to consumers where their products can be purchased. Cooperative advertising can also enhance the manufacturer’s position with retailers and help get their product promoted at the local level (and often on sale or special). Cooperative advertising can also stretch a company’s promotional 16-25

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budget since the retailer also contributes to the advertising of the product. From the perspective of the retailer, cooperative advertising also has many advantages. Co-op ads provide a source of funding for retailers to advertise in local markets and bring consumers to their stores. Moreover, when a co-op ad is promoting a well-known brand, it can generate store traffic that results in sales for this brand as well as other merchandise. Astute retailers take advantage of cooperative advertising as it can pay for a large amount of the advertising they do.

Chapter 17—Public Relations, Publicity, and Corporate Advertising

CHAPTER 17 PUBLIC RELATIONS, PUBLICITY, AND CORPORATE ADVERTISING Chapter Overview Public relations (PR), publicity, and corporate advertising are ways by which information about the organization, its products, and/or its services may be communicated. Like the program elements discussed thus far, the marketer will attempt to use these tools to benefit the firm and its offerings. At the same time, these promotional mix elements are generally used in a different way in that they are not always designed to promote a specific product or service. Rather, they may be used to promote the organization as a whole, a cause or position advocated by the organization, or to create goodwill in the marketplace. In addition, at least one of these elements—publicity—is not always in the control of the marketer. Thus, while it may be possible to affect publicity in some situations, in many others the marketer may have to assume a reactive posture. This chapter discusses each of these program elements, and expands on the changing role of public relations.

Learning Objectives 1. Describe the roles of public relations, publicity, and corporate advertising in the promotional mix. 2. Compare the advantages, disadvantages, and effectiveness of public relations and publicity. 3. Discuss the advantages, disadvantages, and effectiveness of corporate advertising. 4. Compare the different forms of corporate advertising.

Chapter and Lecture Outline I.

PUBLIC RELATIONS A. The Traditional Definition of PR—The chapter begins by differentiating between the traditional role of public relations and the new role. The traditional role reflects a management function that has as its primary responsibility the goal of communicating and the gaining acceptance of the organization’s policies and programs within its various communities. B. The New Role of PR—The new role assumes a much broader, and more marketing-oriented, perspective. In the new orientation, the public relations department operates in close communication with the marketing department (rather than as separate entities) to develop programs and policies. C. Integrating PR into the Promotional Mix—The chapter takes the position that the activities of the public relations department must be coordinated with marketing, and integrated into the overall promotional mix. D. Marketing Public Relations (MPR) Functions—Public relations activities designed to support marketing objectives are called marketing public relations functions. The text discusses the numerous ways that MPR adds value to the integrated marketing program: • • •

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• • • • •

Introducing a product with little or no advertising Providing a value-added customer service Building brand-to-customer bonds Influencing the influential Defending products at risk and giving consumers a reason to buy

Professor Notes II.

THE PROCESS OF PUBLIC RELATIONS The actual process of conducting public relations will require a number of tasks. These tasks will involve both traditional and new role activities. A. Determining and Evaluating Public Attitudes—The first step in the public relations process is to determine the public’s existing attitudes toward the firm and/or its products. Four reasons are given to explain why this step is necessary: • It provides input into the planning process. • It serves as an “early warning system.” • It secures support internally. • It increases the effectiveness of the communication. B. Establishing a Public Relations Plan—Too many firms do not establish a formalized public relations plan. As a result, actions tend to be more reactive than proactive. A formal plan— coordinated with marketing—needs to be developed. C. Developing and Executing the PR Program—A number of activities must be conducted once the plan has been established. 1. Determining relevant target audiences—Target audiences may be categorized as internal or external. Internal audiences include: a. employees b. stockholders and investors c. community members d. suppliers and customers External audiences may include: a. the media b. educators c. civic and business organizations d. governments e. financial groups 2. Implementing the public relations program—Once the target audience has been established, and objectives established, a number of tools may be used for implementation or delivery including: • the press release

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• press conferences • exclusives • interviews • community involvement • the Internet • social networks and blogs D. Advantages and Disadvantages of Public Relations—The text lists a number of advantages and disadvantages associated with the use of public relations. Advantages include: 1. credibility 2. cost 3. avoidance of clutter 4. lead generation 5. ability to reach specific groups 6. image building The primary disadvantages result more from improper implementation of the programs than with public relations in and of itself including: not completing the communication process E.

Measuring the Effectiveness of PR—In addition to determining the contribution of this program element to attaining communications objectives, the evaluation offers other advantages: 1. It tells management what has been achieved through public relations activities. 2. It provides management with a way to measure public relations achievements quantitatively. 3. It gives management a way to judge the quality of public relations achievements and activities.

According to the Public Relations Society of America, organizations that understand and subscribe to the benefits of public relations evaluation can effectively:

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Validate the results of their efforts.

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Link the results to business outcomes that further the realization of organizational goals.

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Credibly merchandise the impact of the results to those who fund PR programs.

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Set smarter objectives, develop better strategies, and employ more compelling and engaging tactics.

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Make midcourse adjustments and corrections.

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Regularly adapt their measurement approaches based on changing objectives, new competitors, and emerging best practices. 17-3

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Professor Notes

McGraw-Hill Connect ®: Public Relations vs. Publicity Type of Activity: Click and Drag Activity Summary: In this activity, students will match the appropriate characteristic with either public relations or publicity. Activity Learning Objectives: 17-01 Describe the roles of public relations, publicity, and corporate advertising in the promotional mix. 17-02 Compare the advantages, disadvantages, and effectiveness of public relations and publicity. CONCEPT REVIEW: An increasing number of marketing-oriented companies have established new responsibilities for public relations. PR takes on a much broader perspective, designed to promote the organization as well as its products and/or services. Publicity refers to the generation of news about a person, product, or service that appears in broadcast or print media. While publicity is often considered a subset of the public relations effort, there are several distinct differences between the two. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

III.

PUBLICITY The text provides a definition of publicity and notes that the distinction between publicity and public relations is not always clear. The dissemination of publicity is a task that is the responsibility of the public relations department, as is the development of programs to deal with publicity originating from other sources. At the same time, public relations activities are under the control of the firm. The same cannot always be said for publicity. A. The Power of Publicity—the text provides information for discussion of how companies handle negative publicity. At one point, BP’s stock dropped to less than one-half of what it was prior to the Gulf spill. Samsung's value declined by billions of dollars when it suffered negative publicity as a result of its exploding cell phone batteries. For example, publicity regarding a breakthrough in the durability of golf balls will go far to promote them if it is reported by Golf magazine. Car & Driver’s award for car of the year reflects the magazine’s perception of the quality of the auto selected. Given this power, the firm must have programs in place to capitalize on or control and minimize the effects of these messages.

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B. The Control and Dissemination of Publicity—While the marketer may not be able to control all publicity, it is possible to impact these communications in a number of ways. For example, press releases, or “leaks” may be used to make sure that the information gets out. Publicity can also be managed or turned around to be used as an advantage. C. Advantages and Disadvantages of Publicity— 1. Lack of control 2. Timing 3. Accuracy

D. Measuring the Effectiveness of Publicity—The measures employed in assessment of the public relations program can also be used here.

Professor Notes

IV.

CORPORATE ADVERTISING A firm’s advertising is not always designed to promote a specific product or service. Corporate advertising is designed to promote the firm overall—either by enhancing its image, assuming a position on a social issue or cause, or seeking direct involvement from the market. As noted in the text, this form of advertising is often considered controversial and/or of dubious benefit to the firm. A. Objectives of Corporate Advertising—Two specific objectives for using corporate advertising have been provided: (1) creating a positive image for the firm and (2) communication of the organization’s views on social, business and environmental issues. In addition, three more specific applications are listed including: • boosting employee morale and smoothing labor relations • helping newly deregulated industries ease consumer uncertainty and answer investor questions • helping diversified companies establish an identity for the parent firm rather than relying solely on brand names

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McGraw-Hill Connect ®: Types of Corporate Advertising Type of Activity: Click and Drag Activity Summary: In this activity, students will read an overview of corporate advertising. Then they will match the types of corporate advertising with the characteristics of each strategy. Activity Learning Objective: 17-03 Discuss the advantages, disadvantages, and effectiveness of corporate advertising.

CONCEPT REVIEW: Corporate advertising was described as controversial, largely because the source of the message is top management, so the rules for other advertising and promoting forms are often not applied. This element of communication definitely has its place in the promotional mix. But to be effective, it must be used with each of the other elements, with specific communications objectives in mind. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

B. Types of Corporate Advertising—Various types of corporate advertising are described. 1. Image advertising—Advertising designed to promote the organization’s overall image may include: - general image or positioning ads - sponsorships - recruiting - generating financial support 2. Event Sponsorships—Anything from apparel and equipment (Under Armour sponsors men’s and women’s teams in a variety of sports, and at all levels) to concerts, stadiums, and college football bowl games are now commonly used for corporate sponsorship. Like any other relationship, however, risks must be assumed by both sides in such agreements. 3. Advocacy advertising—This form of advertising is designed to promote the organization through the taking of a position on an issue rather than through the promotion of the firm directly. Exhibit 17-19 and 9 Exhibit 17-20 are examples of the use of this form of advertising. 4. Cause-Related Advertising—Another form of advocacy advertising, issue advertising, is designed to bring attention to a specific issue (Exhibit 17-22).

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C. Advantages and Disadvantages of Corporate Advertising—As noted, corporate advertising is not considered to be of value by all advertisers. Those citing advantages of this form of advertising argue that it offers an excellent means for positioning the firm and a way of reaching target markets not reached through other forms of advertising, and takes advantage of the efforts of public relations. Critics charge that it is of questionable effectiveness, and that it may be ethically wrong. D. Measuring the Effectiveness of Corporate Advertising—The effectiveness of corporate advertising may be measured through the employment of some of the methods discussed earlier in the chapter. In addition, attitude surveys, studies relating corporate advertising and stock prices, and focus group research may also be employed in this regard. Professor Notes

Teaching Suggestions As in the previous chapter, this chapter can be supplemented and developed in more detail according to the needs of the instructor. A number of good public relations texts are available. In addition to lecturing on the three topics, it is possible to generate a great deal of class discussion. A multitude of public relations and corporate advertising examples can be found, and the discussion of the impact (and examples) of publicity can also stimulate a great deal of student interest. We have found that the issue of corporate advertising, particularly advocacy advertising, provides a great topic for debate. Students might be encouraged to take one position or another and discuss the issues, providing examples to support their arguments. Finally, some time should be spent on the discussion of the new role of public relations. While there has been more and more emphasis on this IMC program element, is it as powerful a tool as many contend? A good discussion of the Ries and Ries book The Fall of Advertising and the Rise of PR could follow.

Answers to Discussion Questions

1. The chapter discusses a number of public relations blunders, many of which might have been avoided with due diligence. Explain why these mistakes occur and who is ultimately responsible. (LO 17-2) In some instances it is the firm’s own blunder that allows information to leak out. Companies such as VW, Samsung and BP could do nothing to stop the media from releasing negative information about them. When publicity becomes news, it is reported by the media, sometimes despite efforts by the firm. In these instances, the organization needs to react to the potential threat created by the news. Unfortunately, simply ignoring the problem will not make it go away. Marketers like to have as much control as possible over the time and place where information is released. A number of persons are responsible for these events. For example in the 2017 Pepsi commercial blunder apparently no one pretested the ad. It was then signed off on and the results were quite negative. In the same year a . Hill Education.

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Chapter 17—Public Relations, Publicity, and Corporate Advertising

phone video was shown of a man being dragged off a United Airlines plane for refusing to give up his seat in an over sold situation. While the flight attendants followed protocol, they didn’t use common sense. United has lost millions of dollars as a result. 2. What impact do you think the millennial generation will have on cause marketing, issue advertising, and advocacy advertising? Explain your reasoning. (LO 17-1) Millennials appear to be more environmentally sensitive than other cohorts. They also appear to be more conscious of what they eat. If this is true one would expect them to be much more active in these forms of advertising, protesting, etc. They litter less, smoke less, buy more organic foods, and in general are concerned about others. On the other hand, they do not appear to be as news worthy. It is hard to say what the overall impact will be, but if they live up to what everyone thinks they will be, we should see an increase in this form of marketin. 3. Explain the differences between traditional and the new public relations objectives (MPRs). What are the advantages and disadvantages of each? (LO 17-2) The Traditional Definition of PR—The chapter begins by differentiating between the traditional role of public relations and the new role. The traditional role reflects a management function that has as its primary responsibility the goal of communicating and the gaining acceptance of the organization’s policies and programs within its various communities. The New Role of PR—The new role assumes a much broader, and more marketing-oriented, perspective. In the new orientation, the public relations department operates in close communication with the marketing department (rather than as separate entities) to develop programs and policies. As shown in Figure 17–2, Harris notes that there are a number of advantages and disadvantages of using MPRs. 4. Describe some of the measures used to measure public relations effectiveness. Critique these and provide an overall critique of their validity. (LO 17-4) Once the research has been conducted and the target audiences identified, the public relations program must be developed and delivered to the receivers. A number of PR tools are available for this purpose, including • • • • • • •

the press release press conferences exclusives interviews community involvement the Internet social networks and blogs

In addition to determining the contribution of this program element to attaining communications objectives, the evaluation offers other advantages: • . Hill Education.

It tells management what has been achieved through public relations activities. 17-8

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•

It provides management with a way to measure public relations achievements quantitatively.

•

It gives management a way to judge the quality of public relations achievements and activities.

According to the Public Relations Society of America, organizations that understand and subscribe to the benefits of public relations evaluation can effectively: •

Validate the results of their efforts.

•

Link the results to business outcomes that further the realization of organizational goals.

•

Credibly merchandise the impact of the results to those who fund PR programs.

•

Set smarter objectives, develop better strategies, and employ more compelling and engaging tactics.

•

Make midcourse adjustments and corrections. Regularly adapt their measurement approaches based on changing objectives, new competitors, and emerging best practices. 5. Describe the conflict between traditional PR agencies and those that see PR as more of a marketing function. Cite reasons why each of these groups holds the position it does. Who is right? (LO 17-1) The lead-in to this chapter demonstrates the changing role that public relations now plays in the IMC programs of small companies to major corporations. In the examples provided you can see that from a more traditional and philanthropic perspective, marketers stand to gain through the use of this medium. At the same time, public relations has now assumed a much more important role in IMC programs. This role is less philanthropic and much more marketing-oriented. In this chapter we examine the role of public relations in the IMC program and how this role has changed over recent years. Like every other aspect of IMC, the public relations function has been changed significantly by digital and social media. Simply put, news travels faster and wider now for most companies and organizations. As a result, the role of public relations and the importance of managing publicity has taken an increased importance. 6. As noted in the chapter lead in, many companies have suffered from the consequences of negative publicity. Discuss what companies might do to ward off the negative impact of bad press. How well did companies in the lead-in fare? (LO 17-2) The companies cited in the lead-in are not the only ones to have experienced the impact of negative publicity. Two major cases involving corporations in recent years involved Toyota and BP. The former involved a problem with unintended accelerator sticking while BP ‘s involved the oil spill in the Gulf of Mexico—a problem it is still dealing with years later. BP appeared to be less successful than Toyota in the final outcome related to their negative publicity. To start, Toyota had a much stronger brand image in the US than did BP. Oil companies, regardless of who they are, are not positively received here. Secondly, the oil spill received far more public . Hill Education.

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Chapter 17—Public Relations, Publicity, and Corporate Advertising

attention and scrutiny than did the Toyota problem. BP was the headline story for months while the well continue to leak, Toyota not as long or with as much attention. Because of Toyota’s strong reputation, and the fact that there was still some doubt as to what the problem really was, Toyota had less of a hill to climb. There were no protests, there was no environmental harm. Toyota’s handling of the crisis was not a textbook example of how to do it. They denied the accusations at first (and still do), they responded slowly, and they tried to put the blame on drivers. Later they responded effectively, but after a long period of time. It is the Toyota brand name that saved them. For BP, on the other hand, the situation was that as an oil company they were already facing negative attitudes. Add to that the ecological damage, and economic damage, and the extensive press coverage and the emotion of lives being impacted on TV and you have a real problem. In many ways BP handled the situation quite effectively—except for their spokesperson saying he wanted to go home and ride his yacht. They responded quickly, decisively, and owned up to the responsibility (though also contending that others were at fault, which they were). What these disasters speak to is the power of a good brand image. Toyota had it. BP did not. In regard to the companies cited in the lead-in, again there were mixed results as well. Maker’s Mark felt little or no consequences, other than having to go back to the original formulation. The Susan G. Komen foundation saw more, in that top executives quit, and contributions dropped significantly (recovering some later.) The Livestrong Foundation of course suffered terribly, and Lance Armstrong and Nike parted ways, though Nike experienced not noticeable impact. Most of Rush Limbaugh’s sponsors never came back.

7. Research studies have indicated that cause marketing can actually lead to an increased intention to purchase a brand. Explain why this is the case and provide examples that you feel may pertain. (LO 17-5) Cause marketing can be a win-win situation for the supporter and the recipient. For the receiver, much needed assistance in the form of monies, etc. will help the cause. For the supporter, consumers may take a positive attitude toward the actions, with the goodwill carrying over to the brand an/or organization. For example, in February, 2014 CVS pharmacies announced they would no longer sell cigarettes in their stores. The positive publicity led to enormous exposure on local and national news. Consumers texted and tweeted their praise for taking this position, and much goodwill was created for CVS. Other companies that have been supporters of various causes, like TOMS shoes, P&G, and Nika Water, among many others, have directly benefited by their support of causes that consumers identified with.

8. Putting one’s name on a stadium can be an expensive proposition, and the prices continue to increase. Discuss whether this would be a good investment for a company, and why or why not. Give examples of companies for which this would be a good investment. (LO 17-3). The following chart shows some of the costs of naming rights for stadiums. As you can see, these costs can be extensive, yet it seems there is no shortage of companies lining up to put their names out there. . Hill Education.

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Largest naming-rights deals Top 20 major league stadium deals Stadium

City

Sponsor

Price

Farmers Field* MetLife Stadium

No. of years

Los Angeles Farmers Insurance $600 million 30 East Metropolitan Life $425 million- 25 Rutherford, Insurance $625 million N.J. Citi Field Queens, N.Y. Citigroup $400 million 20 Reliant Stadium** Houston Reliant Energy $310 million 31 Gillette Stadium^ Foxboro, Mass. Gillette $240 million 15 FedEx Field Landover, Md. FedEx $205 million 27 Minute Maid Park Houston Coca-Cola Co. $178 million 28 University of Phoenix Glendale, Ariz. Apollo Group $154.5 million 20 Stadium Bank of America Charlotte Bank of America $140 million 20 Stadium Lincoln Financial Philadelphia Lincoln National $139.6 million 20 Field Lucas Oil Stadium Indianapolis Lucas Oil Products $121.5 million 20 Citizens Bank Park Philadelphia Citizens Bank $95 million 25 M&T Bank Field Baltimore M&T Bank $79 million 15 Great American Ball Cincinnati Great American $75 million 30 Park Insurance Home Depot Center Carson, Calif. Home Depot $70 million 10 U.S. Cellular Field Chicago U.S. Cellular $68 million 23 Chase Field Phoenix JPMorgan Chase $66.4 million 30 Comerica Park Detroit Comerica Bank $66 million 30 Petco Park San Diego Petco $60 million 22 Sports Authority Denver Sports Authority $60 million 10 Field at Mile High CenturyLink Field Seattle CenturyLink $60 million15$100 million 20

Avg. annual value

Expiration year

$20.0 million TBD $17 million- 2036 $20 million $20.0 million $10.0 million $8.0 million $7.59 million $6.36 million $7.72 million

2028 2032 2031 2025 2029 2026

$7.0 million

2023

$6.98 million 2022 $6.07 million $3.8 million $5.0 million $2.5 million

2027 2029 2017 2032

$7.0 million $2.96 million $2.2 million $2.2 million $2.73 million $6.0 million

2013 2025 2028 2030 2025 2035

$4.0 million$5.0 million

20192024

For some companies, the exposure, recognition and repetition of the brand name makes this a good deal. For example, when Qualcomm signed on to be the name for San Diego’s sports teams (Padres, Chargers, Aztecs) many thought the $18 million was a waste of money. However, the contract ran for twenty years (1997-2017). Think of the national exposure created each time one of these teams (and two NCAA bowl games/year) were on TV. The signage can be seen from two major freeways, a trolley, and on incoming airplane flights. Clearly this was a great deal! Naming rights don’t always work out. Many stadiums have had their names change as companies changed their names, went out of business or just withdrew their support. In this case no one wins. . Hill Education.

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If you look at the names in the above chart, it would seem that the keys to success may be to have brands that are purchased by many segments, good exposure and visibility and brand recognition.

9. The chapter discusses cause marketing, advocacy advertising and issue ads. Explain the differences between these forms of communication and give examples of each. (LO 17-5) All of these forms of communication fall under the rubric of corporate advertising. While each is similar in that the ads are not designed to sell products or services, but rather support causes, there are differences in intent: Advocacy ads—advocacy advertising “is concerned with propagating, ideas and elucidating controversial social issues of public importance in a manner that supports the interests of the sponsor”. The sponsor may advocate a position such as supporting Obamacare, saving water, environmental concerns, etc. While the sponsor may not have a direct link, they usually do. Issue ads—while essentially a form of advocacy ads, issue ads usually do not identify the sponsor, and may be paid for by unions, social and or political groups, etc. Their purpose for sponsoring these ads is to bring pubic attention to an issue they consider important or have a stake in. Cause-related advertising—the least controversial of the three, cause-related ads show a company, organization or group’s support for a cause—no reciprocity involved. Exhibit 17-22 provides an excellent example of a cause-related ad. Others include support for the Leukemia Society, American Cancer Society, Make-a Wish Foundation, etc.

10. Social media have had a profound impact on the power of publicity. Explain what this means and whether you believe it to be true or not. Provide examples to support your position. (LO 172) Social media is like word of mouth on steroids. Regardless of whether it is positive or negative, when something goes viral on social media, millions of people are exposed. Brands have become successful almost entirely on the basis of going viral. Brands and people have suffered from both positive (Gangnam Style) and negative (Lindsay Lohan, Justin Bieber) publicity through social media. In the chapter we discuss the incredible power of publicity, both positive and negative. Clearly marketers would love to be able to capitalize on positive publicity, and control negative postings. Unfortunately for them they cannot. There are numerous examples of persons, brands and companies brought down and succeeding through traditional pr channels. The advent of social media and the extreme speed and size of the market reached just magnifies this exposure. Just ask Tiger Woods or Lance Armstrong.

Additional Discussion Questions (not in text)

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11. The chapter discusses the lack of coordination that often exists between marketing and public relations departments. Discuss some of the reasons this might occur. What can be done to reduce this conflict to achieve greater coordination? (LO 17-1) One of the difficulties in implementing an IMC program is the fact that many of the communications functions operate as silos rather than in an integrated manner. Perhaps the best example of this is the marketing-public relations divide. Marketers are trained in business schools; PR people in Journalism and/or Communications schools. They do not always perceive the world the same. Not only that but they have been educated to do different jobs. PR people (rightfully) do not see their responsibilities as including marketing products. A problem associated with MPR is that it dilutes the credibility of PR, or at least has the potential to do so. Therefore, many would argue that marketing and public relations should remain separate. While there are good arguments on both sides, the bottom line is what is best for the organization or corporation. In a well functioning organization, PR needs to understand the role of marketing and vice versa. Both must recognize that working together is for the betterment of the organization. Thus by getting both parties to understand what the others do and why, many of the barriers to effective communications will be eliminated.

12. Examine a number of examples of different types of sponsorships corporations are currently engaging. Analyze the reason for the sponsorship, and evaluate whether it employs a wise strategy or not. (LO 17-3) Sponsorships are clearly on the increase—particularly in sports and entertainment. Many companies sponsor NASCAR. Others sponsor NCAA college football games (PlayStation Fiesta Bowl, Capital One Orange Bowl, AdvoCare Texas Bowl). Buick sponsors golf tournaments and Verizon sponsors concerts. The list goes on. Thinking about reasons why companies sponsor these events, it becomes evident that they believe their target markets will recognize these associations and they will gain value from this association. Sometimes the sponsorships are to gain awareness and/or recognition (for example, NASCAR), other times there are even more involved marketing strategies—Cadillac promotes rock concerts in an attempt to make their cars more attractive to younger people. Buick attempted the same positioning using Tiger Woods to appeal younger audience (before his scandal), and then did the same with Peyton Manning. NCAA football sponsors use the same tactic. They reach a desirable audience demographically and socioeconomically, building up goodwill along the way. Verizon’s sponsorship of rock concerts also seems obvious. Who attends rock concerts—young people. Who does Verizon most want to reach—all those young smartphone users. Take a look at any sponsorship (Monster Energy drink and the X Games) and you will see a similar pattern.

13. There is a saying that “any publicity is good publicity.” Discuss what you think about this statement. (LO 17-2) This often-heard statement obviously seems to reflect a misunderstanding of the power of publicity. One would certainly get a strong argument against this statement from Audi, Tylenol, Texaco, Wendy’s, and Wal-Mart, to name a few of the companies that have suffered the consequences of negative publicity. . Hill Education.

