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

INSTRUCTOR MANUAL for Advertising and Promotion An Integrated Marketing Communications Perspective, 5th Canadian Edition, With Case Notes. by George Belch Michael Belch Michael Guolla

CHAPTER 1 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. The first section summarizes the content of promotional messages as it reviews how marketing communication is used to convey the marketing mix. The elements of the promotional mix are introduced and a brief overview of the kinds of firms involved in promotion is highlighted. This chapter introduces the concept of integrated marketing communications (IMC) and discusses its evolution, a renewed perspective, and importance. Most marketers understand the value of strategically integrating the various communication functions rather than having them operate autonomously and so the depth of these topics provide a foundation of the emerging IMC trend.. A model of the IMC planning process is examined that gives direction for the content of a promotional plan. Finally, we describe the perspective and organization of the text that is consistent with the planning process.

Learning Objectives 1. Describe the importance of marketing communication within the marketing mix. 2. Identify the tools of the promotional mix - advertising, sales promotion, public relations, direct marketing, Internet marketing, and personal selling – and summarize their purpose. 3. Illustrate the concept of integrated marketing communications (IMC) by considering its evolution, renewed perspective, and importance. 4. Explain the IMC planning process and express the steps in developing a marketing communications program. 5. Identify how the IMC planning process is continued throughout all chapters.

Chapter and Lecture Outline I.

MARKETING COMMUNICATION

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. Previously, the American Marketing Association 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. The description of marketing should include a discussion of the activities involved in the marketing process and its role and importance in different types of companies including both profit and nonprofit organizations. It is important to stress that each element of the marketing mix is multidimensional in nature and includes a number of decision areas. This reminder leads the way to defining the text’s scope. In discussing the marketing mix, it should be highlighted that marketing communication is responsible for drawing attention to product, price and distribution elements in the message received by the audience.

Communicating Product—an organization exists because it has a product, service, idea or cause to offer. Discussion can focus on the value offered by the product and the fact that goods and services offer attributes and benefits that satisfy not only functional but social and psychological needs as well. Communication for brand identification is important with respect to brand name, brand logo, band tag-line and packaging. As some of the text exhibits illustrate, the focus of many ads are to identify the brand characteristics clearly to encourage recognition at the point of purchase where many decision are made. Communicating all facets of the product is expected to contribute to brand equity; 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. A discussion of the overall assessment of brand can ensue with reference to the data in the brand exhibits.

Communicating Price—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. From a marketing communication standpoint, price is often a key piece of information in an ad or is the main selling message.

Communicating Distribution—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. In discussing the latter, the importance of resellers in marketing and promotional strategy should be introduced. 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.

II.

THE PROMOTIONAL MIX

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 as most of an organization’s communication with the marketplace takes place through a carefully planned and controlled promotional program that utilizes elements of the promotional mix. The promotional mix should be defined as the tools or elements that are used to accomplish an organization’s objectives. The role and function of each promotional mix element in the marketing program can be discussed along with its advantages and disadvantages. A.

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

cost-efficient way for communicating, particularly with large audiences

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cost-effective communication if audiences process the message and the message is appropriate for that audience

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valuable tool for creating and maintaining brand equity by creating images and symbolic appeals and for differentiating similar products

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flexible tool for all sorts of products, situations, and audiences

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advertising occurs in all domains; consumer markets including national, retail/local and direct-response advertising, and, business and professional market including industrial, professional and trade advertising.

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opportunity to leverage popular advertising campaigns into successful IMC programs which can generate support from retailers and other trade members

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ability to control the message (what, when and how something is said