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Chapter 17—Public Relations, Publicity, and Corporate Advertising

Publicity is a very powerful tool, and while some companies have benefited from the power of positive publicity, numerous others have lost sales or even been driven from business by negative publicity. Any publicity is definitely not necessarily good publicity. Measuring effectiveness—the measures used to determine the effectiveness by marketing standards may be more difficult to employ. Traditional pr measures may not be as useful. Many companies have experienced the impact of negative publicity over the past few years as a result of product recalls, marketing blunders, etc. Give some example of some instances where companies experienced negative publicity and how they handled it. Evaluate their means of dealing with negative publicity. The power of publicity emanates directly from its high credibility. Because the source of the communication is generally perceived as being objective, or at least as not having a vested interest, the information is often treated differently than that of advertising and/or promotions. As a result this information is passed on more readily, and in general is considered more believable. A contributing factor is the way that the media handle publicity. Unfortunately for many firms, negative publicity often receives more attention than does that of a positive nature. Audi, for example, experienced negative publicity on the TV show 60 Minutes regarding its Audi 5000 and accelerator sticking problems. While Audi won a subsequent court battle, the brand image was tarnished and the 5000 never recovered. Jack-in-the Box and Suzuki have also experienced the strong negative impact of negative publicity. Texaco, Firestone, Mattel, and many other companies have been hurt by bad publicity, each attacking the problem in a different manner, and with different outcomes Examples of the power of publicity are common in both regards. BP, Toyota, Tylenol, and Odwalla are all examples of the power of negative publicity. On the other hand, Aspirin and red wine are examples that demonstrate the impact of how publicity can be used positively. While there are many ways to deal with negative publicity, one thing is certain—the company must face up to it and deal with it. It will not go away. 14. Many accuse companies like GoDaddy.com of exploiting of the media. They contend that events like the NFL’s refusal to show GoDaddy’s and Soda Stream’s commercials are designed strategies to gain publicity. Discuss whether you feel these are designed strategies and whether they are likely to be effective. Cite other examples of such efforts. (LO 17-2) The NFL’s refusal to air a GoDaddy commercial because it was too sexy, and a Soda Stream ad that attacked Pepsi and Coke are seen by many to have been staged attempts to generate free publicity. Both of these events generated a great deal of publicity. The Soda Stream commercial was shown without the mention of Coke and Pepsi and with no fanfare. The impact of the GoDaddy incident had a very different outcome. As the evidence shows, GoDaddy (after the publicity and showing of one of the spots) led to an almost doubling of revenues, and movement from an almost unheard of domain provider to number one. Clearly, the outcome for GoDaddy was positive. An effort by retail clothing store Clothestime, Inc. a few years back to generate publicity by producing sexy ads that some media refused to air was not so successful. The effort seemed so blatant that when the media refused to show it, no one took up the cause. It is hard to say with certainty whether or not these incidences were planned or not. Certainly, in the latter case, given that one ad did air, it could be argued that the intent was to have the commercials shown, and the publicity was generated by the NFL, not GoDaddy. A similar incident occurred with the “What Happens in Vegas, Stays in Vegas” campaign when it wanted to air a Super Bowl spot.

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The NFL’s opposition to the ad led to enormous publicity, and probably benefited the campaign more so that the commercials could ever have done. There is little doubt that companies try to generate free publicity whenever they can (consider it a form of guerilla marketing). Sometimes these efforts are successful, other times they are not as the public recognizes their true intent. Nevertheless, the efforts continue, and are likely to do so in the future.

15. Describe some of the criteria used by companies to measure effectiveness of the public relations program. Provide examples. (LO 17-4) The text discusses a number of criteria for measuring effectiveness of PR programs. Among others, these include: • • • • • • • • •

Total number of impressions over time Total number of impressions on the target audience Total number of impressions on specific target audiences Percentage of positive articles over time Percentage of negative articles over time Ratio of positive to negative articles Percentage of positive/negative articles by subject Percentage of positive/negative articles by publication or reporter Percentage of positive/negative articles by target audience

Also discussed are the means for accomplishing the evaluation process: • •

• • • •

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Personal observation and reaction—Personal observation and evaluation by one’s superiors should occur at all levels of the organization. Matching objectives and results—Specific objectives designed to attain the overall communications objective should be related to actions, activities, or media coverage. For example, placing a feature story in a specific number of media is an objective, quantitative, and measurable goal. The team approach—Whereby evaluators are actually involved in the campaign. By working together, the team develops and accomplishes their goals. Management by objectives—Executives and their managers act together to identify goals to be attained and the responsibilities of the managers. These goals are then used as a standard to measure accomplishments. Public opinion and surveys—Research in the form of public opinion surveys may be used to gather data to evaluate program goal attainment. Audits—Internal audits involve evaluation by superiors or peers. External audits include those that are conducted by consultants, the client, or other parties outside the organization. The growth of video news releases, (VNRs) has increased significantly. The Bush administration and Arnold Schwarzenegger, as governor of California, both employed this strategy. Describe what a VNR is, and discuss some of the ethical issues surrounding their use. Should VNRs have to carry a message noting that they are VNRs? (LO1) 17-15

Chapter 17—Public Relations, Publicity, and Corporate Advertising

IMC EXERCISE Instruct students to find examples of various types of public relations activities engaged in by organizations. These include both traditional and nontraditional methods of public relations. Also, have them find an example of a company engaged in sponsorship of an event such as a music concert tour or sporting event. They should be asked to evaluate the company’s sponsorship of the event with regard to issues such as the target audience they are trying to reach and how they might benefit from the sponsorship of the event.

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Chapter 18—Measuring the Effectiveness of the Promotional Program

CHAPTER 18 MEASURING THE EFFECTIVENESS OF THE PROMOTIONAL PROGRAM Chapter Overview This chapter discusses one of the most critical—yet controversial—issues in all of advertising. While it seems perfectly logical that managers on both the advertising and client side would like to know whether the programs they have implemented are effective, in reality the majority of advertising and promotional programs go untested. Compounding this is the fact that many of those programs that are evaluated use inadequate or inappropriate measures in making this determination. The purpose of this chapter is to discuss why organizations need to measure the effectiveness of their programs, and when, where, and how such measures should be used. The chapter begins with a discussion of the reasons why advertising effectiveness measures should be taken and why they commonly are not. How, when, what, and where such measures should be used follows, with a description of many of the techniques commonly used. The chapter concludes with a discussion of some of the problems involved in measuring the effectiveness of these programs and establishes some of the essentials for proper testing.

Learning Objectives 1. Compare reasons for and against measuring the effectiveness of promotional programs. 2. Describe the tools and processes available for assessing promotional program effectiveness. 3. Discuss the limitations of current methods for measuring advertising effects. 4. Compare different methods of measuring effectiveness of other promotional programs.

Chapter and Lecture Outline I.

ARGUMENTS FOR AND AGAINST MEASURING EFFECTIVENESS

As noted in the beginning of this chapter, it seems logical that research on the effectiveness of the promotional program would be conducted. Yet we also find that this is not always the case. Reasons why research should be conducted and reasons why it is not are presented. A.

Reasons to Measure Effectiveness—Three major reasons are offered for why measures of effectiveness should be taken. These include: 1. Avoiding costly mistakes 2. Evaluating alternative strategies 3. Increasing the efficiency of advertising in general 4. Determining if objectives are achieved

Chapter 18—Measuring the Effectiveness of the Promotional Program

In addition, it should be noted that these results serve as input into the situation analysis of the next planning period. B.

Reasons Not to Measure Effectiveness—A variety of reasons (and excuses) are offered to explain why the effectiveness of the advertising/promotional campaign is not taken. Perhaps the most common of these are: 1. Cost 2. Research problems 3. Disagreement on what to test 4. The objections of creativity 5. Time While some of these arguments have merit, others result from excuse making, politics, or a lack of understanding of the value associated with conducting such research.

Professor Notes

II.

CONDUCTING RESEARCH TO MEASURE EFFECTIVENESS

This section discusses how research to measure effectiveness should be conducted. More specifically, it addresses the issues of what to test, as well as where and how such evaluations should take place. A.

What to Test—Each of the elements of the promotional program should be examined. Research should be designed to determine the effectiveness of: 1. Source factors—An important question is whether the spokesperson being used is effective and how the target market will respond to him or her. 2. Message variables—A number of factors regarding the message and its delivery may have an impact on its effectiveness, including the headline, illustrations, text, and layout. 3. Media strategies—Research may be designed to determine which media class (broadcast vs. print) generate the most effective results, the location within a particular medium (front page or back page), and size or length of time the ad or commercial runs. Another factor is the vehicle option source effect—the differential impact that the advertising exposure will have on the same audience member if the exposure occurs in one media option rather than another. 4. Budgeting decisions—The relationship between the ad budget and sales is often hard to determine because using sales as an indicator of effectiveness ignores the impact of other marketing mix elements.

B. When to Test—Effectiveness testing can generally be classified as: 18-2 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 18—Measuring the Effectiveness of the Promotional Program

1. Pretesting—Pretests are those that occur prior to the implementation of the campaign. 2. Posttesting—Posttests are those that are taken once the program has been implemented. Figure 18-3 lists some of the classifications of testing methods. C.

Where to Test—There are certain advantages and disadvantages associated with where effectiveness tests take place. Again, two different testing environments are discussed. 1. Laboratory tests—those tests conducted in a specific location to which consumers are brought—for example, testing labs, theaters, etc. The major advantage is control. The major disadvantage is a lack of realism and the potential for testing bias. 2. Field tests—those tests taken under more natural viewing situations, such as phone surveys, inquiry tests, etc. The major advantage is that they offer a more realistic viewing situation. At the same time, a lack of control and a number of other distracting conditions are disadvantages associated with these methods.

How to Test—Figure 18-4 lists nine principles of advertising testing that have been endorsed by the nation’s largest advertising agencies. PACT, or Positioning Advertising Copy Testing, principles were developed by advertisers and their agencies to provide guidelines on conducting appropriate advertising effectiveness studies.

Professor Notes

III.

THE TESTING PROCESS

The actual testing of ads may take place throughout the campaign. Four types of tests are discussed. A.

Concept Generation and Testing—Figure 18-6 describes the process involved in concept testing. As noted, concept testing takes place very early on in the development of the campaign, and is designed to explore consumers' responses to ads and/or campaigns being considered. Focus groups and mall intercepts are commonly employed methods at this stage.

Rough Art, Copy and Commercial Testing—Because of the high costs associated with testing, completed advertisements and commercials, many advertisers (or their agencies) conduct such tests prior to the completion of the final product. Figure 18-8 describes some of the terminology used to describe these tests. Results of these tests have been shown to correlate highly with those taken after the ads have been completed. 1.

A/B testing—The process involves the testing of two versions of an advertisement or homepage to see which will be the more effective prior to launch. In the vast majority (if not all) of these cases the ads or web pages are finished products.

Pre-testing Finished Ads—Many advertisers prefer to test the ad in its finished form. A variety of both print and broadcast measures may be used.

Chapter 18—Measuring the Effectiveness of the Promotional Program

1. Pre-testing finished print messages—a number of methods for pretesting print messages are provided. Some of the more common of these are: a. portfolio tests b. readability tests c. new print pretesting measures d. dummy advertising vehicles 2. Pre-testing finished broadcast ads—some of the more popular methods for pre-testing broadcast ads are: a. theater tests—one of the most popular lab methods for pretesting finished commercials. b. on-air tests—often includes single-source ad research. c. physiological measures include:

•

pupil dilation

•

galvanic skin response

•

eye tracking

•

brain waves

Market Testing of Ads—Many of the methods already mentioned are also used in the posttesting of advertisements. The text once again discusses methods of market testing ads of both the print and broadcast varieties. 1. Posttests of print ads—Three of the most common forms of posttesting print ads include: a. inquiry tests—designed to measure advertising effectiveness on the basis of inquiries generated from ads appearing in various print media b. recognition tests c. recall tests—attempt to measure recall of specific ads 2. Posttests of broadcast commercials a. day-after recall tests—The most popular method of posttesting employed in the broadcasting industry for decades was the Burke Day-After Recall test. b. persuasive measures—include purchase, intent, and frequency-of-purchase criteria. c. diagnostics—These measures are designed to garner viewers’ evaluations of the ads, as well as how clearly the creative idea is understood and how well the proposition is communicated. Rational and emotional reactions to the ads are also examined. 18-4

Chapter 18—Measuring the Effectiveness of the Promotional Program

d. comprehensive measures—The chapter discusses one of the more commonly employed posttest measures of broadcast commercials. The Ipsos-ASI Next *TV test replaced the Burke Test which had often been the topic of debate in respect to its value and validity. e. test marketing—Many companies conduct tests designed to measure their advertising effects in specific test markets before releasing them nationally. f.

single-source tracking studies—These track the behaviors of consumers from the television set to the supermarket checkout counter.

g. tracking print/broadcast ads—Tracking studies have been used to measure the effect of advertising on awareness, recall, interest, and attitudes toward the ad and/or brand as well as purchase intentions. Professor Notes

McGraw-Hill Connect ®: Classification of Testing Methods Type of Activity: Click and Drag Activity Summary: In this activity, students will identify each testing method as either a laboratory or field method. Activity Learning Objective: 18-02 Describe the tools and processes available for assessing promotional program effectiveness. CONCEPT REVIEW: In laboratory tests, people are brought to a particular location where they are shown ads and/or commercials. The testers either ask questions about them or measure participants' responses by other methods—for example, pupil dilation, eye tracking, or galvanic skin response. The major advantage of the lab setting is the control it affords the researcher. The major disadvantage is the lack of realism. Field tests are tests of the ad or commercial under natural viewing situations, complete with the realism of noise, distractions, and the comforts of home. Field tests take into account the effects of repetition, program content, and even the presence of competitive messages. The major disadvantage of field tests is the lack of control. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

Chapter 18—Measuring the Effectiveness of the Promotional Program

IV.

ESTABLISHING A PROGRAM FOR MEASURING ADVERTISING EFFECTS

To this point in the chapter, a number of methods of testing the effectiveness of print and broadcast ads have been presented. In each case, these measures were discussed in respect to their contributions as well as their limitations. In this section, the chapter discusses how the marketer might establish a sound program for conducting effectiveness research. A.

Problems with Current Research Methods—A number of problems with existing research methods are discussed, with the PACT program discussed earlier used as a standard against which to measure these methods. In this section, each of the PACT principles are discussed, with suggestions as to how each principle might be met.

Essentials of Effective Testing—Again referring to the PACT program, four suggestions are offered that we believe will improve the effectiveness of the evaluation program. These include: •

establish communications objectives

•

use a consumer response model

•

use both pretests and posttests

•

use multiple measures

•

understand and implement proper research

Professor Notes

V. MEASURING THE EFFECTIVENESS OF OTHER PROGRAM ELEMENTS The majority of this chapter has focused on the measurement of advertising effectiveness. Obviously, measuring the effectiveness of other program elements is important as well. The final section of this chapter discusses the measurement of effectiveness of sales promotions programs, sponsorships and nontraditional media. A. Measuring the Effectiveness of Sales Promotion—A number of organizations measure sales promotions. B. Measuring the Effectiveness of Nontraditional Media—Some progress has been made in the measurement of the media discussed in Chapter 13. 18-6 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 18—Measuring the Effectiveness of the Promotional Program

•

The effects of shopping cart signage—This study used personal interviews in grocery stores to measure awareness of, attention to, and influence of this medium.

•

The effectiveness of ski-resort-based media—The Traffic Audit Bureau is tracking the effectiveness of this form of advertising to give advertisers more reliable criteria on which to base purchase decisions.

•

The effects of in-store radio and television—Interactive Market Systems (IMS) introduced software that enables clients to measure the effectiveness of in-store radio.

•

The effectiveness of other media—A number of companies provide effectiveness measures to determine the impact of package designs, POP displays, trade show exhibits, and the like.

C. Measuring the Effectiveness of Sponsorships—A number of companies now measure sports sponsorship. D. Measuring the Effectiveness of other IMC Program Elements—Many of the organizations mentioned in this chapter offer research services to measure the effectiveness of specific promotional program elements. A number of studies have been conducted in an attempt to measure the combined effects of combining IMC elements. These studies continue to increase in scope and methodology employed. Professor Notes

McGraw-Hill Connect ®: The Testing Process Type of Activity: Click and Drag Activity Summary: In this activity, students will match the appropriate test and output with the correct step where it would typically be used in the testing process. Activity Learning Objectives: 18-01 Compare reasons for and against measuring the effectiveness of promotional programs. 18-02 Describe the tools and processes available for assessing promotional program effectiveness. 18-03 Discuss the limitations of current methods for measuring advertising effects. 18-04 Compare different methods of measuring effectiveness of other promotional programs. CONCEPT REVIEW: All marketing managers want to know how well their promotional programs are working. This information is critical to planning for the next period, since program adjustments and/or maintenance are 18-7 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 18—Measuring the Effectiveness of the Promotional Program

based on evaluation of current strategies. Problems often result when the measures taken to determine such effects are inaccurate or improperly used. Assessing the effectiveness of ads both before they are implemented and after the final versions have been completed and fielded offers a number of advantages. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

Teaching Suggestions Due to the importance and amount of information presented in this chapter, we suggest that the lecture cover at least two time periods. The first session might be used to discuss the importance of conducting effectiveness studies, some of the reasons why such studies are not conducted, and some of the pretest measures. The second session could cover posttests and the PACT guidelines. In addition, the second session should discuss ways of measuring communications objectives. As in some of the previous chapters, this subject matter can be presented in a very interesting fashion. The media frequently provide information that can be used to keep the student current, and to provide “real world” applications. Sources such as Ad Age, AdWeek, and The Wall Street Journal often have articles relating to this subject matter as does the online site eMarketer. In addition, the single-source systems are often in the news. We have found through our experiences that academics seem to place more emphasis on the importance of measuring effectiveness than do practitioners. We believe that this may be one of the more important elements of the entire decision sequence model of promotional planning and suggest that this importance be stressed to students as they will soon be the practitioners.

Answers to Discussion Questions 1. A/B testing has been used by marketers for decades to evaluate two different versions of finished ads and/or web pages. Some experts now believe that A/B testing would be more effective if employed earlier in the campaign development process. Explain what they mean by this, and argue for or against this position. (LO 18-1) A/B testing is about testing different versions of finished ads. Unfortunately, once ads are finished it has cost a lot of money, and companies are often not willing to assume that cost with no final product should both test poorly. By testing earlier, it is possible to see that some ads are just not going to be effective, and the company can cut their losses with mush less monetary outlay. Once again, think about the Pepsi commercial that we have said should have been killed or changed in the pretesting stage. Had this been done, many dollars would have been saved as well as a lot of bad pr. The down side is that emotional ads—like the Pepsi commercial intended to be—often do not test well in earlier stages of development, so a potentially effective commercial may have been discarded. However, this is less likely to be the case than the likelihood of eliminating or changing an ad that has tested very poorly early on. 2. Explain why it is so difficult to measure the overall IMC program effectiveness. (LO 18-3) Think about the argument used to describe why it is so hard to measure the effectiveness of an IMC program using sales as the dependent measure. Other marketing program elements also contribute to the sales result, and it is often difficult to parcel out this effect. 18-8 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 18—Measuring the Effectiveness of the Promotional Program

The same is true when one uses multiple program elements. It is difficult to separate out the impact of advertising, the Internet, direct marketing, etc., as consumers are not always aware of where they heard the message, they may have been exposed in multiple mediums, etc. The lack of control of the environment makes it difficult to determine if and when consumers were exposed. Some attempts at making these measures have taken place. The XMOS studies of a few years back is one example. More recent studies have examined the fact that traditional media like TV and magazines are effective in driving consumers to the Internet, and that direct marketing and mass advertising often support each other. However, conclusive results of the overall impact of IMC is still a way off. 3. This chapter discussed the Ogilvy Awards. Describe what these awards are and how they have changed over time. Give examples of companies that have won these awards (you can find past winners online) and why they have won them. (LO 18-1) By going to the website www.thearf.org/assets/ogilvy, and viewing award winners, you can download the case studies. When reviewing any of these case studies, you will see a number of criteria used to evaluate the program’s success. You many also see some criteria that may not be used as properly as it should. Can we really attribute sales and market share gains directly to the IMC program? Students should be asked to evaluate the metrics used in the cases, and at the same time discuss whether all of these used are appropriate. They should also compare the effectiveness programs used to those criteria in the book that determine essentials for proper measurement. 4. Explain why it is important to pretest. When should this testing take place? Give examples of what might make ads or commercials that are pretested more successful. (LO 18-1) Pretests are those tests that take place before the advertisement or commercial is made available for viewing by the public. These tests may take place at a number of points from as early on as idea generation to testing the final version before showing it. There are a variety of pretests available, including both lab and field tests. Examples of pretests include focus groups, consumer juries, physiological measures, in-home tests, and theater tests. Marketers pretest ads so that they can avoid mistakes and fine tune them before they are exposed to the public at large. Before spending great deals of money for an ad that doesn’t work, they will get some idea of their potential effectiveness prior to going to the market. If there are specific elements of the ad that are not working, corrections can be made. The reasons cited for not pre-testing include cost and time factors. Many marketers do not want to spend the additional dollars required to test. This can be a risky strategy, and the costs of making a mistake may exceed those of testing. Others feel that the cost is not warranted, as the ad has no elements of controversy, is simple, etc. Some marketers skip the pretest phase as they have only a short window of opportunity, and do not have time to pretest. 5. Digital advertisers seem to want to have their own effectiveness measures, while eschewing those of traditional advertisers. What are the pros and cons of this position? Argue for one side or the other. (LO 18-4) Many of these measures are new, some have been around for a while, and some are a combination of old and new. New techniques like eye tracking, facial recognition, and neuroscience applications are being used alongside traditional recall and attitude measurement techniques. More and more retailers 18-9 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 18—Measuring the Effectiveness of the Promotional Program

are using attribution modeling to attempt to determine how various media touch points are performing, and there has been an increase in measuring the effectiveness of emotional versus cognitive ads, the impact of creativity, storytelling versus hard sell, and so on. At the same time, many of the digital metrics do little, if anything, to help us understand why ads work or do not work, and as such, do not go very far in helping us understand true ad effectiveness. 6. Most managers believe that they should be measuring the effectiveness of their advertising programs. However, studies have shown that they usually do not do so. Cite some of the reasons managers should measure effectiveness, and why they do not. (LO 18-1) The chapter cites a number of reasons why advertising effectiveness measures are not taken. Each of these is discussed in the text, but a short review is also provided here. Cost—One of the most commonly cited reasons is the belief that conducting these measures is too costly, or that the moneys are better spent elsewhere. Many advertisers feel that they would rather spend the money to purchase more media, improve production, etc. In addition, they cite the time costs that are involved. Research Problems—Because many advertisers attempt to directly measure the effect of advertising on sales, research problems develop. When the problems associated with isolating the effects of advertising on sales are pointed out, they opt not to conduct research at all. Disagreements on what to Test—As noted, different persons within the organization will have different motivations for conducting effectiveness research, and different needs to be satisfied. Sometimes there is an inability to come to agreement what should be tested, and the testing never gets done. The Objections of Creative—Many agencies are dominated by top managers who have moved through the ranks on the creative side. Many creatives feel that to attempt to measure the effects of their ads would stifle their creativity, and would structure the way that they design their campaigns. As a result they argue against effectiveness measures. If their relationship with the client is a strong one, they are too often successful. A variety of reasons can be offered as to why effectiveness measures should be taken: To Avoid Costly Mistakes—If the ad or commercial is developed is unsuccessful, a great deal of cost will be incurred by the company. These costs include the actual costs associated with the development and implementation of the campaign, as well as the opportunity cost. Evaluating Alternative Strategies—Research can be used to evaluate the effectiveness of various strategies under consideration. These strategies may be tested as early as the concept generation stage or after implementation. Increasing the Efficiency of Advertising—Testing can assist the advertiser in “fine tuning” the ad. Such tests can eliminate mistakes that may result from improper identification of needs and wants of the target market, the use of terms that the receiver does not understand, etc. In reality, there is really no strong argument for not testing, as the benefits will outweigh the costs. This argument is particularly strong when the marketer realizes that the results of the current program will serve as input into the next period’s planning process. If these measures are not taken, the planning process will be restricted. 18-10 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 18—Measuring the Effectiveness of the Promotional Program

7. Marketers have turned to physiological measures in an attempt to determine the effectiveness of their advertising. Discuss some of the methods being used, and the advantages and disadvantages of each. (LO 18-3) The text discusses the use of physiological measures used to determine the effectiveness of advertising. These measures indicate the receiver’s involuntary response to the ad, theoretically eliminating biases associated with the voluntary measures reviewed to this point. (Involuntary responses are those over which the individual has no control, such as heartbeat and reflexes.) Physiological measures used to test both print and broadcast ads include pupil dilation, galvanic skin response, eye tracking, and brain waves (among others): Pupil dilation. Research in pupillometrics is designed to measure dilation and constriction of the pupils of the eyes in response to stimuli. Dilation is associated with action; constriction involves the body’s conservation of energy. Advertisers have used pupillometrics to evaluate product and package design as well as to test ads. Pupil dilation suggests a stronger interest in (or preference for) an ad or implies arousal or attention-getting capabilities. Because of high costs and some methodological problems, the use of pupillometrics has waned over the past decade. But it can be useful in evaluating certain aspects of advertising. Galvanic skin response (GSR). Also known as electrodermal response (EDR) , GSR/EDR measures the skin’s resistance or conductance to a small amount of current passed between two electrodes. Response to a stimulus activates sweat glands, which in turn increases the conductance of the electrical current. Thus, GSR/EDR activity might reflect a reaction to advertising. While there is evidence that GSR/EDR may be useful to determine the effectiveness of ads, difficulties associated with this testing method have resulted in its infrequent use at this time. Eye tracking. As discussed in Digital and Social Media Perspective 18-2, a methodology that is more commonly employed is eye tracking , in which viewers are asked to view an ad while a sensor aims a beam of infrared light at the eye. Eye tracking can identify strengths and weaknesses in an ad. For example, attractive models or background action may distract the viewer’s attention away from the brand or product being advertised. Eye tracking has increasingly been used to measure the effectiveness of websites and online ads and, as noted in the text, e-mail campaigns and newsletters. Brain waves. Electroencephalographic (EEG) measures can be taken from the skull to determine electrical frequencies in the brain. These electrical impulses are used in two areas of research, alpha waves and hemispheric lateralization. 8. How have marketers employed the methodology of eye tracking? Give examples of companies that have employed this methodology. When does eye tracking seem to be most useful? (LO 183)

Eye tracking has been used to observe viewers’ eyes to see where they go in watching a commercial or print ad, and where they focus and how much time is spent there. This form of tracking has been used for quite some time has been proven to offer valuable insights.

Chapter 18—Measuring the Effectiveness of the Promotional Program

The methodology has now been extended to other areas of communications research. Package designers have experimented with various label designs to determine which will stand out on store shelves. Print researchers have examined the movement of the eye when one is reading a newspaper or magazine. A popular use of this methodology now is to see where ones’ eyes go when viewing a website, and how long certain aspects of a site attract attention. Results show that viewers start at the top left (consistent with previous research) and then proceed through the rest of the site. Different banner or ad types will hold the eye’s attention, etc. Again, as a physiological measure, eye tracking provides some insights as to effectiveness— particularly attention. And, again, this measure needs to be combined with others to determine the “why” of such movements. 9.

Describe the Starch Ad Readership Report and the measures provided therein. Discuss how Starch has had to adapt this report due to changing market conditions, and the new metrics now provided. (LO 18-2) The Starch report has been relied upon for decades as a standard for testing print ads. The measures taken include the noting score, brand associated score and the read most score. These scores have been employed since the reports started. Recently, Starch has added additional measures. These include: brand disposition, purchase behavior or intention, actions taken, and publication and advertising engagement. Like many other companies that have measured traditional media advertising effectiveness, Starch has had to adapt their methodology and measures provided to adapt to the changing media environment. As an example, is the addition of the measure of advertising engagement. As noted in the text, engagement is the new “hot” measure. Even though there are a number of problems associated with this measure, clients nevertheless demand it. Should Starch not offer this (or other measures) clients demand, the company runs the risk of being considered outdated and business will move elsewhere.

10.

Explain why different metrics may be more useful to marketers in determining the effectiveness of their advertising at different times. Give examples of which metrics may be useful as consumers go through the purchase decision process. (LO 18-4).

Chapter 7 discussed advertisers’ use of consumer funnels to understand the consumer decision making process and to establish communications objectives. Using these traditional funnels or some of the newer decision making scenarios proposed requires an advertiser attempting to measure the effectiveness of his/her campaign to employ different media at various stages of the decision-making process. Using different media requires the use of different metrics to determine their effectiveness. For example, at the top of the funnel, where awareness is important, the advertiser may want to use TV. Recall of the ad would perhaps be the most effective measure. Further down the funnel, comprehension would be a critical measure. Tests that measure recognition, and comprehension of the message may be more important at this point.

Chapter 18—Measuring the Effectiveness of the Promotional Program

To measure the ability of the ad or website to gain attention, the marketer may wish to use eye tracking. To get the best measure of the campaign’s effectiveness, tracking methods may be the most valuable metric.

Additional Discussion Questions (not in text) 11. The chapter discusses the use of neurosciences to assess viewers’ evaluation of commercials. What are the pros and cons associated with these methods? When should advertisers use them? (LO 18-3) The chapter discusses the use of this research methodology and the pros and cons associated with it. As noted in the text, it often requires that multiple measures of effectiveness be taken to truly evaluate the effectiveness of an ad. Proponents of neurosciences like the fact that it yields an autonomic response and that it is not subject to socially desirable response issues. They also like the fact that the commercials often correlate highly with other measures such as recall. Like medicine, they claim, the more about how we understand the impact of commercials on the brain, the more we will learn about consumers. Those less enthralled with these measures have cited a number of problems, some even going so far as to call them “junk science.” They contend the measures contribute nothing and are less valuable than focus groups in providing insights. One of the limitations of physiological measures is that the research provides an indication as to what the reaction is, but not necessarily why. In other words, I know your response, and the degree of your response, but have little or no insights as to why. As noted, the best solution is to combine these measures with additional measures. Neuroscience clearly makes a contribution to our understanding, but will provide even more insights if combined with other methodologies.

12. Some companies test their commercials in rough formats described in the chapter. Others only test the commercials in finished form. Discuss some of the advantages and disadvantages of conducting tests at both stages. (LO 18-2) The clear advantage of rough testing is the cost savings. Given that roughs correlate so highly with finished ads , many advertisers will use them to explore the potential effectiveness of them before too much money has been spent. For some types of commercials—particularly those involving emotion—roughs may not be as effective. Cartoon versions may not capture the emotions the message intends to communicate. For this reason, advertisers will test finished ads.

Chapter 18—Measuring the Effectiveness of the Promotional Program

The major problem with testing finished ads comes from the fact that as more money is spent to produce the commercial, more pressure will follow to use it, given the investment. Thus, commercials may be used when they test less than effective, rather than going back and starting over. One might speculate that testing all commercials in rough form might provide some insights into whether it makes sense to proceed.

13. Most of this chapter focuses attention on the measurement of traditional forms of advertising. How are companies measuring nontraditional advertising forms? (LO 18-2) As noted in earlier chapters, there have not been a lot of new methodologies provided to measure the impact of the newer media options. Of course, the Internet has its measurement criteria, some of which are unique to the medium (and some of which have questionable validity and reliability), while others are traditional (tracking, recall, etc.). For most of the other media—particularly those discussed in Chapter 13 under branded entertainment—few new measures have been developed. Most of the determination is made by looking at impressions or potential impressions likely to be generated by placements, etc. As you know, impressions are not true measures of effectiveness. As also noted, many of those using branded entertainment don’t seem to be concerned about effectiveness. Of those who attempt to determine the impact of the placements, integrations, etc., they continue to hold out for the Holy Grail—sales. Still others track the number of hits to their website after the placement has occurred—perhaps a more revealing metric than sales. Partly because of management attitude, and partly because of the novelty of these new media, there are not a lot of measures of effectiveness in place. Hopefully, as the media mature, these measures will follow. 14. Explain why it is so difficult to measure the effectiveness of an IMC program that uses multiple program elements. (LO 18-3) One of the arguments for not using sales as an indicator of advertising success is the fact that other marketing factors—price, product and distribution as well as external factors will contribute to the sales of a product. A similar argument exists for measuring the contribution of IMC elements. One of the benefits to be derived from an IMC program is the cumulative impact that occurs through multiple media, points of contact, etc. that likely results in a Gestalt effect—that is, the whole is greater than the sum of its parts. As marketers have discovered, it if very difficult to separate the individual contributions that each medium makes in such a program. One of the reasons for this problem is that consumers may not know or remember where they have seen a communication. In tracking advertising for 17 years for a bank, we often found misreporting of media sources—that is people saying they recall an ad from TV, when there were not TV commercials being run, etc. Consumers just aren’t that attuned to where they see messages. 18-14 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 18—Measuring the Effectiveness of the Promotional Program

Another factor is that while one might be able to recall which medium the message appeared in, it is much more difficult to determine the degree of impact of that medium. In addition, message factors, and source factors—just like price and product will also confound the studies.

15. Studies indicate that the combined effects of advertising in various media may lead to more effectiveness than just using one medium. Explain why you think this might occur, using some of the examples cited in the chapter. (LO 18-1) Various elements of the IMC program each make their own contributions to the overall impact of the campaign. A combination of the program elements is likely to have a greater impact than the effect of the element used alone. Some examples cited in the text: The Online Publishers Association’s study showed that combining Internet and television lead to higher recall than using each alone. The test was designed to test recall and memorability of an ad. Using an advertisement for the US Air force, three different groups were exposed to the ad: (1) those visiting a web page; (2) those watching the TV program Who Wants to Be a Millionaire; and (3) those watching the TV program and visiting the website. The results indicated that brand awareness was higher and day after recall was more than double that of a control group with no exposure; online ads were more likely to be seen than TV advertising; and the people exposed to both ads were more likely to recall the TV commercial. The overall study concluded that there was a synergistic effect when TV and online are used in combination leading to a 9 percent higher recall and a 48 percent increase in recognition of the online ads. An MSN online study also examined the effect when online ads are used in conjunction with traditional advertising. Aided and unaided awareness, brand associations, and purchase intent were measured for Dove and Dove Nutrium soaps using individual media and combinations of online with TV and print. The results indicated that increasing the frequency of online advertising efficiently improved branding results and that combining online advertising with the more traditional TV and print media increased the effectiveness of the entire campaign. In an examination of four product categories, it was found that TV was the most used medium for all four product categories and that is was most useful for providing information on low involvement products, while the Internet was more useful for high involvement products. TV was also shown to be more useful for providing information on affective versus rational decisions. The study concluded that the Internet should be considered in conjunction with other traditional media alternatives.

IMC Exercise Have students find an example of a current or recent advertising campaign being used by a company. Have them explain the various measures of effectiveness that might be used by the company to track effects of the campaign over time or through the consumer purchase funnel. They should explain why particular testing methods would be appropriate and how the information they provide can be used by the marketer at various stages of the funnel. 18-15 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 19—International Advertising and Promotion

CHAPTER 19 INTERNATIONAL ADVERTISING AND PROMOTION Chapter Overview The purpose of this chapter is to introduce the student to the role of advertising and promotion in a company’s international marketing program. We discuss the growing importance of companies being able to compete in the global marketplace and the importance of international advertising and promotion. The international environment and the major factors influencing marketing and promotional decisions in foreign markets are discussed and attention is given to the issue of global or standardized versus local or customized marketing and advertising. This chapter also examines how companies organize for international advertising, select agencies, and make decisions in various areas such as research, creative strategy, and media selection. While the primary focus of this chapter is on international advertising, attention is also given to how other IMC tools are used in international marketing, including sales promotion, public relations, and digital/social media.

Learning Objectives 1. Describe the value of international marketing and promotion. 2. Discuss how economic, cultural, legal, and other factors in the international environment affect advertising and promotional decisions. 3. Compare global and localized advertising and promotion. 4. Discuss the decision areas of international advertising. 5. Describe the role of other elements of the promotional mix in the international IMC program.

Chapter and Lecture Outline I.

THE IMPORTANCE OF INTERNATIONAL MARKETS

Throughout this book, attention focused primarily on the development of promotional programs for products and services sold to the U.S. market. However, many companies are recognizing the opportunities that foreign markets offer for new sources of sales and profits as well as the necessity of marketing their products internationally. Today, world trade is driven by global competition among global companies for global consumers. It has become increasingly important for U.S. companies to adopt an international marketing orientation since imports are taking significant amount of the domestic market for many products and are likely to continue doing so. The balance-of-trade deficit and movement toward a global economy is requiring companies to become more adept at marketing their products and services to other countries. Professor Notes

Chapter 19—International Advertising and Promotion

II.

THE ROLE OF INTERNATIONAL ADVERTISING AND PROMOTION

Advertising and promotion are important parts of the international marketing program of firms competing in the global marketplace. While the United States still leads the world in terms of advertising spending, expenditures outside of the U.S. have increased dramatically over the past decade and are now nearly $500 billion annually. It is worth noting and discussing the importance advertising and promotion for large foreign-based multinationals such as Unilever, Nestle, Volkswagen, Toyota Motor Corp., and McDonald’s. Figure 19-1 shows the top 10 companies by worldwide advertising spending. Advertising and promotion are the most visible as well as the most culture-bound of a firm’s marketing functions. Companies planning on marketing and advertising their products or services abroad are faced with an unfamiliar marketing environment and consumers with different customs, values, consumption patterns and habits, as well as different purchase motives and abilities. Media options are often more limited in foreign countries than in the US and different creative and media strategies, as well as changes in other promotional mix elements, are often required for foreign markets. Professor Notes

III.

THE INTERNATIONAL ENVIRONMENT

Just as with domestic marketing, companies engaging in international marketing must carefully analyze and consider the major environmental factors of each market in which they compete. Consideration of environmental factors is important, not only in evaluating the viability and/or potential of each country as a market, but also in designing and implementing a marketing and promotional program. Figure 19-2 shows some of the forces marketers must consider in each category when analyzing the environment of a country or market. Major environmental factors that must be considered include: A.

Economic Environment—A country’s economic conditions indicate its present and future potential for consuming. Marketers must consider the economic infrastructure or the communications, transportation, financial, and distribution networks needed to conduct business in a particular country. The global recession affected many countries around the world and is a very good example of how the economic environment influences demand for products and services. The European Union has been behind many other countries and regions in recovering from the recession and unemployment remains high in many countries such as Spain and Portugal. China and India are two countries that are transforming the global economy, as both countries have strong economies with annual GDP growth ranging from 6 to 10 percent. Global Perspective 19-1 discusses the growth of China and the challenges and opportunities companies face in the country.

Demographic environment—International marketers must also examine the demographic characteristics of a country including factors such as income levels and distribution, age and occupation distributions, household size, literacy, education and employment rates. Many marketers are turning their attention to third world countries at the bottom of the economic pyramid where consumer markets are slowly emerging.

Chapter 19—International Advertising and Promotion

Cultural environment—An aspect of the international marketing environment that is very important to advertising and promotion is the culture of each country. Among the most important aspects of culture are the language, customs, tastes, attitudes, life style, values, religion, and ethical/moral standards of each society.

Political/legal environment—The political and legal environment is one of the most important factors influencing advertising and promotional programs of international marketers. Government regulations and restrictions can affect a variety of aspects of a company’s advertising program, including:

•

The types of products that may be advertised

•

The content or creative approach that may be used

•

The media that all advertisers (or different classes of advertisers) are permitted to employ

•

The use of social and digital media

•

The amount of advertising a single advertiser may use in total or in a specific medium

•

The use of foreign languages in ads

•

The use of advertising material prepared outside the country

•

The use of local versus international advertising agencies

•

The specific taxes that may be levied against advertising

Professor Notes

McGraw-Hill Connect ®: International Marketing Environment Type of Activity: Click and Drag Activity Summary: In this activity, students will read about the international marketing environment and then place each factor with the appropriate environmental force. Activity Learning Objectives: 19-01 Describe the value of international marketing and promotion. 19-02 Discuss how economic, cultural, legal, and other factors in the international environment affect advertising and promotional decisions.

Chapter 19—International Advertising and Promotion

CONCEPT REVIEW: Many U.S. companies are recognizing not only the opportunities but also the necessity of marketing their products and services internationally because of saturated markets and intense competition from both domestic and foreign competitors. International marketers must carefully analyze the major environmental forces in each market where they compete, including economic, demographic, cultural, and political/legal factors. These factors are important not only in assessing the potential of each country as a market but also in designing and implementing advertising and promotional programs. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking IV.

GLOBAL VERSUS LOCALIZED ADVERTISING

In recent years a great deal of attention has been focused on the concept of global marketing whereby a firm utilizes a standard marketing plan for all countries in which it markets its product or service. Global advertising falls under the umbrella of global marketing as a means of implementing this strategy by using the same advertising approach in all markets. The theorizing of Harvard professor Theodore Levitt helped popularize the concept of global marketing. However, not everyone agrees with Levitt’s global marketing theory, particularly with respect to advertising, as they argue that products and advertising messages must be designed and/or adapted to meet the differing needs of consumers in various countries. The advantages and limitations of global marketing and advertising in particular should be discussed. A.

Advantages of Global Marketing and Advertising—The use of a global marketing and advertising program offers numerous advantages to a company including: • Economies of scale in production and distribution • Lower marketing and advertising costs as a result of reductions in planning and control • Lower advertising production costs • Abilities to exploit good ideas on a worldwide basis and introduce products quickly into various world markets • A consistent international brand and/or company image • Simplification of coordination and control of marketing and promotional programs

Problems with Global Advertising—While the concepts of global marketing and advertising have received a great deal of attention recently, not everyone agrees with this strategy. Some of the problems with global marketing and advertising include: • Differences in culture, market and economic development, consumer needs, media availability and legal restrictions make it extremely difficult to develop an effective universal approach to marketing and advertising. • Advertising in particular is difficult to standardize because of cultural differences in circumstances, language, values, beliefs, lifestyle, and so on. • Usage patterns and perceptions of a product may vary from one country to another and require adjustments in the marketing and advertising program rather than just using a global campaign.

Chapter 19—International Advertising and Promotion

When Is Globalization Appropriate? —While many advertisers view globalization of advertising as a difficult task, some progress has been made in learning what products and services are best suited to worldwide appeals. Products and services that can take advantage of global marketing and advertising opportunities include:

1. Brands or messages that can be adapted for a visual appeal, avoiding the problems of trying to translate words into dozens of languages. 2. Brands promoted using image campaigns that play to universal needs, values, and emotions. 3. High-tech products and new products coming to the world for the first time, not steeped in the cultural heritage of a country. 4. Products with nationalistic flavor if the country has a reputation in the field. 5. Products that appeal to a market segment with universally similar tastes, interests, needs, and values. D.

Global Products, Local Messages—While the pros and cons of globalized marketing and advertising continue to be debated, many companies are taking what might be called an inbetween approach by standardizing their products and basic marketing strategy but localizing their advertising messages to appeal to the local realities and conditions of each market. This approach has been given different labels such as “Think global, act local” or “Global vision with a local touch.” Although some marketers use global ads with little or no modification, most companies adapt their messages to respond to differences in language, market conditions and other factors. Many global marketers use a strategy called pattern advertising whereby their ads follow the same basic approach, but themes, copy and sometimes even visual elements are adapted to differences in local markets. The TAG Heuer ads shown in Exhibit 19-10 are an example of pattern advertising as different celebrities are used for various countries but the various creative elements of the ad such as design and layout remains the same. Another way marketers adapt their campaigns to local markets is by producing a variety of ads with a similar theme and format and allowing managers in various countries or regions to select those messages they feel will work best in their markets.

Professor Notes

DECISION AREAS IN INTERNATIONAL ADVERTISING

As with domestic marketing, certain organizational and functional decisions must be made by companies developing advertising and promotional programs for international markets. This section examines these decision areas. A.

Organizing for International Advertising—The initial decision a company must make when it decides to market its products to other countries is how to organize the international advertising and promotion function. There are three basic options for organizing this function.

Chapter 19—International Advertising and Promotion

1. Centralization—All decisions and planning is done at the firm’s home office. Complete centralization is likely when market and media conditions are similar from one country to another, when the company has only one or a few international agencies, when it uses global marketing and advertising, or when it desires a consistent image worldwide. 2. Decentralization—Marketing and advertising managers in each market have the authority to make their own decisions such as selecting agencies, developing budgets, conducting research, approving creative themes and executions, and selecting media. 3. Combination—Many companies actually use a combination of the first two approaches whereby the home office will have the most control over advertising policy, guidelines and operations in all markets, while managers in local offices will be responsible for submitting advertising plans and budgets for their markets which must be reviewed and approved by the international advertising manager. This approach allows for consistency and uniformity in a firm’s international advertising program yet still permits local input and adaptation of the promotional program. B.

Agency Selection—One of the most important decisions a firm engaged in international marketing must make is the selection of an advertising agency. The three basic alternatives in selecting an agency include: •

Choosing a major agency with both domestic and overseas office. A number of multinational companies are consolidating their advertising with one large agency to develop a consistent global image. IBM was one of the first to do this in 1994 and many large companies have followed.

•

Choosing a domestic agency affiliated with agencies in other countries or belongs to a network of foreign agencies. Many agencies are now affiliated with agencies in other countries or belong to a global network of agencies.

•

Selecting a local agency for each national market in which the company sells its products or services. Some companies prefer to use local agencies because they often provide the best talent in each market. This also increases the morale and involvement of local managers by giving them input into the agency selection process. 1. Criteria for agency selection—The selection of an agency or agencies to handle a firm’s international advertising depends on how the firm is organized for international marketing and the type of assistance it needs to meet its goals and objectives in foreign markets. Specific criteria a company might use in selecting an agency are shown in Figure 19-3.

Creative Decisions—Creative strategy development for international advertising is basically similar in process and procedure to domestic advertising as communication objectives must be set based on the marketing strategy and market conditions for each market, major selling ideas must be developed, and specific appeals and execution styles must be chosen. An important factor influencing the development of creative strategy for international markets is the issue of global versus localized advertising. 19-6

Chapter 19—International Advertising and Promotion

Global advertising uses the same basic appeal and execution style in all countries and requires the development of advertising that will transcend cultural differences and communicate effectively in every country. Companies following a localized advertising strategy must determine what type of selling idea, appeal and execution will work in each market. A product or service may have to be positioned differently in each market depending on consumers’ usage patterns and habits. D.

Media Selection—One of the most difficult decision areas for international advertisers is that of media strategy and selection. U.S. firms usually find that there are major differences in media outside this country and media conditions may vary considerably from one area to another, particularly in developing countries. Problems and differences include the types of media available, the characteristics of media, availability of media information, and restrictions from one country to another. Media planners have two basic media options available. 1. Local media—Using the local media of a country to reach its consumers, such as local magazines, newspapers, radio, billboards, direct mail and, where available and/or permitted, television. 2. International Media—International advertisers can also reach audiences in various countries through the use of international media that have multimarket coverage. The primary types of international media are magazines and newspapers. Some multinational commercial television stations and networks such as STAR India are operating in Europe and Asia and are likely to continue to expand with the growth of direct broadcast by satellite (DBS) in homes.

Professor Notes

VI. THE ROLES OF OTHER PROMOTIONAL-MIX ELEMENTS IN INTERNATIONAL MARKETING The focus of this chapter has been on advertising since it is usually the primary element in the promotional mix of the international marketers. However, as in domestic marketing, promotional programs for foreign markets will generally include other elements such as personal selling, sales promotion and public relations. The role of these other promotional mix elements will vary depending on the firm’s marketing and promotional strategy in foreign markets. A.

Sales Promotion—Many companies rely on sales promotional tools and techniques to help sell their products in foreign markets. Promotional tools that are effective in the U.S. such as free samples, premiums, contests, and gifts may also work well in other markets. One form of promotion that has become very popular among many U.S. firms for use in foreign markets is sponsorship of sporting events, concerts and other music-oriented radio and television programs. Unlike advertising, which often can be done on a global basis, sales promotion must often be adapted to local markets. Kashani and Quelch note several important differences among countries that must be considered in developing a sales promotion program including: 19-7

Chapter 19—International Advertising and Promotion

•

Economic development—the ability to use various sales promotion tools can be influenced by the stage of economic infrastructure and stage of development of a country

•

Market maturity—the stage of development of the market for the product or service within a country. Different types of sales promotion tools are needed to introduce a product or service versus competing in a mature market.

•

Consumer perceptions—consumer perceptions of and willingness to use various sales promotion tools varies by country

•

Trade structure—the willingness and ability of channel members to accommodate sales promotion programs

•

Regulations—legal restrictions and regulations on sales promotion vary by country and can be very restrictive in some countries and affect the type of promotions that can be used.

Public Relations—Public relations plays an important role in supporting and enhancing the marketing and advertising efforts of companies involved in international advertising. Public relations activities are needed to deal with local governments, media, trade associations and the general public. The job of PR agencies in foreign markets is not only to help the company sell its products or services but also to present the firm as a “good corporate citizen” who is involved with and concerned about the future of the country. Companies must have a favorable reputation and image if they are to be successful in foreign markets, as groups may feel threatened by the presence of a foreign multinational in their country. Public relations efforts may also be needed to deal with specific problems a company faces in international markets. Many multinational companies are choosing ad agencies that offer public relations capabilities so their entire communication program can be integrated and conducted on a global basis. The chapter discusses major public relations problems companies such as McDonald’s and KFC have encountered in foreign markets.

Digital and Social Media 1. Worldwide Growth of the Internet—The Internet is coming of age as a global marketing medium as well as an important IMC tool for companies around the world. As of 2016, there were more than 3.4 billion internet users around the world. Internet usage is highest in China, which now has more than 721 million people online followed India with 462 million, the United States with 281 million and Japan with 115 million. Internet use in international markets is still limited in some countries is expected to develop quickly as telecommunications companies move into emerging markets such as Eastern Europe, India, and Latin America and improve the communications infrastructure. 2. Use of Digital and Social Media in International Marketing—Digital media is now an integral part of the IMC program for most international marketers as they have websites for specific countries and/or regions which allow them to tailor the information they provide to the needs, interests, and lifestyles of consumers in these markets. The use of social media is also becoming prevalent in countries around the world. Facebook has become the first truly 19-8

Chapter 19—International Advertising and Promotion

global social networking brand has now has nearly 2 billion users around the world. Digital and Social Media Perspective 19-1 discusses how Facebook has become the leading social networking site in most countries. Professor Notes

McGraw-Hill Connect ®: Oreos Around the World Type of Activity: Video Case Activity Summary: Kraft's Oreo is the most popular cookie in the world enjoyed in over 100 countries across the world. The video gives students a summary of their international advertising and promotional strategies to improve the brand performance across the globe. Students will answer questions about the video. Activity Learning Objectives: 19-03 Compare global and localized advertising and promotion. 19-04 Discuss the decision areas of international advertising. 19-05 Describe the role of other elements of the promotional mix in the international IMC program. CONCEPT REVIEW: In recent years, much attention has focused on global marketing, where a standard marketing program is used in all markets. Part of global marketing is global advertising, where the same basic advertising approach is used in all markets. Opponents of the global (standardized) approach argue that differences in culture, market and economic conditions, and consumer needs and wants make a universal approach to marketing and advertising impractical. Many companies use an in-between approach, standardizing their basic marketing strategy but localizing advertising messages to fit each market.

Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

Chapter 19—International Advertising and Promotion

Teaching Suggestions This chapter focuses on international advertising and promotion. It is very important to cover this topic as many companies, including those based in the U.S., Japan and Europe, recognize that their domestic markets offers limited opportunity for expansion due to slow population growth, saturated markets, and intense competition. Moreover, imports are taking larger share of the domestic market for many products and are likely to continue to do so. Companies must learn how to defend against foreign inroads into their domestic markets and how to market their products and services to foreign countries. We are living in very fascinating and rapidly changing time with respect to developments in the international arena. It is important that students are encouraged to keep abreast of these social, political and economic changes, how they are affecting the global marketplace, and their implications for international marketing and advertising. As discussed in IMC Perspective 19-1, China has become the world’s second largest economy after the United States and presents marketers with tremendous opportunities as well as many challenges. While most of the chapter discusses issues of relevance to international advertising, it also covers the role of other integrated marketing tools in international marketing including sales promotion, public relations and the use of the internet and digital/social media. An excellent source of information on international advertising is Advertising Age as the online version has a section on global news.

Answers to Discussion Questions 1. The chapter opener discusses the "Taste the Feeling" global marketing launched by the CocaCola Company in 2016. Evaluate the creative strategy being used for this campaign as well as the “one-brand” approach that will unite various brands such as Coca-Cola Light/Diet Coke, Coke Zero, and Coca-Cola Life under one personality rather than running different campaigns for each. (LO 19-1, 19-2) A major part of the new strategy is a “one-brand” approach that will unite various brands such as Coca-Cola Light/Diet Coke, Coke Zero, and Coca-Cola Life under one personality rather than running different campaigns for each. Diet Coke and Coke Zero are positioned as customized choices for drinkers who may want a sugar-free soft drink. The one-brand approach includes a global packaging shift as the new cans and bottles for the entire Coca-Cola trademark line will feature the brand’s signature “Red Disc” which has become a signature element of the brand through the years. The new packaging launched in Mexico and parts of Europe but is not expected to be used in North America until at least 2017. In some European countries, such as Spain, a new can design features the color red on the top half of the cans, with different colors on the bottom representing varieties such as the flagship Coca-Cola brand, Coke Zero, and Coca-Cola Light (Diet Coke is marketed as Coca-Cola Light in all markets except North America, Australia, and the UK). Implementation of the new global strategy is a major undertaking and 4 of the 10 agencies Coca-Cola works with worldwide are taking a lead role in the “Taste the Feeling” campaign, including Ogilvy New York, Sra. Rushmore of Madrid, Santo of Buenos Aires, and Mercado-McCann of Argentina. However, other agencies will contribute content to the integrated campaign as it evolves. Coca-Cola is phasing the one-brand approach more slowly in North America where Diet Coke and Coke Zero have carved out unique identities. The company will continue to work with agencies for these brands in markets such as the United States. However, the company's long-term goal is to bring the two brands under the Coca-Cola branding umbrella rather than having consumers view them as having a separate identity. Coca-Cola knows it has a lot riding on the new “Taste the Feeling” campaign, but feels that changes were needed to address the challenges it is facing in the global market such as declining soda consumption in many markets amid growing health concerns and a shift to healthier lifestyles. Marcos de Quinto believes that the new “Taste the Feeling” global IMC campaign, as well as the new 19-10 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 19—International Advertising and Promotion

packaging strategy, will help consumers around the world better connect with the brand and various Coke products. His goal is to keep things simple for consumers and return to the essence of what the Coca-Cola brand is about - a brand for everybody and one that makes them feel good. 2. Why are international markets becoming so important to companies in the United States as well as other nations? Discuss the various factors that companies must consider in developing IMC programs for various countries. (LO 19-1) There are several reasons why international markets are becoming so important to U.S. companies as well as corporations based in other nations. Many markets such as the U.S., Japan, and most European countries offer limited growth potential for many products and services because of slow population growth, saturated markets, and intense competition. In addition, in some industries such as alcoholic beverages, soft drinks, and tobacco, sociocultural and regulatory trends are causing many markets to stagnate or even decline. U.S. companies are also losing market share to imports and are likely to continue to do so in the future. As the standard of living and economic situation improve in many foreign markets, U.S. companies will want to take advantage of the marketing opportunities in these areas. In some countries, such as Japan, changing values and lifestyles are also resulting in more consumption and spending by consumers and represent an opportunity to many U.S. companies. A key demographic segment for many companies is the teen market as they are heavy users of soft drinks, fast food, movies, and music. Many foreign countries have a very young population with a large number of teens and young adults who are very receptive to Western ways and products. Thus, companies targeting teens have an opportunity to grow by penetrating foreign markets. For European companies such as Nestle, Unilever, Nokia, and Samsung, foreign markets are vital to their success. These companies are based in Switzerland, the Netherlands, Finland, and South Korea, respectively, which are relatively small, and without foreign markets, they would not have a large enough market nor economies of scale to survive against larger U.S. and Japanese companies. Advertising and promotion play a very important role in many firms’ international marketing programs as they must communicate information about their products and services to foreign markets and convince inform consumers of their particular attributes, features and benefits. Advertising and promotion are the most visible of a firm is marketing activities as well as the most culture bound. There are a number of factors marketers must consider in developing IMC programs for various countries. They must carefully analyze the major environmental factors of each market in which they compete or plan to enter including economic, demographic, cultural, and political/legal factors. Companies must also consider whether they can use a global marketing and advertising strategy or adapt their IMC programs for various countries and/or regions. Decisions also must be made regarding how to organize for IMC, agency selection, creative strategy and execution, media planning and selection, and the role of various other IMC tools such as sales promotion, public relations, and digital/social media. 3. Discuss the factors that are leading to the economic growth of China and the market opportunities that are evolving. What challenges do marketers and their agencies face in developing IMC programs for the Chinese market? (LO 19-2) China has become such an important market for most multinational companies for a number of reasons. First, with 1.3 billion people, China has become one the world’s largest and fastest growing consumer markets. China has been experiencing tremendous economic growth, particularly in the urban areas that are home to more than a third of the country’s population. Political and economic reform has also brought a new spirit of consumption to China along with dramatic increases in purchasing power. The average annual disposable income of urban Chinese households has nearly doubled over the past five years and continues to rise. Since the government either subsidizes or provides many of the necessities including housing and health care, Chinese consumers have disposable income to spend on a variety of products. The newly emerging middle class in China is 19-11 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 19—International Advertising and Promotion

also very brand-conscious and demand is strong for many of the popular import-brands from Western companies as well as those in Japan and Korea. Marketers face a number of challenges in developing IMC programs for the Chinese market. While China has been experiencing strong economic growth, the per capita income of the country is still below that of most industrialized countries. Even in the major cities, where the standard of living is higher, disposable income is still not that high and the purchasing power of most consumers is still limited. Foreign companies also face cultural barriers and political/legal restrictions in developing marketing programs for China. The government does not want advertising to affect the political, moral, or social climate of the country and ads of outside companies are scrutinized very carefully. Marketers also must deal with a lack of information regarding media preferences and patterns as well as availability. Television in China is controlled by state-owned China Central Television, which controls programming and scheduling. Foreign companies are also facing increasing competition from local brands that are improving their quality and brand images and have a cost advantage over imported products. Advertising agencies are also finding that doing business in China can be very challenging as local clients are very demanding and agency relationships often do not last long. Many multinational marketers are terminating their global agency alignments in China and working with local advertising and promotion agencies, particularly as they expand deeper into the rural areas of the country. 4. Discuss how global marketers might use the 2022 FIFA World Cup soccer tournament that will be held in Qatar as an integrated marketing communications opportunity. What types of companies are best suited to use the World Cup as an IMC opportunity? (LO 19-1,19-2) The FIFA World Cup is held once every four years and features 32 qualifying nations. It is the largest single event sporting competition in the world as nearly 3 billion people worldwide follow the monthlong tournament on television and over 3 million spectators attend the 64 matches played. The World Cup, like the summer and winter Olympic Games, is an excellent integrated marketing communications opportunity for companies as soccer (or football as it is referred to in most countries) is the most popular sport in the world and has a very large and passionate fan base. Marketers use the World Cup in various ways as an IMC opportunity ranging from simply advertising during the televised games to using it as a global partnership or sponsorship opportunity. For example, for the 2014 World Cup in Brazil FIFA had six global partners, eight global sponsors and eight local supporters. The six global partners paid an average of $31 million each per year over a four-year period from 2010 through 2014 while the eight sponsors paid an average of $15 million and six national supporters are laid out $8 million each. Companies that pay to be official partners or sponsors can refer to themselves as such in their marketing and promotional materials over the fouryear period and use the FIFA World Cup logo. Given the high cost of being a World Cup partner or sponsor, major global companies generally pay the monies for this opportunity such as Adidas, Sony, Coca-Cola, Hyundai/Kia, and Emirates Airlines. These companies will often develop special IMC campaigns around the World Cup and activate their sponsorships in a variety of ways including advertising during the games, contests and sweepstakes, digital marketing through their websites and social media, on-site promotions at the games, and major public relations campaigns. Many marketers also become involved with the World Cup by being sponsors of their countries national teams and advertising during the games on networks such as ESPN that has the contract to televise the tournament in the United States. 5. What are some of the cultural variables that marketers must considering in developing advertising and promotional programs in a foreign market? Choose one of these cultural variables and discuss how it has created a problem or challenge for a company in developing an advertising and promotional program in a specific country. (LO 19-2)

Chapter 19—International Advertising and Promotion

Cultural factors influence the development of advertising and promotional programs for foreign markets in a number of ways. Advertisers must consider the language, customs, tastes, attitudes, lifestyle, values, religion, and ethical/moral standards of each society when developing an advertising campaign. Cultural factors determine what products and services marketers can sell to foreign markets as well as how they can communicate with consumers. They must understand not only the language of the country but also its nuances, idioms, and subtleties. They must also be aware of the connotations of words and symbols they use in their ads and how advertising messages, including copy, images and slogans, will be translated. Students should choose a particular cultural variable such as customs, values, language or ethical/moral standards and find an example of how it has created a specific challenge or problem for marketers in a specific country. 6. What is meant by a country-of-origin effect? Discuss the implications of the results found in the survey conducted among college students in the United States, which found that they have limited knowledge of the country-of-origin of most brands. Does this mean country-of-origin is not important to students? (LO 19-3) A country-of-origin effect refers to consumers’ general perceptions of quality for products made in a given country. For example, Germany is known for excellent automotive engineering, and brands such as Mercedes or BMW are generally perceived as being of higher quality because they are from this country. The results of the Andersen Analytics study found that the vast majority of college students are not swayed of the country of origin of most brands. The results of the study suggest that marketers targeting young people of college age have little to gain by promoting their country of origin in their advertising and other forms of marketing communication. Younger people are not as cognizant of country of origin and really may not care that much about where a product is made. Young people may also recognize that most products are not made in the country where the company is headquartered as many companies now use contract manufacturing or make products in countries where labor costs are low. It might be interesting to discuss whether the importance of country of origin becomes more important as consumers age and become more concerned with product quality, particularly for more expensive items such as cars, consumer electronics, and clothing. 7. Discuss the advantages and disadvantages of using a global advertising campaign. For what type of products/services is a global advertising approach appropriate? (LO 19-03) A global marketing strategy and advertising program offers certain advantages to a company, including the following: •

Economies of scale in production and distribution

•

Lower marketing and advertising costs as a result of reductions in planning and advertising production

•

Abilities to exploit good ideas on a worldwide basis and introduce products quickly into various world markets

•

A consistent international brand and/or company image

•

Simplification of coordination and control of marketing and promotional programs

Some of the problems with global marketing and advertising include: •

Differences in culture, market and economic development, consumer needs, media

Chapter 19—International Advertising and Promotion

availabilities and legal restrictions make it extremely difficult to develop an effective universal approach to marketing and advertising. • •

Advertising in particular is difficult to standardize because of cultural differences in circumstances, language, values, beliefs, and lifestyle. Usage patterns and perceptions of a product may vary from one country to another and require adjustments in the marketing and advertising program rather than just using a global campaign.

While many in the advertising industry view globalization of advertising as difficult, some progress has been made in learning what products and services are best suited to global appeals: 1. Brands or messages that can be adapted for a visual appeal, avoiding the problems of trying to translate words into dozens of languages. 2. Brands promoted with image campaigns that play to universal needs, values, and emotions. 3. High-tech products and new products coming to the world for the first time and not steeped in the cultural heritage of a country. 4. Products with nationalistic flavor if the country has a reputation in the field. 5. Products that appeal to a market segment with universally similar tastes, interests, needs, and values. 8. Discuss some of the differences in media that exist across various countries and how they might impact the media strategy used by marketers. (LO 19- 04) Companies face a number of problems in developing media strategies for different countries. First, the types of media available in each country are different. For example, TV sets are not as prevalent in many homes in developing countries and even if they are, the amount of commercial time available may be limited. Companies who using the Internet and social media a major part of their integrated marketing communications strategy must consider the penetration of personal computers and smartphone in homes and businesses in foreign markets. The characteristics of media also differ from country to country in terms of coverage, cost, and quality of reproduction, restrictions and the like. Multinational companies also face problems in getting reliable media information such as circulation figures of magazines, audience profiles, and costs. Media rates may also fluctuate because of unstable currencies and economic conditions. There also may be differences in consumer characteristics and media usage patterns due to factors such as literacy rates or media preferences. 9. Discuss the evolving role of the Internet and other digital media in the IMC program of international marketers. How can marketers make effective use of digital and social media in marketing their products and service in various countries? (LO 19-5) The Internet has become an important IMC tool for companies around the world as more businesses and homes become connected to it. There are nearly 3.4 billion Internet users around the world with the largest number in Asia followed by Europe and North America. Digital media are becoming an integral part of international marketers IMC programs at a global, regional and local level as they are using the Internet to promote their companies and brands and engage in e-commerce. Most multinational marketers now have websites for specific countries or regions that allow them to tailor the information they provide to the needs, interests, lifestyles and consumption patterns of consumers 19-14 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 19—International Advertising and Promotion

in these markets. The use of social media is also becoming prevalent in many countries as Facebook now has more nearly 2 billion users around the globe. The company now owns Instagram, which has over 400 million active users, 75 percent off whom live outside the U.S., while Twitter has over 300 million users. Many countries have their own social networking sites, which are upgrading their capabilities to remain competitive as other sites enter their markets. It is likely that the use of social networking sites will become more prevalent and marketers will increase their use of them. Marketers are also expected to increase their use of mobile marketing techniques as more consumers use smart phones and other mobile devices to access the Internet. 10. Why do you think Facebook has become so popular in countries around the world? Discuss the importance of social media in the IMC programs of international marketers. (LO 19-5) The use of social media is becoming prevalent in countries throughout the world as Facebook now has nearly 2 billion users and is the leading social media site in the most countries while Instagram now has over 400 million active users. As discussed throughout the text, social media sites are becoming very popular with the growth of the internet and broadband connections, particularly through wireless. The growth of smartphones and other mobile devices are also driving the growth of social media in countries through the world as the majority of people now go online through their phones and this is likely to increase in the future. Facebook has been working to improve its platform and interface on mobile devices while Twitter already lends itself to mobile given its characteristics. The use of social media sites is also on the rise because people enjoy using them to communicate, stay in touch with friends, share pictures and other media, and to entertain themselves. Social media will continue to be an important part of the IMC programs of international marketers as companies recognize the value of using Facebook, Instagram, YouTube, Twitter and other sites to communicate with consumers and are finding more ways to do so. Companies around the world recognize that having a Facebook page or YouTube page is as important as having a website and now a necessity as consumers expect to be able to connect with companies through social media. Moreover, it is important for marketers to monitor social media to see what consumers are saying about their companies and brands and be able to respond in a timely manner. There are still countries where Facebook, Instagram, YouTube and Twitter do not have a presence, such as China, which present them with growth opportunities. However, China has its own social media sites such as Sina Weibo and Renren, which are very popular and provide a possible IMC platform for global marketers. The importance of social media in the IMC program of marketers is likely to increase as additional sites are developed and adopted by consumers as part of their daily lives.

Additional Discussion Questions (not in text)

11. Discuss the arguments for and against the use of global marketing and advertising. What types of products and services are best suited for global advertising? What developments have taken place in recent years that support the use of global advertising and what factors might make this approach more difficult to use effectively? (LO 19-3) There are several advantages to global advertising including lower advertising production costs, the ability to exploit good creative ideas on a worldwide basis, the opportunity to have a consistent brand and/or company image all over the world, and the simplification of coordination and control of advertising programs. Problems with global advertising are that differences in culture, market and economic development, consumer needs and usage patterns, media availability and regulations make it extremely difficult to develop an effective universal approach to advertising. Advertising is very difficult to standardize because of cultural differences such as language, traditions, value, lifestyles, 19-15 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 19—International Advertising and Promotion

customs, and the like. Another problem with the use of global advertising is that consumer usage patterns and perceptions of a product may vary from one country to another and may require adjustments in marketing and advertising approaches. Marketers must also recognize that the use of a global advertising campaign can alienate consumers as well as local employees if they feel their individual differences or cultural diversities are being ignored. Advances in technology such as the Internet, digital media, cable and satellite television, travel and other areas are making the use of global marketing more feasible. Consumers around the globe are exposed to the same music, movies, TV shows, sporting events and web sites. Advances in travel are making it possible for consumers to visit other countries and experience their culture. One thing that is making global marketing more difficult is the trend in many countries to return to more localized music, TV shows and other forms of entertainment. Some countries are trying to preserve their local culture and national identity and may be less receptive to brands from foreign countries that are advertised globally. Global advertising is likely to be inappropriate when there are strong cultural differences among consumers that may influence their interpretation of, and responses to, advertising or when consumer usage patterns and perceptions of a product or service may vary from one country to another. However, these cultural differences are disappearing rapidly, particularly among certain markets such as young people. 12. What is meant by the “think global, act local” approach to global marketing and advertising? Discuss some of the ways marketers can adapt their advertising to local markets. (LO 19-3) Proponents of global marketing such as Professor Theodore Levitt argue that the worldwide marketplace has become homogenized and the basic needs, wants and expectations of consumers transcend geographic, national and cultural boundaries. They argue that consumers around the world are very similar with regard to tastes, needs, wants, preferences and emotional desires and motives. More recently, support for the idea of global marketing has come from advocates of global consumer culture theory who argue that the globalization of markets had led to the existence of a global consumer culture in which many consumers share consumption values, regardless of where they reside. Obviously much has happened over the past two decades that lends greater support to the call for global marketing. There have been significant developments in communications and technology that are leading to the globalization of markets. Satellite-delivered programming has resulted in the television shows being seen by consumers around the world, as governments can no longer control what shows are seen in their countries. The Internet is clearly a new global medium that provides companies with access to consumers around the globe. Social media sites such as Facebook, Instagram, YouTube, Snapchat and Twitter are also popular in most countries. Entertainment such as sporting events, movies, TV shows and concerts are now seen by consumers around the world and having an impact on them. Thus, products and services can be marketed in a similar fashion around the world using global marketing approaches. Not everyone agrees with the concept of pure global marketing arguing that total standardization is unrealistic and changes are required for local markets. They advocate a “think global, act local” approach whereby the same basic advertising theme or approach is used in each country but modifications are made to adapt to differences in culture, language, market conditions and other factors. Marketers use this approach by adapting their campaigns to local markets by producing ads with a similar theme or positioning platform but with copy, visual, models and other executional elements that are adapted to the local market. 13. Many large multinational companies are consolidating all of their worldwide advertising with one large agency. Evaluate the pros and cons of this approach. (LO 19-4) A number of factors are driving this consolidation trend. Major corporations recognize they must develop a consistent global image for the company and/or its brands and speak with one coordinated 19-16 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 19—International Advertising and Promotion

voice. This can be very difficult to do if a company is working with numerous agencies around the world. For example, Dell entered into a partnership with the WPP Group to form a new global integrated marketing and communications agency serves the company’s global marketing needs. Dell had been working with more than 800 different marketing communication firms around the world and wanted to simplify its agency structure. IBM was the first major company to consolidate its global advertising with one agency. The reason given by IBM for consolidating its advertising with Ogilvy & Mather Worldwide was that the company had been projecting too many images with its advertising divided among so many agencies. IBM recognizes that it is competing in a global market for computers and feels it is important to deliver clear, consistent messages that take advantage of the high amount of equity in the IBM name. The agency consolidation allows IBM to gain greater control over, and facilitate coordination of, its worldwide advertising. IBM also thinks that high-tech products such as computers can be advertised using a global advertising campaign since the reasons for purchasing them are similar the world over. Companies are also consolidating their global advertising in an effort to increase efficiency and save money. Finally, advances in technology such as fax machines, e-mail, video conferencing, and airline connections make it much easier to manage accounts around the globe. The risk of the consolidation decision is that one centralized agency may not be able to develop as effective advertising in many foreign markets as a local agency. Local agencies often have a better understanding of the marketing and advertising environment in their country or region and thus may be able to develop more effective advertising than a large multinational agency. Using a single agency also means that a marketer has no backup agency to turn to if there are problems such as ineffective ad campaign. Companies who consolidate also face the problem of selling the idea to regional offices and local country managers who may not like having control of advertising taken from them. 14. What are the three basic options a company has for organizing its international advertising and promotion function? Discuss the pros and cons of each. (LO 19-4) There are three basic options for organizing the international advertising and promotion function including centralization, decentralization or a combination of the two. The centralized organizational structure involves having all advertising and promotional decisions such as agency selection, research, creative strategy and campaign development, media strategy and budgeting done at a company’s home office. Under a decentralized organizational structure, marketing and advertising managers in each market have the authority to make their own advertising and promotional decisions for their local markets. Under the combination approach, the home office or headquarters will have the most control over advertising policy, guidelines and operations in all markets. However, the local advertising managers will submit advertising plans and budgets and play a major role in working with the agency in adapting the advertising appeals to their particular markets and making media selection decisions. Centralization works well when market and media conditions are similar from one country to another, when, the company has only one or a few international agencies handling its advertising, when the company can use standardized advertising or when it desires a consistent image worldwide. Centralization also works best when a company’s international business is small and it operates through foreign distributors or licensees. The decentralized approach is used when companies want to give more control and authority to local managers and believe they know the situations in their markets the best. Decentralization also works best in small or unique markets where advertising must be adapted to fit the conditions of the local market. The combination approach allows for standardization and consistency in a company’s international advertising yet allows for local input or adaptation.

Chapter 19—International Advertising and Promotion

15. Discuss the role of sales promotion tools such as sampling and coupons in international marketing. What challenges might marketers face in using these tools in various countries around the world? (LO 19-5) Sales promotion tools such as sampling and coupons generally play the same role in international marketing as they do in a domestic marketing program. Samples can be a very effective way to get consumers in foreign markets to try a new product and realize the benefits of using it. As noted in the text, a number of companies such as WD-40, Haagen-Dazs, and Nestle have used extensive sampling programs to generate trial of their products. Coupons can be very important in encouraging consumers to try a new product or an established brand. However, while most consumers may be willing to accept a sample of a product, coupons might face more hurdles as consumers in some countries have negative attitudes toward them and retailers may not be willing to accept coupons as readily as in the United States and other countries where there are systems in place to handle and process them. Retailers in many countries do not want to handle coupons and other types of promotions that may require additional effort on their part. Thus, marketers must carefully evaluate the marketing situation in each country before developing and implementing a sales promotion program.

Chapter 20—Regulation of Advertising and Promotion

CHAPTER 20 REGULATION OF ADVERTISING AND PROMOTION Chapter Overview The purpose of this chapter is to examine the regulatory environment in which advertising and promotion operate including industry self-regulation and regulation by federal and state agencies. The chapter begins by examining the various ways the advertising industry attempts to police itself through the use of selfregulation by various parties including advertisers and agencies, trade associations, the business community, and the media. Attention is also given to appraising the value and effectiveness of selfregulation. The remainder of this chapter focuses on governmental regulation of advertising, particularly at the federal level. We discuss the background of federal regulation of advertising and examine the role and functioning of the Federal Trade Commission including its handling of deceptive advertising cases. Additional federal regulatory agencies that have some influence or power over advertising are also discussed along with advertising regulation at the state level. The chapter concludes with an examination of regulations affecting other promotional areas such as sales promotion, direct marketing, and marketing on the Internet.

Learning Objectives 1. Explain how advertising is regulated and by which regulatory agencies. 2. Evaluate the effectiveness of self-regulation of advertising. 3. Describe how advertising is regulated by state and federal agencies. 4. Discuss the regulation of sales promotion, direct marketing, and Internet marketing.

Chapter and Lecture Outline I.

INTRODUCTION

Advertisers operate in a complex environment of local, state, and federal rules and regulations. Additionally, there are a number of advertising and business-sponsored associations, consumer groups and organizations and media that attempt to police advertising through various self-regulatory programs and guidelines. While in most situations the various rules and regulations primarily influence individual advertisers and their messages, there are situations where advertising for an entire industry can be affected. The tobacco industry has already been banned from advertising on the broadcast media, while there is currently strong sentiment to impose restrictions on the advertising and promotion of alcoholic beverages and direct-to-consumer drug advertising. A. Overview of Regulation—Regulation and control over advertising come from internal or selfregulation by various groups within the advertising industry and business community as well as from external federal and state regulatory agencies such as the Federal Trade Commission. While only the governmental agencies have the force of law, most advertisers will abide by the guidelines and decisions of internal or self-regulatory bodies. It is important for all of those involved in the advertising decision making process, both on the client and agency side, to have an understanding of various rules and regulations that affect advertising and promotion and how the regulatory bodies operate.

Chapter 20—Regulation of Advertising and Promotion

Professor Notes

II.

SELF-REGULATION

For many years, the advertising industry has practiced and promoted the use of voluntary self-regulation as a means of regulating and controlling advertising. Most advertisers and their agencies as well as the media recognize the importance of maintaining consumer trust and confidence in advertising. Selfregulation has also been viewed as way of limiting government interference and control over advertising. A.

Self-regulation by Advertisers and Agencies—The self-regulatory process actually begins with the interaction of the client and agency when creative ideas are considered and evaluated. Most advertisers recognize that their ads are a reflection of the company and want to be sure that their advertising claims are truthful, verifiable, and do not mislead or deceive consumers. Internal control and regulation also come from advertising agencies, which are responsible for verifying all product claims made by the advertiser. Agencies generally take formal steps to protect themselves from legal and ethical perils through agency-client contracts. However, agencies have been held legally responsible for fraudulent or deceptive claims along with the client in some cases.

Self-Regulation by Trade Associations—Many industries have developed self-regulatory programs and guidelines or codes for advertising. This is particularly true in industries where advertising is prone to controversy such as liquor and alcoholic beverages, drugs, and various products marketed to children. Many professions also maintain advertising guidelines through local, state and national organizations. While industry associations’ guidelines and codes are meant to show that member firms are concerned with the impact and consequences of their advertising, they have no legal basis for enforcing them and must rely on peer pressure or other sanctions to gain compliance.

Self-Regulation by Business—A number of self-regulatory mechanisms have been established by the business community in an effort to control advertising practices. The largest and best known of these is through the Better Business Bureau (BBB), which promotes fair advertising and selling practices in all industries in local areas. The parent organization of the local BBB offices is the Council of Better Business Bureaus, which plays a major role in the monitoring and control of advertising at a national level through the Advertising Self-Regulatory Council, which includes three investigative units: the National Advertising Division (NAD), Children’s Advertising Unit (CARU), and Electronic Retailing Self-Regulation Program (ERSP).

The Advertising Self-Regulatory Council and the NAD/NARB—The National Advertising Division (NAD) works closely with the National Advertising Review Board (NARB) to sustain truth, accuracy and decency in national advertising. These two organizations are the operating arms of the Advertising Self- Regulatory Council (ASRC) and constitute the advertising industry’s most effective self-regulatory mechanism. The NAD maintains an advertising monitoring system that is the source of many of the cases it reviews along with complaints received from consumers, local BBBs, and competitors’ challenges (which have become the primary source of NAD cases as shown in Figure 20-1).

Chapter 20—Regulation of Advertising and Promotion

CARU and ERSP—the Children’s Advertising Review Unit’s activities include the review and evaluation of child-directed advertising in all media, as well as online privacy issues that affect children. The CARU also provides a general advisory service for advertisers and agencies and has developed self-regulatory guidelines for children’s advertising. The Electronic Retailing SelfRegulation Program is sponsored by the electronic retailing association and its mission is to enhance consumer confidence in electronic retailing (e-commerce) and discourage advertising and marketing practices in the industry that contain unsubstantiated claims and promote effective self-regulation. In 2012, the ASRC became an independent enforcement mechanism for a new self-regulatory program, the Interest-Based Advertising Accountability Program which regulates online behavioral advertising across the Internet. The new program, which was developed by the Digital Advertising Alliance, applies consumer-friendly standards to online behavioral advertising across the internet. The SelfRegulatory Principles for Online Behavioral Advertising, shown in Figure 20-2, are designed to address consumer concerns regarding the use of personal information for interest-based advertising and focus on transparency and consumer control issues. 1. Advertising associations—Various groups in the advertising industry have also been proponents of self-regulation. These include the two major national organizations, the 4A’s, which is the major trade association representing U.S. advertising agencies, and the American Advertising Federation (AAF). These associations have established guidelines for truthful and responsible advertising and have been active in the legislative area of advertising and in influencing agencies to abide by their codes and principles. E.

Self-regulation by Media—Another very important self-regulatory mechanism in the advertising industry is that of the media. Most media maintain some form of advertising review process and may reject any ads they regard as objectionable. Newspapers and magazines have their own set of advertising standards, requirements, and restrictions that will often vary depending on the size and nature of the publication. Advertising on television and radio has been regulated for years through codes developed by the industry trade association—the National Association of Broadcasters (NAB). Probably the most stringent review process and standards of any media are those of the four major television networks through their “Standards and Practices” divisions, which carefully review all commercials submitted to the network or affiliate stations. Figure 20-4 shows a sampling of the TV network’s guidelines for children’s advertising.

Appraising Self-regulation—The three major participants in the advertising process—the advertisers, agencies and media- all work both individually and collectively to encourage truthful, ethical, and responsible advertising. The advertising industry views self-regulation as an effective mechanism for controlling advertising and prefers this form of regulation to government intervention. The president-CEO of the ASRC notes that the self-regulatory system protects consumers from misleading advertising claims; points the way on new media issues; levels the playing field for all advertisers by holding them to high standards of truthfulness and requiring claim substantiation; and provides support for the development of new self-regulatory programs. Self-regulation has been effective and has probably led to the development of standards and practices that are higher than those imposed by law and beyond the scope of proper legislation. There are, however, limitations to self-regulation and this process has been criticized in a number of areas. Concern has been expressed over the time it takes the NAD to resolve a complaint, and over staffing and budgeting constraints, which limit the NAD/NARB system’s ability to investigate more cases and complete them more rapidly. Self-regulation has also been criticized

Chapter 20—Regulation of Advertising and Promotion

for being self-serving to the advertisers and the advertising industry and for lacking the power to be a viable alternative to federal or state regulation. Professor Notes

III.

FEDERAL REGULATION OF ADVERTISING

Governmental control and regulation of advertising comes from various federal, state and local laws and regulations with enforcement being the responsibility of various government agencies. The most important source of external regulation of advertising comes from the Federal Trade Commission (FTC). A.

Advertising and the First Amendment—Freedom of speech or expression, as defined by the First Amendment, is the most basic federal law governing advertising in the United States. The courts have extended First Amendment protection to commercial speech, which is speech that promotes a commercial transaction. The text discusses some of the landmark cases where the federal courts have issues rulings supporting the coverage of commercial speech by the First Amendment. We also discuss a recent case involving Nike and whether the First Amendment protects statements the company made to defend its labor practices.

Background on Federal Regulation of Advertising—Federal regulation of advertising originated in 1914 with the passage of the Federal Trade Commission Act, which created the FTC. This act was originally passed to help enforce antitrust laws, and false advertising was not prohibited unless there was evidence of injury to a competitor. Another important piece of legislation was the Wheeler-Lea Amendment, which Congress passed in 1938. It amended Section 5 of the FTC act and empowered the FTC to act against unfair or deceptive acts or practices if there was evidence of injury to the public. Proof of injury to competition was not necessary.

The Federal Trade Commission—The FTC is charged with the responsibility of protecting both consumers and businesses from anticompetitive behavior and unfair and deceptive practices. The major divisions of the FTC include the Bureaus of Competition, Economics and Consumer Protection. The Bureau of Consumer Protection investigates and litigates cases involving acts or practices alleged to be deceptive or unfair to consumers. The FTC has had the power to regulate advertising since the passage of the Wheeler-Lea Amendment. The authority of the FTC was increased considerably throughout the 1970s. The passage of the Magnusson-Moss Act of 1975 broadened the powers of the FTC and increased its budget as the second section of this act, the FTC Improvements Act, gave the FTC the power to establish trade regulation rules (TRRs). These are industry-wide rules that defined unfair practices before they occurred. During the 1970s, the FTC made enforcement of laws regarding false and misleading advertising a top priority as several new programs were instituted. However, many of these programs, as well as the expanded powers of the FTC to develop regulations based on “unfairness,” became the source of controversy. At the source of this controversy is the fundamental issue of what constitutes unfair or deceptive advertising.

The Concept of Unfairness—Under Section 5 of the FTC Act, the Federal Trade Commission has the mandate to act against unfair and deceptive advertising practices. While the FTC has taken steps to define and clarify the meaning of deception, for many years the Commission was less 20-4

Chapter 20—Regulation of Advertising and Promotion

clear with regard to the meaning of unfairness. In response to this problem, the FTC sent Congress a statement in 1980 that contained an interpretation of unfairness. According to the FTC policy, the basis for unfairness is that a trade practice (a) causes substantial physical or economic injury to consumers (b) could not be reasonably avoided by consumers, and (c) must not be outweighed by countervailing benefits to consumers or competition. E.

Deceptive Advertising—Deceptive advertising can take a number of forms ranging from intentional false or misleading claims by an advertiser to ads that may be true in a literal sense but leave consumers with a false or misleading impression. Regulatory agencies must make a distinction between false or misleading messages and those that rely on puffery, which refers to the use subjective claims or statements about a product or service. The chapter discusses the battle between Pizza Hut and Papa John’s over the latter’s use of puffery as a defense for its “Better Ingredients. Better Pizza” tagline and how Domino’s Pizza joined the war by running a commercial poking fun at Papa John’s puffery defense (Exhibit 20-9). While unfair or deceptive acts or practices in advertising are the primary focus of the FTC, these terms have never really been precisely defined. In 1983, the FTC put forth a new working definition of deception which argued that the commission will find deception “if there is a misrepresentation, omission or practice that is likely to mislead the consumer acting reasonably in the circumstances to the consumer’s detriment.” There are three essential elements to this definition or deception. The first element is that the misrepresentation, omission or practice must be likely to mislead the consumer. The second element is that the act or practice must be considered from the perspective of the reasonable consumer. The third key element is materiality, which means that the act influenced the consumer’s decision-making process in a detrimental way. The FTC does have several programs for helping in the evaluation of an ad for deception. 1. Affirmative disclosure—The FTC may require advertisers to include types of information in their ads so consumers will be aware of all the consequences, conditions, and limitations associated with the use of the product or service. The goal of affirmative disclosure is for consumers to have sufficient information to make an informed decision. Another area where the FTC is seeking more specificity from advertisers concerns country of origin claims. In 1998 the FTC issued new guidelines for advertising or labeling a product as “Made in USA” which requires that all significant parts and processing that go into the product must be of U.S. origin and the product should have no or very little foreign content. 2. Advertising substantiation—This FTC advertising substantiation program requires advertisers to have documentation to support the claims in their ads and to prove they are truthful. The program requires substantiation of claims made with respect to safety, performance, efficacy, quality, or comparative price. The FTC’s challenge of the claims made by Reebok and Skechers for their toning shoes on grounds that that lacked proper substantiation can be discussed here.

The FTC’s Handling of Deceptive Advertising Cases 1. Consent and cease-and-desist orders—Allegations that a firm is engaging in unfair or deceptive advertising come to the attention of the FTC from a variety of sources including complaints from competitors, from consumers, from other governmental agencies, or from the commission’s own monitoring and investigations. Once the FTC decides that a complaint 20-5

Chapter 20—Regulation of Advertising and Promotion

is justified and warrants further action, it notifies the offender, who then has 30 days to respond to the complaint. The FTC complaint procedure will then depend on the response and actions taken by the advertiser. An advertiser charged with deceptive advertising can agree to a settlement with the FTC by signing a consent order, which is an agreement to stop the practice or advertising in question. This agreement is for settlement purposes only and does not constitute an admission of guilt by the advertiser. Most FTC inquiries are settled by consent orders. If the advertiser chooses not to sign the consent decree, a hearing can be requested before an administrative law judge. The judge’s decision can be appealed to the full five-member commission by either side. If the commission upholds the complaint, the advertiser can appeal the case to the federal courts. Since the appeal process may take some time, the FTC has the power to issue a cease and desist order requiring the advertiser to stop the specified advertising claim until a hearing is held. Violation of a cease and desist order is punishable by a fine of up to $10,000 a day. Figure 20-5 summarizes the FTC complaint procedure. 2. Corrective advertising—A problem may exist even if an advertiser ceases using a false or deceptive advertisement since consumers may still retain some or all of the deceptive claim in memory. To address this problem of residual effects of prior deceptive advertising, the FTC developed a program in the 1970s known as corrective advertising. Under this program, an advertiser found guilty of deceptive advertising can be required to run additional advertising (corrective ads) designed to remedy the deception or misinformation contained in previous ads. Corrective advertising is probably the most controversial of all the FTC programs as advertisers have argued that it infringes on First Amendment rights of free speech. The effectiveness of corrective advertising campaigns has also been questioned, as has the FTC’s involvement in specifying the content of corrective message. The text discusses the landmark corrective advertising case involving Listerine mouthwash and more recent cases involving Novartis Consumer Health and its product Doan’s Pills as well as Bayer’s Yaz birth control product. G.

Developments in Federal Regulation by the FTC—Over the past decade the FTC has focused its attention on the enforcement of existing regulations, particularly in areas such as telemarketing and Internet privacy. The FTC also has focused on eliminating false e-mail advertising and has stepped up its enforcement against senders of deceptive or misleading claims via e-mail. The commission also scrutinized the use of testimonial ads more carefully, particularly with respect to the use of a “results not typical” disclosure in situations where the outcomes are more likely to vary substantially than be typical for most consumers. The FTC has been active in bringing enforcement action against deceptive health claims as well as companies and principals in the mortgage lending industry for deceptive and unfair practices in servicing mortgage loans. The FTC has also become more involved in the area of environmental marketing and the use of “green” claims for carbon offset, landfill reduction, and sustainable packaging. Under the Obama administration, the FTC was very active in the regulation of advertising as well as of other marketing practices. Over the next several years, the FTC is expected to increase its efforts to enforce federal privacy laws, particularly in the expanding world of smartphones and mobile apps. The commission will continue to be the primary regulator of advertising and marketing practices in the United States, although the direction of the FTC is likely to be influenced by the political party of the presidential administration.

Chapter 20—Regulation of Advertising and Promotion

Additional Federal Regulatory Agencies 1. The Federal Communications Commission—The FCC has jurisdiction over the radio, television, telephone and telegraph industries. Its authority over the airways gives it the power to control advertising content and to restrict what products and services can be advertised on radio and television. It can also eliminate obscene and profane programs and/or messages and those it finds in poor taste. The FCC generally works closely with the FTC in the regulation of advertising. For example, the FCC and FTC have been investigating the advertising of long-distance phone services, as they are concerned that many of these ads deceive consumers. In recent years, the FCC has become very active in enforcing laws governing the airing of obscene, indecent and profane material. For example, in 2004 the FCC levied fines against shock-jock Howard Stern for indecent content and Clear Channel Communications, which carried his syndicated radio show. The FCC has also become involved in issues affecting the area of publicity and public relations such as making sure that broadcasters screen news releases to ensure that they clearly disclose the nature, source and sponsorship of material. The crackdown is designed to address a marketing practice whereby promotional vides sent to TV stations are represented as news stories. 2. The Food and Drug Administration—Now under the jurisdiction of the Department of Health and Human Services, the FDA has authority over the labeling, packaging, branding, ingredient listing, and advertising of packaged foods and drug products. The FDA has limited authority over nutritional claims made in food advertising and can set rules for promoting food and drug advertising. In 1996, President Clinton signed an executive order declaring that nicotine is an addictive drug giving the FDA broad jurisdiction to regulate cigarettes and smokeless tobacco. However, the U.S. Supreme Court ruled in March 2000 that the FDA has no power to regulate the manufacture and sale of cigarettes. This decision blocked the FDA rules that would have restricted tobacco advertising from taking effect. However, in 2009 Congress passed a tobacco-control bill giving the FDA sweeping new powers over the packaging, manufacturing and marketing of tobacco products. The Family Smoking Prevention and Tobacco Control Act was signed into by President Obama and imposes many restrictions on the advertising and promotion of tobacco products, as discussed in the chapter. The American Legacy Foundation was established as part of the Master Settlement Agreement with the charge to reduce tobacco use. The ALF has developed a number of successful programs such as the Truth® campaign that was launched in 2000 to reduce smoking among youth. In 2016 the Food and Drug Administration was given the authority to regulate electronic cigarettes (e-cigarettes) as well as other tobacco products 3. The U.S. Postal Service—The U.S. mail is a major advertising medium, as a large number of marketers use the mail to deliver advertising and promotional messages. The U.S. Postal Service has control over advertising involving the use of mail and ads involved with lotteries, fraud and obscenity regulations. 4. Bureau of Alcohol, Tobacco, Firearms, and Explosives—The ATF is an agency within the Treasury Department that enforces laws, develops regulations, is responsible for tax collection in the liquor industry, and regulates and controls the advertising of alcoholic beverages.

Chapter 20—Regulation of Advertising and Promotion

The Lanham Act—While most advertisers have relied on self-regulatory mechanisms and the FTC to deal with the problem of deceptive or misleading advertising by their competitors, many companies are becoming more active in filing lawsuits against competitors who they feel are making false claims under the Lanham Act. This act, which was originally written in 1947 as the Lanham Trade-Mark Act, was amended to encompass false advertising and provides individual advertisers with the opportunity to file a civil suit against a competitor. Many companies are using the Lanham Act to sue competitors for their advertising claims, particularly since comparative advertising has become so common. The Trademark Law Revision Act of 1988 closed some loopholes in the Lanham Act and has made it even easier to sue competitors for making false advertising claims.

Professor Notes

IV.

STATE REGULATION

In addition to the various federal rules and regulations, advertisers must also concern themselves with numerous state and local controls over advertising. For many years, state regulation of advertising was based on the Printers’ Ink Model Statutes. Many states have since modified the original statutes and adopted laws similar to those of the Federal Trade Commission Act that serve as a basis for false and misleading advertising. As the federal government became less involved in the regulation of advertising during the 1980s, many state attorneys general began to enforce state laws regarding false or deceptive advertising. The National Association of Attorneys General (NAAG) made concerted moves against a number of national advertisers because of inactivity by the FTC during the Reagan administration. The foray of the NAAG into the regulation of national advertising raised the issue of whether states working together can create and implement uniform national advertising standards that supersede federal authority. However, the American Bar Association panel that examined the FTC concluded that the Federal Trade Commission is the proper regulator of national advertising and recommended that the state attorneys focus their attention on practices that harm consumers in a single state. It remains to be seen how the NAAG will proceed and fare in its efforts to regulate national advertising. However, it has become evident that states will become involved in the policing of national, as well as local, advertising. Advertisers are concerned over this trend toward increased regulation of advertising at the state and local levels, as they do not want to have to modify national advertising campaigns to comply with regulations of individual states. Professor Notes

Chapter 20—Regulation of Advertising and Promotion

McGraw-Hill Connect ®: Understanding the Federal Regulatory Agencies Type of Activity: Click and Drag Activity Summary: In this activity, students will read about federal regulatory agencies and then match each type of regulation with the government entity responsible for its oversight. Activity Learning Objectives: 20-03 Describe how advertising is regulated by state and federal agencies.

CONCEPT REVIEW: Traditionally, the federal government has been the most important source of external regulation. While the FTC is the major regulator of advertising for products sold in interstate commerce, several other federal agencies and departments also regulate advertising and promotion. These include the Federal Communications Commission, the Food and Drug Administration, and the U.S. Postal Service. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking V.

REGULATION OF OTHER PROMOTIONAL AREAS

Sales Promotion—Both consumer- and trade-oriented promotions are subject to various regulations. The FTC regulates many areas of sales promotion through the Marketing Practices Division of the Bureau of Consumer Protection. The state attorney general offices and local regulatory agencies police many promotional practices. The Robinson-Patman Act regulates various aspects of trade promotion such as allowances. Specific sales promotion tools that are subject to regulations include: 1. Contests and sweepstakes—Marketers must be careful to ensure that their contest or sweepstakes is not classified as a lottery, which is considered a form of gambling. A second important requirement in the marketer provide full disclosure of the promotion regarding issues such as the number of prizes to be awarded, odds of winning, duration and dates of termination, and availability of lists of prize winners. Many marketers are now using the Internet and social media sites to run their contests and sweepstakes. This is creating additional issues that marketers must consider, such as whether automated or repetitive electronic submissions will be accepted, content of submissions, and online data privacy laws if the promotion is being marketing using e-mail. Marketers that post audio/visual entries on YouTube or feature a contest on Facebook or Twitter must comply with each site’s guidelines for on-site promotions. 2. Premiums—Marketers must make a fair representation of the value of a premium offer. Marketers must also be careful in the use of premium offers for special audiences such as children. The Children’s Advertising Review Unit has voluntary guidelines concerning the use of premium stating that advertising promoting a premium must emphasize the product rather than the premium offer.

Chapter 20—Regulation of Advertising and Promotion

3. Trade Allowances—Marketers using various types of trade allowances must be careful not to violate any stipulations of the Robinson-Patman Act, which prohibits any form of price discrimination. Certain sections of the Robinson-Patman Act prohibit a manufacturer from granting wholesalers and retailers various types of promotional allowances unless they are made available to all customers on proportionally equal terms. The Robinson-Patman Act also regulates vertical cooperative advertising. 4.

Direct Marketing—The Federal Trade Commission enforces laws in a number of areas that relate to direct marketing including mail-order offers, the use of 900 telephone numbers, and direct-response television advertising. In addition to the FTC, the United States Postal Service enforces laws dealing with the use of the mail to deliver advertising and promotional messages or receive payments and orders that have been delivered by other means such as print or broadcast advertising. Both the FTC and Postal Service police direct-response advertising very closely to ensure that the ads are not deceptive or misleading or misrepresent the product or service being marketed. Laws also forbid mailing unordered merchandise to consumers and rules govern the use of negative option plans whereby a company proposes to send merchandise to consumers and expects payment unless the consumer sends a notice of rejection or cancellation. The FTC also has rules requiring that direct marketers promptly ship merchandise. Another area of direct marketing facing increased regulation is telemarketing. With the passage of the Telephone Consumer Protection Act of 1991, marketers who use telephones to contact consumers must follow a complex set of rules developed by the Federal Communications Commission. Under these rules, telemarketers are required to maintain an in-house list of residential telephone subscribers who do not want to be called and consumers who continue to receive unsolicited calls can sue for damages. This law also bans unsolicited “junk fax” ads. The FTC has also been actively involved in the regulation of advertising that encourages consumers to call telephone numbers with a 900 prefix, whereupon they are automatically billed for the call. In 1993, the FTC issued its 900-Number Rule for advertising directed at children. The rule restricts advertisers from targeting children under the age of 12 with ads containing 900 numbers unless they provide a bona fide educational service. The rule also requires that 900-number ads directed to those under the age of 18 must contain a clear and conspicuous disclosure statement that requires the caller to have parental/guardian permission to complete the call. The name of this legislation was changed to the Pay-Per-Call Rule and in 1998, it was revised to give the FTC the authority to broaden its scope and add new provisions. In 2003 Congress approved the FTC’s proposal for a national “do-not-call” registry under which consumers can sign up to be put on a list that will bar them from receiving calls from telemarketers. The do-not-call registry has withstood several legal challenges by the direct marketing industry and in 2005, the FTC, FCC and individual states began enforcing it. Companies can be fined $11,000 for each call that violates the FTC provisions. The National Do Not Call Registry contains nearly 220 million phone numbers. The direct-marketing industry is also scrutinized by various self-regulatory groups such as the Direct Marketing Association and the Direct Selling Association that have specific guidelines and standards firms are expected to adhere to and abide by. However, many critics argue that these groups are not doing enough to keep consumers from receiving unwanted marketing messages, such as calls from telemarketer and direct-mail offer and solicitations.

Chapter 20—Regulation of Advertising and Promotion

Marketing on the Internet—Two major areas of concern with regard to marketing on the Internet are privacy issues and online marketing to children. 1. Privacy and Security—Recently the major privacy issue regarding the Internet that has emerged involves undisclosed profiling whereby Web marketers can profile a user on the basis of name, address, demographics, and online/offline purchasing data. Companies that collect Internet usage data and information have joined together under the banner of the Network Advertising Initiative and developed a self-regulatory code that requires websites to disclose their use of ad servers and permit consumers to opt out of data collection that could be used for profiling. 2. Online Marketing to Children—One of the biggest concerns regarding the Internet is how to restrict marketers whose activities or websites are targeted at children. Concerns over online marketing to children led to the passage of the Children’s Online Privacy Protection Act of 1998, which the FTC began enforcing in April 2000. This law requires posted privacy policies and verifiable parental consent before marketers can collect personally identifiable information from children, such as names and email addresses. As of July 1, 2013 the FTC began enforcing updates to the COPPA to bring the law in line with changes that have occurred in the market include the growth of mobile device usage among children and the data collections that goes along with it. Concerns over privacy have increased with the explosion in the popularity of social media. Many marketers adhere to the Digital Alliance Ad Choice program which is a self-regulatory initiative that was implemented by the Advertising Self-Regulatory Council as part of it Internet Advertising Accountability Program. FTC has brought complaints against both Facebook and Twitter and both have had to make changes to their privacy policies. 3.

Online Endorsements and Native Ads—The FTC has also taken action to address the issue of endorsements made through social media sites and blogs. In 2009, the agency passed a new set of guidelines for online endorsements that require online endorsers and bloggers to disclose any material connection to an advertiser. Under the new guidelines, paid endorsers who post on social media sites such as Facebook, or post product reviews on e-commerce sites such as Amazon, can be held liable if they do not identify themselves as such.

4. Spamming—Another Internet related area receiving regulatory attention is spamming which is the sending of unsolicited multiple commercial electronic messages. A number of states have enacted anti-spamming legislation and a federal antispam bill (CAN-SPAM) act went into effect on January 1, 2004. Professor Notes

McGraw-Hill Connect ®: Navigating the FTC Complaint Procedure Type of Activity: Decision Generator 20-11 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 20—Regulation of Advertising and Promotion

Activity Summary: Abby works in Marketing for a major cell phone provider. As a market analyst, one of Abby's jobs is to monitor the ads of competitors to check for strategic shifts and possibly deceptive advertising. This activity will have the students select the best answer for each question. Activity Learning Objectives: 20-01 Explain how advertising is regulated and by which regulatory agencies. 20-02 Evaluate the effectiveness of self-regulation of advertising. 20-03 Describe how advertising is regulated by state and federal agencies. 20-04 Discuss the regulation of sales promotion, direct marketing, and Internet marketing. CONCEPT REVIEW: Allegations of unfair or deceptive advertising come to the FTC's attention from a variety of sources, including competitors, consumers, other government agencies, or the commission's own monitoring and investigations. Once the FTC decides a complaint is justified and warrants further action, it notifies the offender, who then has 30 days to respond. Difficulty: Medium Bloom’s: Analyze AASCD: Analytical Thinking

Teaching Suggestions Regulatory factors are a major concern for marketers and consideration should be given to the various laws, rules and regulations that can constrain and restrict advertising and other forms of promotion. While students may have some knowledge of the area of advertising regulation, it is unlikely that they will understand the extent to which advertisers must deal with regulatory concerns from various governmental agencies or self-regulation by various business, advertising, and media organizations. For example, the chapter opener discusses how the Federal Trade Commission (FTC) has revised its Guides Concerning the Use of Endorsements and Testimonials in Advertising to reflect the increasing use of endorsements and testimonials being done online, particularly through social media. The guidelines indicate that marketers using digital media are subject to the same truthful advertising laws that other forms of advertising always have been. One of the goals of the FTC has been to clarify or establish when a blogger or even a consumer promoting a product on a social media platform or a review site such as Amazon or Yelp becomes an endorser. It is also important to discuss the Federal Trade Commission and the changes that have occurred in its power and role over the past decade. You might refer student to the Advertising Self-Regulatory Council website, which can be found at http://www.asrcreviews.org/ and contains information on the ASRC’s various self-regulatory programs. Several of the landmark cases supporting protection of advertising as a form of commercial speech under the First Amendment are covered in this chapter. You may also find it helpful to research some of the important cases involving advertising regulation in more detail and discuss them in class. These include some of the older and well-known deceptive advertising cases such as Profile Bread, Ocean Spray Cranberry Juice, STP, and Listerine. There is an excellent article in the October 17, 1994 issue of Advertising Age on the landmark legal battle between Campbell Soup Co. and the FTC that was the impetus for the FTC program on corrective advertising. An interesting area for discussion is just how involved the government and FTC should be in the regulation of advertising and whether programs such as advertising substantiation or corrective advertising are necessary. Attention should also be given to discussing the Lanham Act, which has become a very significant development in the area of advertising regulation. Competitors are now suing one another under this act rather than just complaining to the 20-12 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 20—Regulation of Advertising and Promotion

NAD/NARB or the FTC. An excellent article on the Lanham Act and its implications for advertising is “Us vs. Them: The Minefield of Comparative Ads,” by Bruce Buchanan and Doron Goldman, Harvard Business Review, May/June 1989, pp. 38-50. Attention should also be given to legal developments affecting other IMC tools such as direct marketing, sales promotion, and the Internet. For example, in February 2003, Congress approved the FTC’s proposal for the formation of a national Do-Not-Call Registry and this program is now in effect. Direct marketing groups such as the Direct Marketing Association have filed several lawsuits against the FTC registry. However, thus far, the courts have upheld the registry’s validity and it has reduced the number of households to which telemarketers can make phone calls. We suggest that you stay abreast of developments concerning the status of the Do Not Call Registry by referring to publications such as Advertising Age or going to the DMA website at https://thedma.org/.

Answers to Discussion Questions 1. The chapter opener discusses the rules and regulations the Federal Trade Commission (FTC) uses for online endorsements. Do you agree with the new guidelines from the FTC requiring bloggers and endorsers to disclose any material connection to a company whose product or service they are endorsing? How might this impact companies that use social media in their IMC programs? (LO 20-1, LO 20-3) In 2009, the FTC revised its rules and regulations regarding the use of endorsements and testimonials in advertising for the first time since 1980. One of the goals of the revised guidelines is to clarify what an endorser such as a celebrity or blogger can say about a product or service in a testimonial. The new FTC rules state that celebrity endorsers can be held liable for false statements about a product or service and all endorsements must include results or outcomes that consumers can generally expect from using it. For example, advertisers are advised that using unrepresentative testimonials may be misleading if they are not accompanied by information describing what consumers can generally expect from use of the product or service. The old days of using a disclaimer such as “results not typical” or making claims that might be misleading without disclosing limitations or conditions are gone. In addition, the FTC guidelines let endorsers know that they should not talk about their experience with a product or service unless they have tried it, or make claims about a product or service that requires proof they do not have. Marketing on the Internet is not yet subject to any formal government regulations as Internet industry leaders have encouraged the FTC to allow the industry to regulate itself. However, the Federal Trade Commission has been active in the regulation of fraud and misleading advertising though this new medium. With the growth of social media and the explosion in the number of blogs, the FTC has become concerned over endorsers using these platforms to promote a product or service without making consumers aware that they are being paid to do so. The FTC notes that its new guidelines are designed to clarify what an endorser can say about a company or brand on a social media site or blog. Proponents of the guidelines note that bloggers and social media marketers should not be exempt from the same rules of openness and fairness that other they have to follow when using other media. They note that endorsements on social media sites or blogs should not be hidden and represented as editorial as that the consumer has a right to know if someone is being paid to endorse a brand on these sites. The use of fraudulent testimonials and endorsements are illegal in traditional media advertising and should not be allowed on blogs or through social media. Opponents of the new guidelines argue that they are too broad and vague and not enough specificity is provided regarding how disclosures must be communicated. They note that the FTC will review violations of the new guidelines on a case-by-case basis, which means the commission can apply the 20-13 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 20—Regulation of Advertising and Promotion

rules selectively. Critics also argue that there are First Amendment issues with the new guidelines as well as it they may be overly restrictive as to what a consumer can say on a social media site or a blog. The new guidelines are going to require that marketers take more responsibility for the actions of people they pay to endorse their products. The guidelines require that marketers develop policies regarding disclosure and truthfulness in their social media programs and that they monitor online conversations of those paid to endorse their products and services and correct any misstatements. 2. Discuss the need for regulation of advertising and other IMC tools. Do you advocate more or less regulation of advertising and other forms of promotion by governmental agencies such as the Federal Trade Commission and the Food and Drug Administration? (LO 20-1, LO 20-3) There is a need for regulation of advertising and other IMC tools as consumers rely on the information provided by marketers to make consumption decisions. If this information is false and/or misleads the consumer then, the advertising and other forms of promotion are not fulfilling this basic function. Consumers also have a right to know that the claims made in advertising and other forms of promotion such as the efficacy, performance, quality or safety of a product can be supported by the companies that make them. They also should be aware of any consequences, conditions and/or limitations associated with the use of a product or service. While most marketers are honest and truthful in their advertising and promotion messages, there are still many who use deceptive messages to persuade consumers to purchase their product or service. Thus, there is a need for governmental agencies such as the FTC and FDA to become involved in the regulation of advertising to ensure that consumers are receiving accurate and truthful information and can make informed choices. Opponents of government regulation argue that the advertising industry does a very good job of regulating itself through voluntary self-regulation. They also note that legislation such as the Lanham Act serves as a deterrent to companies who might engage in deceptive advertising as they can be sued by competitors for doing so. While self-regulation of advertising and promotion has been effective, it is unrealistic to think that it is sufficient for regulating this complex industry. Thus, regulation by government agencies is necessary to protect consumers and to ensure that they are receiving truthful and accurate information upon which they can base their purchase decisions and choose among the myriad of brands available in most product/service categories. 3. Discuss the role the Advertising Self-Regulatory Council plays in the self-regulation of advertising. Discuss the arguments for and against self-regulation as an effective way of protecting consumers from misleading or deceptive advertising as well as companies competing against one another. (LO 20-2) The Advertising Self-Regulatory Council (formerly known as the National Advertising Review Council) was formed by the three leading advertising industry associations—the American Association of Advertising Agencies, American Advertising Federation and the Association of National Advertisers—along with the Council of Better Business Bureaus to sustain high standards of truth, accuracy, and social responsibility in national advertising. In 2009, the CEOs of three other major marketing associations—the Direct Marketing Association, Electronic Retailing Association and the Interactive Advertising Bureau—joined the NARC Board of Directors. For many years the advertising industry, business community, and the media have promoted the use of voluntary selfregulation as a means of regulating and controlling advertising. These organizations recognize the importance of maintaining consumer trust and confidence and for advertising to be perceived as truthful and non-offensive. It can be argued that self-regulation has resulted in advertising standards and practices higher than those imposed by law. On the other hand, critics of self-regulation argue that it is self-serving to the advertisers and advertising industry as groups such as the NAD/NARB lack the power and authority to properly regulate and control advertising. These agencies do not have the staff or budget to investigate cases and it takes them too long to resolve them. 20-14 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 20—Regulation of Advertising and Promotion

The incentive for advertisers to cooperate with self-regulatory bodies is based on several factors. First, it is in the best interest of all advertisers to maintain consumer trust and interest in advertising. Peer group pressure and sanctions may also provide an incentive to cooperate with self-regulation. Finally, most advertisers view self-regulation as preferable to government interference and control over advertising as the latter may result in more stringent and troublesome regulations. In 2015, an American Bar Association working group released a report that reviewed and suggested improvements to the advertising industry’s self-regulatory system. The ABA report concluded that that current system administered by the NAD works well but did find areas needing improvement. 4. Do you agree with the DISCUS argument that advertising for hard liquor should be treated the same as advertising for beer and wine? Should advertising for spirits be confined to late-night programs on the networks or should the ads be permitted to run earlier in the evening as well? (LO 20-2) The decision by the Distilled Spirits Council of the United States (DISCUS) to overturn the selfimposed ban on broadcast advertising has been very controversial. DISCUS has argued that marketers of distilled spirits want to break down the public perception that spirits are stronger or more dangerous than beer and wine and thus deserving of harsher social and political treatment. The vicepresident for marketing and strategy at Seagram, the company that actually ended industry’s ban by airing an ad for Crown Royal Canadian whiskey, has argued that distilled spirits should have the same access to broadcast media as beer and wine. He noted that “the average consumer talks about liquor as being hard…so therefore liquor has to have sort of specialness or evilness about it.” The distilled spirits companies argue that the alcohol content of standard drinks of beer, wine, or distilled spirits (either straight or in a mixed drink) are equivalent. It should be noted that the Federal Trade Commission argues that there is no basis for treating liquor ads differently than advertising for other types of alcohol. It is likely that distilled spirits are at a competitive disadvantage to beer and wine if marketers of the products cannot advertise on television. This is particularly true in today’s media environment as narrowcasting is now possible through television, which means distilled spirits marketers can target their advertising to specific segments of the adult population. Moreover, image advertising is very common in the marketing of alcoholic beverages and television is an excellent medium for creating brand images. However, critics argue that that television advertising provides marketers with a very effective way to advertise hard liquor and will encourage young people to drink. They also argue that allowing ads for hard liquor on network television shows, particularly during prime time, will result in many young people under the legal drinking age of 21 seeing them, which may encourage them to drink. However, limiting ads for hard liquor to late-night programs will reduce the likelihood that young people will view them. It is likely that the level of advertising for hard liquor will continue to increase on cable networks and local affiliates of the four major networks. However, it is still in the best interest of the four major networks to refrain from accepting commercials for hard liquor during prime time shows. Accepting hard liquor ads will lead to more controversy and increase the likelihood that public advocacy groups such as MADD and the Center for Science in the Public Interest will step up their efforts to ban all alcohol advertising from television and radio. This issue can be the basis for an interesting class discussion, as you should ask students to discuss whether they are influenced by advertising for alcoholic beverages and if they think advertising for hard liquor should be viewed differently than beer or wine. 5. IMC Perspective 20-1 discusses how Skechers and Reebok were fined for making advertising claims for their toning shoes that the Federal Trade Commission argues were false, misleading 20-15 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 20—Regulation of Advertising and Promotion

and unsubstantiated. Evaluate the claims made by these companies in their toning shoe ads from a deceptive advertising perspective. Why do you think they agreed to settle their cases rather than appeal them? (LO 20-1, LO 20-3) As discussed in the IMC Perspective 20-1, the Federal Trade Commission, along with attorneys general from nearly all 50 states, launched an investigation of the advertising claims being made by both Skechers and Reebok for their toning shoes and found them to be deceptive. Both companies were making claims in their advertising touting benefits from wearing the shoes such increased muscle activation, improved circulation, greater muscle tone, reduced cellulite, weight loss and firmer, toner butts. Following an investigation, the FTC alleged that neither company could substantiate the claims being made in advertising for their shoes. Skechers was charged with selectively “cherry-picking” results from its studies and failed to substantiate its advertising claims. Moreover, the FTC noted that the Skecher ads included an endorsement from a chiropractor who was married to a marketing executive in the company and that the independent clinical study conducted by the chiropractor did not support the results claimed. The advertising used by both companies would meet the FTC’s definition of deception which focuses on whether there is a misrepresentation, omission or practice that is likely to mislead the consumer acting reasonably in the circumstances. A key element to deceptive advertising is materiality or whether the misrepresentation or practice influences the reasonable consumer’s decision making process. Obviously, the various claims being made by both companies for their toning shoes were material in nature. There are several reasons why both Reebok and Skechers agreed to settle their cases rather than appeal them. First, the companies wanted to avoid a prolonged legal battle that would likely have resulted in a significant amount of negative publicity for both companies. Also, as discussed in the chapter, many deceptive advertising cases brought by the FTC are settled by having companies sign a consent order, which is an agreement to stop the practice or advertising in question. This type of agreement is for settlement purposes only and does not constitute an admission of guilt by the advertiser. However, the FTC required Rebook to pay $25 million to resolve the charges while Skechers had to pay $40 million. The companies were required to put most of the money into a fund so it could be returned to consumers who bought toning shoes based on the unsubstantiated claims. It is important to note that the FTC also focused on the lack of proper substantiation or support for the claims Skechers and Reebok were making for their toning shoes. Under the settlement, the companies can still sell the shoes but cannot make specific claims and assertions without proper substantiation to support them. 6. Find several examples of advertising claims or slogans that are based on puffery rather than substantiated claims. Discuss whether you feel these advertising claims can be defended on the basis of puffery. (LO 20-3) Puffery has been defined as “advertising or other sales presentations which praise the item to be sold with subjective opinions, superlatives, or exaggerations, vaguely and generally, stating no specific facts.” For example, POM Wonderful advertises its juices as “Crazy Healthy”, Nestle claims that it “makes the very best chocolate,” and Bayer aspirin calls itself the “wonder drug that works wonders.” The use of puffery is very common and students should be asked to find additional examples of ads that use puffery and evaluate them. They should have no problem finding ads in magazines or on television that use puffery. Defenders of puffery argue that it represents a form of “poetic license” or allowable exaggeration and does no harm as consumers can recognize it and do not really believe the claims. However, critics of puffery argue that consumers cannot distinguish between puffery and verifiable, fact-based claims. Preston argues that puffery burdens consumers with untrue beliefs and has a negative effect on their purchase decisions. The argument over puffery concerns how much latitude advertisers should be 20-16 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 20—Regulation of Advertising and Promotion

given for use of superlatives and subjective claims. One could take the position that puffery may make advertising more interesting; however, it may also have the capacity to mislead consumers. 7. Evaluate the charges the Federal Trade Commission brought against Volkswagen Group of America for deceptive advertising. How might this issue affect consumer perceptions of Volkswagen and how should the company handle this controversy? (LO 20-1, 20-3) In a major case involving inadequate advertising substantiation, the FTC also took action against Volkswagen Group of America in 2016 charging that the company's “clean diesel” advertising campaign was deceptive. The U.S. Environmental Protection Agency discovered that special software installed in Volkswagen diesel-powered vehicles was designed to defeat emissions testing, making the cars seem far cleaner and safer for the environment than they actually were as the cars were emitting up to 40 times more toxic fumes than permitted. In its complaint the FTC alleges that during a seven-year period Volkswagen deceived consumers by selling or leasing more than 550,000 diesel cars based on false claims that the cars were low-emission, environmentally friendly, met emissions standards and would maintain a high resale value. The FTC sought a court order requiring Volkswagen to compensate consumers who bought or leased any of the affected vehicles between late 2008 and late 2015, as well as an injunction to prevent Volkswagen from engaging in this type of conduct again. The deceptive advertising done by Volkswagen has cost the company more than $15 billion thus far. In October 2016, a U.S. district court approved a $14.7 billion settlement requiring Volkswagen to mail notifications to all current affected owner and lessees of their diesel 2.0-liter cars informing them of a $10 billion buyback program. TDI owners who purchased their cars before September 17, 2015 can sell them back to Volkswagen for between $12,500 and $44,000, depending on model, age, trim and region. Lessees will receive a cash value between $$2,600 and $4,900. The settlements have provided compensation to consumers who bought Volkswagen diesel cars and may have been impacted by the deceptive claims. However, the controversy greatly damaged Volkswagen’s image in the U.S. market and it may take years for the company to fully rebuild credibility and trust among consumers. 8. Ethical Perspective 20-1 discusses the controversy surrounding the direct-to-consumer (DTC) advertising of prescription drugs. Evaluate the arguments both for and against pharmaceutical companies being allowed to advertise their drug products directly to consumers. (LO 20-3) In 1997, the Food and Drug Administration (FDA) issued new guidelines making it easier for pharmaceutical companies to advertise their prescription drugs directly to consumers. Reasons given for easing the restrictions are that increased advertising will help educate consumers by providing them with more information about their options and encourage people to see doctors about medications who might not have done so otherwise. However, physician, consumer, and health groups have questioned whether some of the ads are accurate and inform consumers of the risks associated with taking these drugs and have raised concern over the increase in drug advertising. Consumer groups have asked the FDA to enforce the “fair balance” provision that requires drug ads to give both the benefits and risks of taking a medication. Critics argue that much of the advertising done by pharmaceutical companies only shows the benefits of taking a drug and that the disclaimers and cautionary voiceovers are not sufficient in getting consumers to research the potential side effects associated with many drugs. Insurance companies and employers who pay for medical coverage of their employees have also raised concern over the increase in prescription drug advertising. They argue that the ads will drive up the costs of health care since advertising is expensive and added to the costs of drugs and encourages consumers to request higher-cost brand names rather than less expensive generic alternatives. Concerns over DTC drug advertising escalated in late 2004 when 20-17 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 20—Regulation of Advertising and Promotion

Merck had to pull its popular Vioxx medication from the market after it was determined that the drug increased the risk of heart attack in some people. This led critics to call for a moratorium on the DTC advertising of new drugs following their approval until the product is in the marketplace long enough for the FDA to have confidence that it is as safe as thought to be when it was approved. The argument for an even longer moratorium gained momentum recently after it was announced that Merck and Schering-Plough, which co-market Vytorin, delayed for 21 months the results of a study that showed the cholesterol medication did not reduce plaque buildup in arteries as claimed. The pharmaceutical industry is recognizing that it needs to address the problems with DTC advertising. In 2005, the industry’s trade association released voluntary guidelines calling for better presentation of risk information. However, critics have argued that the industry developed these standards to preempt stricter guidelines that might be imposed by the FDA. In 2007, Congress passed legislation giving the FDA more power to regulate DTC drug advertising. The new bill gives the FDA power to require drug companies to submit TV ads for review before they run, but it can only recommend changes, not require them. It also gives the FDA the power to impose fines if a drug company’s ads are found to be false and misleading. Many argue that the FDA needs even more authority to regulate DTC advertising of prescription drugs. They note that the U.S. is one of only two countries that permit the DTC advertising of prospection drugs and many feel the practice should be banned entirely. 9. Do you think the U.S. Food and Drug Administration should consider adopting the type of cigarette packaging being used in Australia that requires graphic images and removes all branding elements? How effective do you think this type of packaging would be in reducing cigarette smoking? (LO 20-3) In late 2012, Australia became the first country to require cigarettes to be sold in uniform plain packages. The Australian law requires cigarettes to be sold with no company logos and with the same font for all brands on a dark brown background. Graphic health warnings cover 90 percent of the back of the packaging and 70 percent of the front. The Australian government enacted the law as part of its effort to deter smoking as it estimates that diseases related to tobacco have killed nearly a million people in the country over the past 50 years and annual health costs from the habit are nearly $33 billion each year. A number of other countries are considering implementing similar legislations such as New Zealand and the United Kingdom. Mandatory picture warnings were first introduced in Canada in 2010 and are now used in 47 countries. Legislation requiring the use of graphic images was supposed to go into effect in the U.S. in late 2012, but has been delayed by challenges from the tobacco companies on First Amendment grounds. However, this legislation would not go as far as Australia’s law, which takes away cigarette companies’ ability to use its trademarks and other branding elements. Supporters of the approach being used in Australia argue the use of the graphic images will deter smoking by showing the health risk associated with the habit and taking away the brand identity and image of cigarette brands, which have been built through years of advertising and other forms of IMC. However, the tobacco industry is vehemently opposed to the legislation, arguing it violates their First Amendment rights. Many other companies are opposed to the idea as there is concern that it could set a precedent that might eventually spread to other industries where there are public health concerns such as alcohol or food and beverage products that are high in sugar. Opponents also question whether the graphic images will really deter smokers since most are addicted to tobacco and thus will purchase cigarettes in the plain packages and just put them in some type of case or sleeve to hide the images. 10. Discuss how the Do-Not-Call Registry developed by the Federal Trade Commission is impacting the direct marketing industry. What arguments might direct marketers use in trying to have this program rescinded? (LO 20-4)

Chapter 20—Regulation of Advertising and Promotion

Congress approved the FTC’s proposal for the formation of a national Do-Not-Call registry in February 2003 and this program contains nearly 220 million phone numbers. Marketers face penalties of $11,000 per incident for calling someone on the list. The new federal rules do not cover telemarketing activities that occur within a state and, thus, do not involve interstate commerce. However, many states now have their own Do-Not-Call registries and these will continue to be important to protect consumers from unwanted calls originating from companies doing business within the state where they reside. The creation of the do-not-call registry has greatly reduced the number of households that telemarketers can call. However, it has not had the negative effect anticipated by the telemarketing industry. Telemarketers can still call consumers with whom they have an established relationship and many companies have shifted their focus from cold-calling for prospects to managing existing customer relationships. These customers are generally receptive to calls from telemarketers, which has increased the efficiency of the business. The primary arguments direct marketers can use in trying to implement this program is that it violates their First Amendment rights and that such a program is not needed. The Direct Marketing Association, which is the primary trade group for the direct marketing industry, has argued that consumers already have a number of do-not-call options. They can already ask to be excluded from an individual company's telemarketing list at the same time they can sign up with state lists or pay $5 to sign up on the voluntary national list maintained by the Direct Marketing Association. The DMA argues that the national registry will impose more bureaucracy on the direct marketing industry and that the industry that the same goal can be achieved by the industry itself with better education and enforcement. The Direct Marketers Association and the American Teleservices Association, which represents callers, each has separately sued the Federal Trade Commission over its Do Not Call telemarketing rules. The DMA's lawsuit contends the FTC has overstepped its legal authority to prevent fraud by attempting to ban legitimate telemarketing, and that its action also violates marketers' First Amendment rights at free speech. The American Teleservices Association, which represents callers, made similar claims in its suit. However, in February 2004, the U.S. Court of Appeals upheld the validity of the Do-Not-Call Registry, ruling that it is a valid commercial speech regulation. The two major trade associations may yet appeal the case to the U.S. Supreme Court. 11. What are some of the regulatory issues marketers must take into consideration in developing contest, sweepstakes and other types of promotions that will be offered online or through social media? (LO 20-4) Many marketers are now developing contests, sweepstakes, and other type of promotions that are implement online over on their websites or social media pages. There are a number of issues that must be considered regarding a marketer’s own rules that govern the promotion, such as whether automated or repetitive electronic entries will be accepted, how the contest or sweepstakes website will detect violations and restrictions on length, size or format of content submitted. If the promotion is being marketing using e-mail, marketers must comply with the CAN-SPAM Act. If the online entry form collects personal information from persons under the age of 13, marketers must comply with the Children’s Online Privacy Protection Act. Marketers using promotions on YouTube, Instagram, Snapchat, Facebook or Twitter must comply with each social media site’s guidelines for online promotions. For contests that involve usergenerated content such as photos, videos, or short stories, the rules must contain specific language granting the company the necessary rights to use the content. Some social media sites also have their own restrictions on how marketers can conduct contests and sweepstakes on their platforms. 12. Discuss how regulatory agencies such as the FTC are responding to the increased use of digital and social media by marketers. What are the key areas that are requiring regulation to protect consumers from online marketing practices of companies? (LO 20-4) 20-19 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 20—Regulation of Advertising and Promotion

The rapid growth of the Internet as a marketing tool has created a new area of concern for regulators. Concerns over privacy and security have increased with the explosion in the popularity of social media sites such as Facebook, Twitter, Instagram and others. For example, the FTC settled a complaint against Twitter charging it deceived consumers and put their privacy at risk by failing to safeguard their personal information, marking the agency’s first such case against a social networking service. The FTC ordered Twitter to establish a security program subject to government monitoring for the next 10 years. Twitter agreed to the terms in exchange for the FTC not pursuing a civil lawsuit against the company. Facebook has also announced significant changes to its privacy policies giving users more control over their content, reducing the amount of their information that is available to others, and making it easier to control whether applications and websites can access their information. Consumer privacy and security have become major issues among government regulators because of high-profile data breaches and concerns over the collection and use of consumer data for marketing purposes. Marketers must ensure that their online marketing programs comply with consumer privacy and data security guidelines; failure to do so can lead to government enforcement actions, expensive litigation, and negative publicity that can be very damaging to their reputations and have long-term effects. The FTC won an important case against Wyndam Hotels in 2015 when it charged the company’s security practices unfairly exposed credit card information of hundreds of thousands of consumer to hackers in three separate data breaches. Another major privacy issue regarding the Internet that has emerged involves undisclosed profiling whereby online marketers can profile a user based on name, address, demographics, and online/offline purchasing data. Marketers argue that profiling offers them an opportunity to target specific niches and reach consumers with custom-tailored messages. However, the FTC has stated that Internet sites that claim they do not collect information but permit advertisers to surreptitiously profile viewer sites are violating consumer protection laws and are open to a charge of deception. While various proposals are aimed at protecting the privacy rights of adults, one of the biggest concerns is over restricting marketers whose activities or websites target children. These concerns over online marketing to children led to the passage of the Children’s Online Privacy Protection Act (COPPA) of 1998, which the FTC began enforcing in April 2000. This act places tight restrictions on collecting information from children via the Internet and requires that websites directed at children and young teens have a privacy policy posted on their home page and areas of the site where information is collected. The law also requires websites aimed at children under age 13 to obtain parental permission to collect most types of personal information and to monitor chat rooms and bulletin boards to make sure children do not disclose personal information there. When the law was enacted in 2000, it was left to the FTC to determine how to obtain the required permission, and the FTC temporarily allowed websites to let parents simply return an e-mail to approve certain information. Since then no other solution to the permission issue has surfaced, and the FTC has made the solution permanent. However, the issue continues to be an area of concern since many marketers close their websites to children under the age of 13, but children under this age will often lie about their ages to gain access to the sites. As of July 1, 2013 the FTC began enforcing updates to the COPPA to bring the law in line with changes that have occurred in the market include the growth of mobile device usage among children and the data collections that goes along with it.

Additional Discussion Question (not in text)

13. Discuss the role the media play in the self-regulation of advertising. Do you view self-regulation as an effective way of protecting consumers from offensive or misleading advertising? (LO 20-2)

Chapter 20—Regulation of Advertising and Promotion

The media are an important self-regulatory mechanism in the advertising industry. Most major media have some type of review process for advertising and can reject ads they find objectionable. Some media exclude ads for an entire product class such as Reader’s Digest’s ban on tobacco and liquor ads. Many magazines and newspapers have standards regarding the type of advertising they will accept. However, these standards vary depending on the nature and size of the publication. Large, established publications may have more stringent standards than those less financially secure and in need of advertising revenue. The major television networks have incorporated many of the provisions of the codes used by the National Association of Broadcasters into their own standards. The networks have the most stringent advertising review process of any media as their standards and practices division reviews all commercials before they can be aired on the network or an affiliate. Commercials that are considered too offensive or potentially misleading are sent back to the advertiser for revision and resubmission. However, most of the cable channels do not have the same standards as the networks and advertisers often will run ads on cable to circumvent the review more stringent requirements of the networks. Media self-regulation plays an important role in protecting consumers from offensive or misleading advertising. However, given the myriad of magazines and newspapers, as well as the increasing number of cable channels, it is possible for advertisers to find a way to reach consumers with their messages. 14. The text discusses the decision by the California Supreme Court in the Nike case to view statements about a company’s labor policies or operations in ads or press releases as commercial, rather than political in nature and thus not subject to First Amendment protection. Do you agree or disagree with this ruling? Discuss how this ruling might affect various forms of integrated marketing communications used by Nike and other companies in California? (LO 20-1) Freedom of speech or expression is the most basic federal law governing advertising in the United States. For many years, freedom of speech protection did not include advertising and other forms of speech that support a commercial transaction. However, the courts have extended First Amendment protection to advertising as a form of commercial speech. There have been a number of landmark cases where the federal courts have issued ruling supporting the coverage of commercial speech such as advertising under the First Amendment. However, the courts have ruled that only truthful commercial speech is protected, not advertising or other forms of promotion that are false, misleading or deceptive. In the case involving Nike, the California Supreme Court reversed the decisions of two lower courts and ruled that Nike’s public relations campaign defending its labor policies and working conditions inside its factories in Asia should be considered commercial speech, even though it was not talking specifically about its shoes. The court ruled that corporations know that issues such as labor conditions and policies contribute to the public’s perception of a company and consumers’ willingness to buy its products. At issue here is how to distinguish between political and commercial speech. The U.S. Supreme Court has ruled that the First Amendment protects political speech, even when inaccurate. However, this is not true for advertising and other forms of commercial speech used to sell a product or service. Nike has argued that its public relations activities defending its labor practices and working conditions, which have included the issuing of press releases and writing letters to colleges faced with student activists calling for the boycott of Nike products, are not the same as advertising and cannot be considered commercial in nature. However, the California Supreme Court ruled that if Nike could misrepresent the conditions under which its shoes are made without any punishment through its public relations efforts, then any company could use the First Amendment to make false statements about its products or practices with the intent of increasing sales. It is important to note that the California Supreme Court did not decide whether Nike really was guilty of abusing workers or misleading consumers, leaving these issues for an eventual trial court.

Chapter 20—Regulation of Advertising and Promotion

The U.S. Supreme Court heard oral arguments and reviewed 34 briefs regarding the case but dismissed it for lack of jurisdiction and sent it back to California for trial. Rather than risk a costly and protracted trial, Nike decided to settle the case and the California Supreme Court decision now stands. Thus, companies doing business in the state run the risk of attracting a lawsuit if their public relation campaigns touch upon their products or operations. The outcome alters the definition of commercial speech and leads to new restrictions on claims that companies can make about their policies, practices and behavior. Treating press releases, letters, and other public statements defending a company’s actions as equivalent to advertising could also result in companies being less willing to speak out on important public issues and have a profound impact on their public relations activities. It will be interesting to see if additional cases regarding the PR activities of a company result in lawsuits in California as well as other states. 15. What is meant by advertising substantiation? Should advertisers be required to substantiate their claims before running an ad or only be required to provide documentation only if their advertising claims are challenged? (LO 20-3) Advertising substantiation is a FTC program requiring advertisers to have supporting documentation for their claims and to be able to prove that they are truthful before running their ads. Proponents argue that advertisers should be required to substantiate their claims before running an ad so that they have a reasonable basis for making the claim. Prior substantiation provides consumers with a basis for believing advertising claims such that they can make rational and informed decisions. It also deters companies from making claims that they cannot adequately substantiate. Opponents of prior substantiation argue that it is too expensive to have a company document all of their claims and that most consumers would not be interested in the technical data and evidence used to substantiate them. Requiring formal, prior substantiation might also result in advertisers resorting in puffery rather than making specific performance or efficacy claims. 16. What is corrective advertising? Why do you think corrective advertising is so controversial? Evaluate the arguments for and against corrective advertising? (LO 20-3) Corrective advertising is a Federal Trade Commission program whereby and advertiser found guilty of deceptive advertising can be required to run additional ads designed to remedy the deception resulting from consumer exposure to the previous ads. The purpose of corrective advertising is to remedy the misinformation, incorrect beliefs or perceptions that consumers may have developed as a result of deceptive or misleading advertising. Corrective advertising is also designed to help restore competition to the stage that prevailed before the deceptive advertising occurred. The FTC can determine the extent of corrective advertising effort required of an advertiser by considering the length of time for which the deceptive ads were run and the extent to which the market holds misperceptions or incorrect beliefs because of the deceptive ads. Consumer research may be needed to determine the prevalence of the misperceptions in the market, their impact on purchase behavior, and how strongly these false beliefs are held. Regarding media in which corrective ads should appear, the FTC considers the media the advertiser used in running the deceptive ads and requires that corrective ads be run in these vehicles. Corrective advertising is very controversial because advertisers view it as a drastic remedy that infringes on First Amendment right of freedom of speech by requiring them to run the corrective messages. They argue that corrective advertising puts the FTC in the business of creating ads when they require particular content in corrective messages. Moreover, the monies that must be spent to run corrective messages comes out of the advertiser’s media budgets and means they have less funds available for messages promoting their brands. They also question whether corrective messages are effective. 17. A number of states are considering legislation that would create Do Not Mail list registries, which would allow consumers to keep unsolicited direct mail out of their mailboxes. Discuss the 20-22 Copyright © 2018 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc-Graw Hill Education.

Chapter 20—Regulation of Advertising and Promotion

arguments for and against legislation that would prohibit marketers from sending direct mail to consumers. (LO 20-4) There are several arguments in favor of legislation that would create Do Not Mail list registries. The typical American household receives nearly 40 pounds of direct mail each year, most of which is unsolicited, never opened and rarely generates a response. The response rate for direct mail solicitations is only about 2 percent, which makes this a very inefficient process. Most consumers also find it very annoying as most of the direct mail offers that consumers receive come from companies they have never bought anything from and/or have no interest in buying from them. Environmental groups argue that the vast amount of direct mail solicitations and catalogs that consumers receive have a major environmental impact as it takes 53 million trees to product the 3.6 million tons of paper in all of the catalogs and direct mail pieces. Advocates of the creation of Do Not Mail registries argue that consumers should have the right to decide if they want to receive catalogs and other types of direct mail rather than have to sift through all of the unwanted solicitations they receive. The creation of Do Not Mail registries is opposed by marketers as well as the Direct Marketing Association, which is the primary trade organization for the direct marketing industry. The DMA argues that there are already provisions available for those consumers who do not want to receive unsolicited direct mail as they can pay $1 and have their name put on Do Not Mail list for three years. They note that the service is supported by the United States Postal Service and has more than 4.5 million subscribers. However, the online service prevents companies from adding a person’s name to their list but does not stop catalogs and other mail solicitations they are already receiving. The DMA also refutes the environmental impact of direct mail by noting that the trees are planted to replace those cut down for wood and paper products and that Americans can save over 3 billion miles of driving by eliminating trips to retailers and shopping by catalog instead. Finally, the DMA argues that direct mail is important to businesses that rely on it to communicate with consumers and creates nearly $700 billion in economic activity annually. Thus, there would be a major economic impact if Do Not Mail legislation were to be enacted.

Chapter 21—Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

CHAPTER 21 EVALUATING THE SOCIAL, ETHICAL, AND ECONOMIC ASPECTS OF ADVERTISING AND PROMOTION Chapter Overview The purpose of this chapter is to evaluate the social, ethical and economic aspects of advertising. Advertising is a very powerful and influential force in our society, and this text would not be complete without considering the various perspectives and criticisms regarding its social and economic effects. The first half of the chapter focuses on the various criticisms of advertising from an ethical and societal perspective. Attention is then given to appraising the effects of advertising on the economy including its effect on consumer choice, competition, and product costs and prices. Perspectives regarding the economic effects of advertising are summarized by considering two principal models or schools of thought: the Advertising = Market Power and Advertising = Information perspectives. It should be noted that the primary focus in this chapter is on social and economic aspects of advertising, as this is the promotional mix variable that is the subject of the most concern, controversy, and regulation.

Learning Objectives 1. Discuss various ethical perspectives on advertising and promotion. 2. Discuss various social perspectives on advertising and promotion. 3. Evaluate the social criticisms of advertising. 4. Discuss the effect of advertising on consumer choice, competition, and prices.

Chapter and Lecture Outline I.

INTRODUCTION

Because of its high visibility and pervasiveness, along with its persuasive character, advertising has been the subject of a great deal of controversy and criticism. Various parties and scholars have attacked advertising for a variety of reasons including its excessiveness, the way it influences society, the methods used by advertisers, its supposed exploitation of consumers, and its effect on our economic system. The role of advertising and other forms of marketing communication in society is a controversial one and a discussion of the area would not be complete without considering the various criticisms regarding its social and economic effects as well as some of the responses to these charges. Professor Notes

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Chapter 21—Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

II.

ADVERTISING AND PROMOTION ETHICS

While many laws and regulations determine what advertisers can and cannot do, not every issue is covered by a rule or guideline. In many situations, advertisers must make decisions regarding appropriate and responsible actions based on ethical considerations rather than what is legal or within industry guidelines. Ethics are moral principles or values that govern the actions and decisions or an individual or group. While a particular action or practice may be within the law, this does not necessarily mean it is ethical. Ethical issues must be considered in making integrated marketing communication decisions as a lapse in ethical standards or judgment can result in actions that are highly visible and can be damaging to a company’s reputation and image. Advertising is subject to considerable criticism because it is judged by a variety of groups with different norms, values, and ethical standards. Arguments on both sides of controversial ethical and social issues will be presented in this chapter. However, students may have to draw their own conclusions as to which position is right or wrong. Professor Notes

III.

SOCIAL AND ETHICAL CRITICISMS OF ADVERTISING

Much of the controversy over advertising stems from the ways it is used by many companies as a selling tool and because of the impact advertising has on society’s tastes, values, and lifestyles. There are a number of criticisms of specific techniques used by advertisers as well as charges against its impact on society in general. A.

Advertising as Untruthful or Deceptive—One of the major attacks against advertising is that many ads are misleading or untruthful and end up deceiving consumers. The issue of what constitutes deception is, as we discussed in Chapter 20, a very difficult one. However, a concern of many critics is the extent to which advertisers are deliberately untruthful or misleading in their advertising. Most large companies are unlikely to risk their reputation and image or subject themselves to prosecution by various regulatory groups by making overtly false or misleading advertising claims. Many of the companies involved in outright fraud or deception are often smaller, local companies or those using direct mail to advertise their products and services. However, national advertisers will often test the limits of various industry and governmental rules and regulations and make claims that may give their brands an advantage in highly competitive markets. Critics of advertising often question whether consumers are receiving proper information to make an informed choice since advertisers usually only present information that is favorable to their brands. Many critics feel that advertising should be primarily informative in nature and not be permitted to use puffery or embellished messages. Others argue that advertisers should have the right to present the most favorable case for their products and services. They note that most consumers can protect themselves from being persuaded against their will and that various regulatory bodies and mechanisms are sufficient to keep advertisers from deceiving or misleading consumers.

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Chapter 21—Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

Advertising as Offensive or in Bad Taste—Another common criticism of advertising, particularly by consumers, is that ads are offensive, tasteless, irritating, boring obnoxious, and so on. 1. Sources of distaste—Consumers can be offended or irritated by advertising in a number of ways. Some are offended that a product or service is even advertised at all (such as contraceptives or personal hygiene products). A research study of prime-time commercials found a strong product class effect with respect to the type of ads consumers perceived as distasteful or irritating. Another way advertising can offend consumers is by the type of appeal or the manner of presentation. Ads that use fear appeals or exploit consumer anxieties, such as fear of social rejection, are often the target of criticism. 2. Sexual appeals—The type of advertising appeals that have received the most criticism for being offensive or in poor taste are those using sexual appeals and/or nudity. These techniques are often used as ways of gaining consumers’ attention and in some cases may not even be appropriate to the product being advertised. Even if the sexual appeal is appropriate for the product, many people may still be offended. Advertisers who use nudity and sexual suggestiveness argue that their ads are not offensive and are consistent with contemporary values and lifestyles that are more accepting of this type of advertising. Another common criticism of sexual appeals is that they can be demeaning to women (and men as well) by depicting them as sex objects. Figure 21-3 shows the results of a very interesting study that examined differences between men and women in their attitudes toward sex in advertising. This study found interesting differences in how the two sexes view the use of sexual appeals. 3. Shock advertising- Many advertisers are relying on shock advertising by using nudity, suggestiveness, and/or other startling images to gain consumers attention and shock them. Companies that have been known for using shock advertising over the years include Benetton, Calvin Klein and Bijan. Clothing retailer Abercrombie & Fitch has also been criticized in recent years for the sexual-laden content in its quarterly catalogs. The company recently toned down its catalogs and eliminated the racy ads and sexual images that offended many parents. Advertisers often complain about the double standard that exists for TV programs and commercials, noting that even the most suggestive commercials are bland compared with what is shown in many television programs. The networks argue, however, that they have to scrutinize commercials more carefully because they encourage people to imitate behaviors, whereas programs are merely meant to entertain. It is likely that advertisers will continue to use sexual appeals and shock ads to gain the attention of consumers. A. Advertising and Children—One of the most controversial topics advertisers must deal with is the issue of advertising to children. A study by the Kaiser Family Foundation found that children ages 2 to 11 are exposed to an average of 25,000 TV commercials per year. Concern has also been expressed over marketers’ use of other promotional vehicles and techniques such as radio ads, point-of-purchase displays, premium offers, and the use of commercial characters as the basis for television shows. Arguments can be presented on both sides of this controversial issue. Arguments against advertising to children include: • Children, especially young ones, are vulnerable to advertising because they lack the necessary experience and knowledge to understand and evaluate the purpose of persuasive advertising appeals.

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•

Children cannot differentiate between commercials and television programs, do not perceive the selling intent of commercials, and cannot distinguish between fantasy and reality.

•

Children must be able to understand how advertising works and develop a skeptical or critical attitude to defend themselves against it.

•

Advertising to children is inherently unfair or deceptive.

Arguments in favor of advertising to children include: •

Advertising is a part of life and children must learn to deal with it as part of the consumer socialization process of acquiring the skills needed to function in the marketplace.

•

Studies have shown that children are capable of perceiving persuasive intent and the inability to perceive such intent does not necessarily lead to incorrect beliefs about a product.

•

There is no evidence of a relationship between television advertising of sugared foods and tooth decay.

•

Parents should be involved in helping children interpret advertising and can refuse to purchase products they feel are undesirable for their children.

•

Advertisers have a right under the First Amendment to communicate with consumers who make up their primary target audience

Concern over advertising to children remains an important issue for consumer groups such as the Center for Science in the Public Interest and Commercial Alert. Advertising to children is likely to remain a controversial issue to which advertisers must remain sensitive. Another area of concern that has emerged is the role of advertising and other marketing practices in contributing to the obesity problem among children (as well as adults). The opening vignette to the chapter discusses this controversy and the attacks being made against the food industry.

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Chapter 21—Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

Social and Cultural Consequences—Concern is often expressed over the impact of advertising on society, particularly with respect to its influence on values and lifestyles. Opinions regarding the value of advertising as an important social influence agent are often very negative and it is criticized for a number of reasons. 1. Advertising Encourages Materialism—Many critics claim that advertising has an adverse effect on consumer values by encouraging materialism, which refers to a preoccupation with material things rather than intellectual or spiritual concerns. Advertising can create materialism in many ways such as: •

Seeks to create needs rather than merely showing how a product or service fulfills them

•

Surrounds consumers with images of the good life and suggests the acquisition of material possessions leads to contentment and happiness and adds to the joy of living

•

Suggests material possessions are symbols of status, success, and accomplishment and/or will lead to greater social acceptance, popularity, sex appeal, and so on

The criticism of advertising on the basis of creating materialism assumes that materialism is undesirable and done at the expense of nonmaterialistic goals. Even if one assumes that materialism is undesirable, there is still the issue of whether advertising is responsible for creating and encouraging these values. This brings up the classic argument as to whether advertising is a major force contributing to society’s values, such as materialism, or whether advertising merely reflects or mirrors the values of society and does not mold or shape them. 2. Advertising makes people buy things they do not need—Another common criticism of advertising is that it has the power to manipulate consumers and make them buy things they do not need. Persuasive advertising which plays on consumers’ emotions, anxieties, and social and psychological needs and desires is viewed as undesirable. This type of advertising is seen as going beyond basic needs or necessities in appeals to sell products and services. Only informational advertising, which reports factual, functional information such as price performance, and other objective criteria, is viewed as acceptable and desirable. Defenders of advertising offer a number of rebuttals to these criticisms. They argue that a substantial amount of advertising is essentially informational in nature and that it is difficult to separate desirable, informational advertising from undesirable, persuasive advertising. They also note that most lower-level needs in our society are satisfied and it is natural for consumers to be concerned with higher order needs, and for advertising to appeal to these wants and desires. They also note that advertising cannot make consumers do things against their will and they can defend themselves against advertising. Consumers do have a choice and can ignore ads for products and services that they do not really need.

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Chapter 21—Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

3. Advertising and stereotyping—Advertising is often accused of creating and perpetuating stereotypes thorough its portrayal of certain groups including women and ethnic minorities. a. Women—Advertising has received a great deal of criticism for its stereotyping of women. Critics charge that advertising generally depicts women as being preoccupied with beauty, household duties, and/or motherhood or shows them as decorative objects or sexually provocative figures. Critics also argue that advertisers have failed to acknowledge the changing role of women in society. While sexism and stereotyping of women still exist, advertising’s portrayal of women is improving in many areas as more advertisers recognize the changing role of women in our society and the importance of portraying them realistically. b. African Americans and Hispanics—African Americans and Hispanics are two ethnic groups that have also been the target of stereotyping in advertising. For many years advertisers ignored blacks and Hispanics as identifiable subcultures and viable markets and ads were either not targeted to them and the use of black or Hispanic models and spokespersons was very limited. In recent years, however, not only has the use of blacks and Hispanics in advertising increased, but so too has the depiction of their social and role status. Another trend is that the more ads are likely to be racially integrated such as the Levi’s ad shown in Exhibit 21-13. c. Other groups—Some advertisers have been criticized for portraying senior citizens as feeble, foolish, inept, or in desperate need of help. It has become increasingly difficult for advertisers not to offend some segment of the public. However, advertisers must be sensitive to the portrayal of specific types of people in their ads. One area where changes are occurring is in advertising targeted to gay consumers. Many major advertisers have begun running ads with gay themes although they are often confined to magazines and newspapers targeting the gay market. 4. Advertising and the media—The fact that advertising plays such an important role in financing the media has led to concern on the part of many that advertisers can influence or even control the media. The text discusses how the media sometimes face challenges from advertisers who stop advertising in a publication when they find their editorial coverage objectionable or unfavorable to the company. a. Arguments supporting advertiser control: •

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The media’s dependence on advertising revenue makes them susceptible to various forms of influence such as exertion of control over editorial content, biasing editorial opinions, limiting coverage of controversial topics or stories, and influencing the program content of television.

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•

Newspapers and magazines receive most of their total revenue from advertising, whereas commercial television and radio derive nearly all of their income from advertising. Thus, the media may be reluctant to carry stories detrimental to companies who purchase large amounts of advertising time or space.

•

There have been several situations where advertisers have brought pressure to the media and influenced content or programming decisions. Some of these situations have been in response to pressure or the threat of boycotts from consumer groups opposed to program content.

b. Arguments against advertiser control: • It is in the best self-interest of the media that advertisers not influence them too much. To retain public confidence, they must report the news fairly and accurately and not be perceived as biased or attempting to avoid controversial issues. Media executives point to the vast amount of topics they cover and the investigative reporting they do as evidence of their objectivity.

•

It can be argued that advertisers need the media more than the media need any individual advertiser, particularly when the medium reaches a large audience or does a good job of reaching a specific market segment.

The media in the U.S. are basically supported by advertising, which allows consumers to enjoy media for a fraction of what it would cost without advertising. Although not perfect, a system of advertising-supported media provides us with the best option for receiving information and entertainment and is probably more desirable than the alternatives of paying higher subscription costs, pay-per-view, or having governmentsupported media. E.

Summarizing Social Effects—Negative opinions regarding advertising have been around just as long as the field itself and it is very unlikely that they will ever disappear. It is important that the advertising industry remains cognizant of, and continually addresses the various issues and concerns over, the effects of advertising on society. Advertising is a very powerful institution, but it will only remain so as long as consumers have faith and trust in the ads they see and hear every day. It is important to note that advertising and other integrated marketing communication tools, such as direct marketing and public relations, are also used to promote worthy causes and to deal with problems facing society such as drunk driving, drug abuse, and the AIDS crisis. Many advertising agencies do pro bono work for nonprofit organizations and various causes and the media often donate free advertising time and space for these ads.

Professor Notes

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IV.

ECONOMIC EFFECTS OF ADVERTISING

Considerable attention has been given to examining the economic impact of advertising. Advertising plays an important role in a free-market system such as that found in the US and other countries by making consumers aware of products and services and providing them with information that can be used to make purchase decisions. However, advertising’s economic role goes beyond this basic function of information provision, as it is a very powerful force that can affect the functioning of an entire economic system. It is viewed by many as a positive force that encourages consumption and fosters economic growth. On the other hand, many critics of advertising view it as having detrimental economic effects, by not only failing to perform its basic function of information provision adequately, but also adding to the costs of products and services and discouraging competition. A number of major issues regarding the economic effects of advertising are considered. A.

Effects on Consumer Choice—Some critics argue that advertising has a negative effect on consumer choice, as large advertisers use their power to limit our options to a few well-advertised brands. Economists argue that advertising is used by large national advertisers to achieve differentiation and brand loyalty, usually at the expense of smaller brands. These large companies often end up charging a higher price and are able to achieve a more dominant position in the market than smaller companies that cannot compete against their large advertising budgets. When this occurs, advertising restricts choices and becomes a substitute for competition based on price or product quality. Defenders of advertising argue that it does not create brand monopolies and reduce the opportunities for new brand or product introduction. The opportunity to advertise gives companies the incentive to develop new brands and improve existing ones. Advertising is instrumental in helping companies inform consumers about their new products.

Effects on Competition—One of the most common criticisms economists have with advertising concerns its effect on competition. They argue that large firms with huge advertising budgets create a barrier to entry, which makes it difficult for other firms to enter the market. This in turn leads to less competition and higher prices. Large advertisers enjoy certain competitive advantages such as economies of scale in advertising, particularly with respect to factors such as media costs. While advertising may have an anticompetitive effect on a market, there is no clear evidence that advertising alone reduces competition, creates barriers to entry and thus increases market concentration. Defenders of advertising note that it is unrealistic to attribute a firm’s market dominance solely to advertising as there are a number of other factors to consider such as price, product quality, distribution effectiveness, production efficiencies, and competitive strategies. While market entry against large established competitors is difficult, companies with a quality product offered at a reasonable price find that advertising actually facilitates their market entry by make it possible to communicate with consumers.

Effects on Product Costs and Prices—A major area of debate among economists, advertisers, consumer advocates and policymakers concerns the effects of advertising on product costs and prices. Critics offer several reasons why advertising results in higher prices: •

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• •

Advertising increases product differentiation and adds to the perceived value of the product in the mind of the consumer, which allows advertised brands to command premium prices. There are often large differences in prices between national brands and private label brands that are physically and functionally similar, which is evidence of the added value created by advertising. Consumers pay higher prices for this added value.

Proponents of advertising offer several counter-arguments to the claim that advertising increases prices: • Price insensitivity and brand loyalty can be created by a number of nonadvertising factors such as product quality, packaging, favorable usage experience, and market position. • •

Advertising can actually result in lower costs by helping firms achieve economies of scale in product and distribution and helping stimulate demand among mass markets. Advertising can make a market more competitive, which often leads to greater price competition. Several studies have found lower consumer prices in markets permitting advertising for a product versus those that did not.

Summarizing Economic Effects—Economists’ perspectives regarding the effects of advertising can be divided into two principal models or schools of thought, each of which makes different assumptions regarding the influence of advertising on the economy: 1. Advertising Equals Market Power—This model reflects traditional economic thinking and views advertising as a way of changing consumers’ tastes, lowering their sensitivity to price, and building brand loyalty among buyers of advertised brands. This results in higher profits and market power for the large advertiser, reduces competition, and leads to higher prices and fewer choices for consumers. Proponents of this viewpoint are generally negative in their assumptions regarding the economic impact of advertising. 2. Advertising Equals Information—This model takes a more positive viewpoint of advertising’s economic effects, as it views advertising as providing consumers with useful information, increasing their price sensitivity, which moves them toward lower-priced products, and increasing competition in the market. Advertising is viewed as a means of communicating with consumers and telling them about a product and its major features and attributes. More informed consumers put pressures on firms to lower prices and improve quality. Proponents of this model assume that the economic effects of advertising are favorable and view it as contributing to efficient and competitive markets. These two perspectives take very divergent views regarding the economic impact of advertising as shown in Figure 21-7. It is unlikely that the debate over the economic effects of advertising will be resolved soon. Many economists will continue to take a negative view of advertising and its effects on the functioning of the economy, while advertisers will continue to view it as an efficient way for companies to communicate with their customers and an essential component of our economic system.

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Professor Notes

McGraw-Hill Connect ®: Social and Cultural Consequences of Advertising Type of Activity: Click and Drag Activity Summary: In this activity, students will match ads or ad campaigns with the specific criticism against advertising that they might receive. Activity Learning Objectives: 21-01 Discuss various ethical perspectives on advertising and promotion. 21-02 Discuss various social perspectives on advertising and promotion. 21-03 Evaluate the social criticisms of advertising. 21-04 Discuss the effect of advertising on consumer choice, competition, and prices. CONCEPT REVIEW: Advertising is a very powerful institution and has been the target of considerable criticism regarding its social and economic impact. The criticism of advertising concerns the specific techniques and methods used as well as its effect on societal values, tastes, lifestyles, and behavior. Critics argue that advertising is deceptive and untruthful; that it is often offensive, irritating, or in poor taste; and that it exploits certain groups, such as children. Many people believe advertising should be informative only and advertisers should not use subjective claims, puffery, embellishment, or persuasive techniques. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

McGraw-Hill Connect ®: Market Power vs. Information Type of Activity: Click and Drag Activity Summary: In this activity, students will match characteristics of advertising to the appropriate school of thought that either “advertising equals market power” or “advertising equals information.” Activity Learning Objectives: 21-01 Discuss various ethical perspectives on advertising and promotion. 21-02 Discuss various social perspectives on advertising and promotion. 21-03 Evaluate the social criticisms of advertising. 21-04 Discuss the effect of advertising on consumer choice, competition, and prices. . Hill Education.

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CONCEPT REVIEW: The belief that advertising equals market power reflects traditional economic thinking and views advertising as a way to change consumers' tastes, lower their sensitivity to price, and build brand loyalty among buyers of advertised brands. The belief that advertising equals information takes a more positive view of advertising's economic effects. This model sees advertising as providing consumers with useful information, increasing their price sensitivity (which moves them toward lower-priced products), and increasing competition in the market. Difficulty: Medium Bloom’s: Understand AASCD: Analytical Thinking

Teaching Suggestions In this chapter we evaluate advertising from a societal, ethical, and economic perspective. Advertising is a very powerful institution in this country and has been the target of considerable criticism regarding its social and economic impact. Much of the criticism of advertising concerns the specific techniques and methods used by advertisers, as well as advertising’s effect on societal values, tastes, lifestyles, and behavior. We examine these various criticisms of advertising along with the responses of advertisers to these attacks. It is important to recognize that there are usually two sides to each of these issues and we try to recognize the arguments of the critics as well as of the advertising industry. For example, one of the classic debates over the social impact of advertising concerns the issue of whether advertising is responsible for creating undesirable consumer values, such as materialism, or whether advertising merely reflects or mirrors the values of society rather than molding or shaping them. Arguments can be made on both sides of this issue and it makes an interesting topic for student discussion. A very good exchange of arguments regarding this issue can be found in articles by Richard W. Pollay, “The Distorted Mirror: Reflections on the Unintended Consequences of Advertising,” Journal of Marketing, April 1986 and Morris B. Holbrook, “Mirror, Mirror on the Wall, What’s Unfair in the Reflections on Advertising,” Journal of Marketing, July 1987 and a rejoinder by Pollay, “On the Value of Reflections in ‘The Distorted Mirror,” which also appeared in the July 1987 issue of JM. Stephen Fox’s book The Mirror Makers: A History of American Advertising and Its Creators (New York: Morrow 1984) also provides an excellent discussion of arguments concerning the impact of advertising on society. Numerous controversial issues regarding advertising are raised in this chapter and can be used as a basis for discussion or debate. These include the issues of targeting promotional programs to schools; advertising to children; advertising’s portrayal of women as well as various ethnic groups; the ability of large advertisers to exert influence on, or even control over, the media; and the economic impact of advertising. You may want to have your students visit websites or advertising watchdog organizations such as Commercial Alert (www.commercialalert.org) to learn more about how this group works to keep advertising and other commercial activities within their proper sphere.

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Answers to Discussion Questions

1. What are some of the different ways companies use shock ads? Do you think they are designed to create sales, or to bring attention to specific issues? Do they work? Give examples. (LO 21-2) With the increasing clutter in the advertising environment, advertisers continue to use sexual appeals and other techniques that offend some people but catch the attention of consumers and may even generate publicity for their companies. In recent years, there has been an increase in what is often referred to as shock advertising, in which marketers use nudity, sexual suggestiveness, or other startling images to get consumers’ attention. Many advertising experts argue that what underlies the increase in the use of shock advertising is the pressure on marketers and their agencies to do whatever it takes to get their ads noticed—we have seen this in earlier chapters. However, critics argue that the more advertisers use the tactic, the more shocking the ads have to be to get attention. How far advertisers can go with these appeals will probably depend on the public’s reaction. When consumers think the advertisers have gone too far, they are likely to pressure the advertisers to change their ads and the media to stop accepting them. While marketers and ad agencies often acknowledge that their ads push the limits with regard to taste, they also complain about a double standard that exists for advertising versus editorial television program content. The creative director for Abercrombie & Fitch’s agency argued that there is a double standard and hypocrisy in the shock advertising debate: “When advertising uses sex, everybody complains—when editorial does it, nobody cares.” Advertisers and agency creative directors argue that even the most suggestive commercials are bland compared with the content of many television programs. Answers will vary. 2. The chapter discussed the empowerment of females in advertising. Give examples of some of the companies that have used this form of advertising. Why do you think they have done this? Is it for altruism or financial gain? (LO 21-1) Advertising has received much criticism for stereotyping women and failing to recognize the changing role of women in our society. Critics have argued that advertising often depicts women as preoccupied with beauty, household duties, and motherhood or shows them as decorative objects or sexually provocative figures. Various research studies conducted through the years show a consistent picture of gender stereotyping that has varied little over time. Portrayals of adult women in American television and print advertising have emphasized passivity, deference, lack of intelligence and credibility, and punishment for high levels of effort. In contrast, men have been portrayed as constructive, powerful, autonomous, and achieving.

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The chapter provides a number of examples of changes in how women are depicted, ranging from the depiction of young girls to full bodied women. There are now award programs for ads featuring women that do not meet the previous “model” stereotype. These should be used as examples 3. The chapter discusses how many marketers are struggling with their multicultural marketing efforts and suggests that one reason may be the lack of diversity in advertising agencies. What are some of the reasons for the low number of minorities, such as African Americans, working in advertising? How can the industry address this problem? (LO 21-2) There is little question that advertising has been guilty of stereotyping women and ethnic groups in the past and, in some cases, still does so. But as the role of women changes, advertisers are changing their portrayals to remain accurate and appeal to their target audience. Advertisers are also trying to increase the incidence of minority groups in ads while avoiding stereotypes and negative role portrayals. They are being careful to avoid ethnic stereotyping and striving to develop advertising that has specific appeals to various ethnic groups. Increases in the size and purchasing power of ethnic minorities are leading companies to give more attention to multicultural marketing. Advertising is often accused of creating and perpetuating stereotypes through its portrayal of women, ethnic minorities, and other groups. A number of companies now run interracial ads—but not without risk. Advertisers are also finding that advertising developed specifically for the African American market, such as the Levi’s ad shown in Exhibit 21–13, is an effective way of reaching this ethnic market. A study by Corliss L. Green found that ads targeting African Americans through racially targeted media, especially with racebased products, benefit from featuring African American models with a dominant presence in the ad.

4. The CEOs of Abercrombie & Fitch and American Apparel have both been variously characterized as either manipulators of the media for their ability to generate publicity for their companies or petulant. Both have lost their jobs in the face of declining sales. Are they geniuses or just sexist? Support your argument. (LO 21-1) There are a number of places in the text where we discuss CEO Mike Jeffries of A&F, and his efforts to gain attention through shock advertising. The question is whether this is still an effective strategy given the many years this method of gaining publicity has been employed. While at first some may have considered Jeffries as a great marketer, this may be changing. The latest efforts may have backfired, as there was more backlash than in previous years. In addition, positive attitudes toward the brand in its key demographic, 18-34-year-olds have declined, while those of competitor H&M have gone up. Further evidence is provided by the fact that in January 2014 Jeffries was replaced as Chairman of A&F upon recommendation of the Board of Directors. His shock antics were certainly a part of this decision. While shock ads may work in the short run, it appears that over time, they are of little value. 5. Companies like Old Navy and Cheerios have employed the use of interracial ads, and have stirred up both controversy and support. Comments have been made that while some believe . Hill Education.

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that we are in a post racism era, whereas others disagree. Provide arguments for both sides and explain the potential impact on the brands. (LO 21-3) Clearly, the public appears to be more open to ads and commercials that employ interracial couples, groups of peers, etc. It appears that some of the walls of established color barriers are coming down. At the same time, this is not a universal truth. While news reports of protests of interracial ads may be uncommon, this does not mean that bigotry has ceased to exist. Many incidents of racial discrimination are reported, and one can be sure that many more are not. In recent years (particularly since the Trump administration took office) accounts of such incidents are on the rise. One can assume that while the U.S. may be more racially liberal, we cannot assume that interracial ads are now accepted by everyone. 6. The use of ads that use interracial and gay and lesbian themes appear to be on the increase. There seems to be a relaxed atmosphere regarding the use of these groups in advertising. Explain the benefits and pitfalls inherent in this strategy. (LO 21-2) A 2013 study reported on by Susan Heavey of Reuters News indicated that there are very mixed emotions regarding the acceptability of homosexuality around the world. While there seems to be a growing acceptance in the United States, Canada, Europe and South America, but still staunch resistance in the Mideast. The Olympic Games of 2014 demonstrated the strong sentiment against gays and lesbians in Russia. Other studies have indicated that for those with more acceptance of homosexuality, ads depicting this more liberal view were perceived favorably, while more conservative positions led to more negative evaluations. It seems tautological that those holding different perspectives would evaluate these ads differently. Thus marketers who run these forms of advertising run the risk of alienating those who oppose gay and lesbian depictions, but at the same time may stand to gain favor among those with a more liberal bent. Marriage equality laws are being passed by more and more states in the U.S. and polls have shown that the majority of U.S. citizens no longer take a negative stance on homosexuality. This certainly reduces the risk of running these ads. At the same time, a Coca-Cola ad shown on the 2014 Super Bowl showing people in different languages singing “America the Beautiful” led to thousands and thousands of negative comments on Social Media protesting the commercial. All of this was over language. It should be clear to advertisers that some are not quite as liberal as they might expect, and that running any type of potentially negative ads may have consequences. 7.

There are conflicting positions as to whether the government should get involved in issues regarding issues such as obesity, cigarette smoking, and vaping by passing regulations, restrictions, and/or taxes. Present both sides of the argument and take a position, providing support for your opinion. (LO 21-3) Food marketers spend approximately $40 billion per year to market their products to children. These marketing efforts include media advertising, promotions, the use of licensed characters to promote food products, web sites and online promotions, and many other techniques. Critics argue that the marketing efforts of the food industry are spent to promote foods that are high in calories, sugar

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and/or fat content such as candy, soda and snack foods. They note that the ads and other forms of promotion encourage people to eat more than they should and to consume unhealthy food and beverage products. The opening of school doors to various advertising and promotional programs by companies such the granting of pouring rights to soft drink companies has also created a major controversy. The soft drink companies do offer alternative beverages such as fruit juices, juice drinks and bottled water to alleviate this concern. However, critics still argue that our schools are not a proper venue for any types of commercial messages and that school administrators should not have to strike marketing deals with companies to fund education programs. The food industry recognize that they are under attack and are taking steps to address the problem such as developing more healthy products and changing their advertising and promotion practices. Companies such as Kraft Foods have stopped advertising popular snack-food items to children under the age of 12 while Coca-Cola updated its guidelines to eliminate advertising and sampling to kids under 12 and not show young children consuming soft drinks unless they are accompanied by an adult. The industry recognizes that they need to be proactive in addressing the problem or face the possibility of more stringent government regulation of the marketing of their products. A significant development occurred in 2007 when a group of 11 major companies that account for two-thirds of all food advertising targeted at children pledged to stop advertising products that do not meet certain nutritional standards to children under the age of 12. However, it is likely that the food industry will continue to come under attack by various consumer groups such as the Center for Science in the Public Interest and others. These groups argue that food and beverage marketers have not gone far enough and there should be even more restrictions on the advertising and promotional efforts to children. It is likely that the food and beverage companies will continue to develop new product and modify existing brands to keep them compliant with their own new guidelines and provide children with more healthy options. Companies such as PepsiCo and Coca-Cola have diversified their product portfolios and added items such as vitamin water, juices and even reduced calorie sport drinks to lower their dependency on soft drinks and provide more options to consumers.

Groups such as Commercial Alert are concerned about the intrusion of advertising and other types of marketing messages into all aspects of consumers’ lives. Discuss some of the reasons consumer watchdog groups are critical of advertising and other types of marketing practices. (LO 21-2) Many marketers are obliterating the line between marketing communications and entertainment by creating and delivering ads and other messages that appear to be part of popular culture. Branded content refers to the practice of creating various forms of entertainment into which brands can be integrated such as music, movies, short films, video games, and music videos. The practice goes beyond traditional product placement as it seeks to make brand a more integral part of the entertainment. Many companies are making their brands part of reality TV shows. These practices are becoming popular among marketers for several reasons. Many companies feel that traditional TV commercials are losing their effectiveness and are looking for new ways to reach consumers. They are also realizing that with advances in technology, such as digital video recorders, audiences are able to skip over ads, and they must make find more entertaining genres of advertising in order to capture and hold the attention of consumers. Critics are concerned over the use these techniques as they view them as stealth messages and argue that consumers are often unaware of their persuasive intent. Groups such as Commercial Alert are concerned over the use of branded content as they feel that movies and television shows are being corrupted by commercialization that goes beyond mere product placement and now

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includes the altering of scripts to integrated advertising and branding messages into films and television shows. Consumer groups are also concerned over the impact that advertainment and branded content will have on children who cannot identify or properly process advertising messages that are embedded into movies and TV shows. Critics also argue that consumers should have places in their lives that are free from advertising and marketing messages rather than being constantly persuaded by marketers.

Discuss how attitudes toward the use of sex in advertising differ between men and women. Discuss the implications of these attitudinal differences for marketers who are developing ads for each sex. (LO 21-1) The results of an online survey of 200 men and 200 women conducted by MediaAnalyzer Software & Research are shown in Figure 21-3. The results concerning general opinions about sex in advertising revealed that it is a very polarizing issue. While almost half of men indicated that they like sexual ads, very few women felt this way. Nearly two-thirds of the men indicated that sexual ads have high stopping power and get their attention while only a quarter of the women thought the same. Women were also more likely to feel that there is too much sex in advertising, that sexual ads promote a deterioration of moral and social values, and that ads with sexual themes are demeaning of the female models that appear in them. Only a small percentage of both men and women indicated that ads with sexual themes make them purchase a product. However, a higher percentage of men than women indicated that ads with sexual themes make them look at them and remember a brand. The results of this survey indicate that men are much more receptive to the use of sexual appeals than are women. Men are much more likely than women to notice an ad that has a sexual theme and remember the brand. They also like sexual ads more and are less likely to view them as demeaning to women. These finding suggest that ads with sexual appeals may be an effective way to get the attention of males and to register a brand name. However, the findings do not suggest that a sexual themed ad will be effective in getting either sex to purchase a product. For women, the results suggest that sexual appeals may not be as effective as they are less likely to notice the ad, even less likely to remember the brand and purchase interventions are extremely low. Moreover, the results show that women do not like ads with sexual themes and find them demeaning to women. Of course it would be interesting to analyze these findings by age to determine if younger women were more open to sexual themed ads than older women. More detail on the results of this study can be found in an article in the October 17, 2005 issue of Adweek (pp. 14-17).

10.

Economists argue that advertising can be a barrier to entry for many companies that simply cannot come up with the money required to initiate an effective advertising campaign. At the same time, SPANX has succeeded without spending any money to promote the product. Explain how a company like SPANX can be successful with little or no advertising. (LO 214) The Advertising = Market Power perspective reflects traditional economic thinking and views advertising as a way of changing consumers’ tastes, lowering their sensitivity to price, and building brand loyalty among buyers of advertised brands. This results in higher profits and market power for large advertisers, reduces competition in the market, and leads to higher prices

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and fewer choice alternatives for consumers. High prices and excessive profits give advertisers even more incentive to advertise their products and output is restricted compared with conditions of perfect competition. Proponents of this model are generally negative in their perspective regarding the economic impact of advertising. The Advertising = Information perspective views advertising as providing consumers with useful information, increasing their price sensitivity which moves them toward lower-priced products, and increasing competition in the market. Advertising is viewed as a means of communicating with consumers and telling them about a product and its major features and benefits. More informed and knowledgeable consumers will put pressure on companies to provide high quality products at lower prices, and efficient firms remain in the market, whereas inefficient firms leave as new entrants appear. Proponents of this model assume that the economic effects of advertising are favorable and view it as contributing to more efficient and competitive markets. In general, many marketers believe that companies with large advertising budgets have an advantage of those who do not. But along comes a SPANX who succeeds with no ad budget, seemingly defying this perspective. While SPANX represents the exception rather than the rule, it does appear that companies are more able to become successful in this day and age with less ad spending. Some of this can be attributed to the power of social media, some to the effective use of public relations, and some to effectively using product placements—all of which SPANX did well. At the same time, the SPANX speaks to another component of the Marketing 4p’s—product. The fact is that the product met the needs of the consumer, and when women found out about it, the looked for it and bought it—any form of communications worked.

Additional Discussion Questions (not in text)

11.

The Campaign for Real Beauty is an integrated marketing communication program that Unilever has been using for its Dove brand since 2004. Do you view this campaign as movement in a positive direction with regard to the portrayal of women in advertising or as a creative way for Dove to sell more beauty products? Defend your position. (LO 21-3) Unilever has developed an extensive integrated marketing communications programs to support the Campaign for Real Beauty for its Dove beauty products. The campaign uses a variety of IMC tools, including media advertising that targets women with the natural beauty appeal message; the Campaign for Real Beauty website; sales promotion tools such as contests and sweepstakes, events and sponsorship programs with various groups such as the Girl Scouts of the USA; causerelated marketing through the Dove Self-Esteem Fund; direct marketing to women who register on the website or attend events; and an extensive publicity/public relations campaign. The campaign has generated a great deal of publicity and media coverage with brings even greater attention to Dove and its products and contributes to the marketing program. The Campaign for Real Beauty was launched after Unilever’s Dove brand team reviewed the results of a study indicating that most women feel that the media and advertisers set an unrealistic standard of beauty that they cannot achieve. The survey also found that only a small percentage of women are satisfied with their body weight and shape and only 2 percent considered themselves

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beautiful. The goal of the campaign is to change the stereotypical portrayal of beauty based on physical attractiveness and to encourage women to feel good about themselves. Most ads for beauty and cosmetic products show glamorous super models and are based on the idea that women will aspire to be like these women and purchase the advertised product in hopes of improving their appearance. However, Dove has taken more of an inspirational approach by encouraging women to focus on their natural beauty and appealing to their self-esteem. The goal is to send a positive message to women, particularly teens and younger women, regarding acceptable standards of beauty. Critics of the campaign argue that it is really just a clever way for Dove to market its beauty and cosmetic brands and is more about selling these products than making a social statement. They argue that there is a contradiction in the message of the campaign as it suggests that women still need to use Dove products to be beautiful. They also argue that Dove markets items such as cellulite cream and anti-aging products and the efficacy of these products has not been proven. The campaign has also been criticized on the grounds while the models shown in the ads are not the typical slender super model, they are still more attractive than the average woman. Overall, the Dove campaign has been viewed very favorably and most observers feel that it a very positive step in terms of the way women are portrayed in advertising. The campaign has encouraged other marketers such as Nike to change the way they portray women and celebrate the diversity of their physical appearance. Even the critics of the campaign would probably agree that portraying women in a more natural and realistic way is better than encouraging them to try and look like the super models that appear in most ads.

12.

Discuss the arguments for and against advertiser influence and/or control over the media. How might a newspaper or magazine avoid being influenced by advertisers? (LO 21-4) There are a number of reasons why critics argue that advertisers have influence over the media and that the advertising and financial side of the publishing business controls or influences the editorial content of magazines and newspapers. The main factor in support of this position is that the media are either totally or highly dependent upon advertising revenue. Television and radio networks and stations receive nearly all their revenue from advertising, while newspapers and magazines receive nearly 70 percent of their total revenue from the ads they sell. Smaller, less financially secure media are the most prone to influence and pressure from advertisers, particularly companies who account for a large amount of the medium’s advertising revenue. Thus, they may be reluctant to print an unfavorable story about a company or industry that accounts for a large percentage of their advertising revenue. There is concern that some magazines and newspapers may be lowering “The Wall” which separates their news and business departments in their search for new ways to increase readership and revenue as competition from the Internet and other media increases and their audience or circulation numbers decline. The lowering of the Wall has serious implications for the media as journalists argue there must be not be any pressure from the advertising and financial side of the business so they are free to cover any story and be objective in their reporting. They argue that decisions on the writing, editing, and publishing of stories should be made on their journalistic merit rather than whether they will attract or repel advertisers. There are several arguments against advertisers’ ability to control the editorial content of media such as television stations, magazines and newspapers. First, it is in the best self-interest of the media that they not be influenced too much by advertisers. To retain public confidence, they must report the news fairly and accurately and not be perceived as biased or attempting to avoid

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controversial issues. Many TV stations, magazines, and newspapers also note the vast amount of topics they cover and the investigative reporting they often do on companies as evidence of their objectivity. They also note that the advertiser needs the media more than they need an individual advertiser, particularly when the medium has a large audience or reaches a specific market segment. Many television stations, newspapers, and magazines have a very broad base of advertising support and can afford to lose an advertiser who might attempt to exert too much influence or control over them.

13.

Discuss the role of ethics in advertising and promotion. How do ethical considerations differ from legal considerations in developing an integrated marketing communications program? (LO 21-1) While many laws and regulations determine what advertisers can and cannot do, not every issue is covered by a rule or guideline. Ethics involve the use of moral principles and values in evaluating a decision or action. Ethical considerations are very important in advertising as the use of a particular type of ad or the targeting of a specific group may be legal but may not be ethical. Ethical issues must be considered in making advertising and promotion decisions as a lapse in ethical standards or judgment can result in actions that are highly visible and often very damaging to a company’s image or reputation. Ethical considerations differ from legal considerations in that ethics involves individual or group moral principles or values and can be very subjective while legal considerations are generally much more objective. Legal considerations can be enforced through the regulatory process while ethical problems can only be remedied by voluntary actions of those who are responsible for the unethical actions.

14.

With which position do you agree? “Advertising determines American consumers’ tastes and values and is responsible for creating a materialistic society.” “Advertising is a reflection of society and mirrors its tastes and values” (LO 21-2) This question presents the classic dilemma of whether advertising is responsible for creating materialistic values in consumers or whether it merely reflects or mirrors the values of society rather than molding or shaping them. Those who agree with the first position argue that advertising encourages materialistic values by seeking to create needs rather than merely showing how a product or service fulfills them; surrounding consumers with images of the good life and suggesting that the acquisition of material possessions leads to contentment and happiness and adds to the joy of living; and suggesting that material possessions are symbols of status, success and accomplishment and/or will lead to greater social acceptance, popularity, sexual appeal, and so on. Those supporting the second position argue that consumers’ values are defined by the society in which they live and value systems are the result of extensive long-time socialization or acculturation. They argue that advertisers develop ads in response to prevailing values and are thus reflecting tastes and values rather than molding or shaping them.

15.

Discuss how advertising can affect product costs and the prices consumers pay for products and services. (LO 21-4)

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Arguments that advertising increases the costs of products and services include the fact that the large sums of money spent on advertising constitute a business expense that must be covered and thus is passed on to consumers in the form of higher prices. Advertising can also result in higher prices by increasing product differentiation and adding to the perceived value of the product in the mind of the consumer. Brands that have achieved high levels of differentiation or perceived value can command a premium price. Proponents of advertising argue that it can actually result in lower costs of products and services by helping firms achieve economies of scale in production, distribution and marketing by stimulating demand among mass markets. Advertising can also lead to lower prices by making a market more competitive, which usually leads to greater price competition. Studies of several industries have shown that advertising results in lower consumer prices. Some critics argue that advertising has a negative impact on consumer choice, as large advertisers use their power to limit consumers’ options to a few heavily advertised brands. They argue that advertising is used to achieve differentiation and brand loyalty, which occurs at the expense of smaller brands. Defenders of advertising argue that it does not create brand monopolies and reduce opportunities for new companies and/or brands to enter the market. The opportunity to advertise gives companies the incentive to introduce new brands and improve existing ones. Advertising is viewed as playing a critical role in informing consumers about new products and making it possible for new companies to enter the market. Thus, it helps expand consumer choice rather than limiting it.

IMC Exercise Have students find several ads that they feel are examples of negative social consequences of advertising discussed in the text such as the following: •

Ads that are offensive or in poor taste because of the product or service they advertise, the type of appeal they use, or the manner of presentation used

•

Ads that use one of the shock advertising techniques discussed in the chapter

•

Ads that may have an adverse effect on consumer values by encouraging materialism

•

Ads that encourage consumers to purchase a product that they really do not need

•

Ads that stereotype women, men, or ethnic groups such as African Americans, Hispanics, AsianAmericans, or some other group, such as the elderly

Explain why you feel these ads are examples of negative advertising. How do you think the advertisers might justify the use of the ads you have chosen?

. Hill Education.

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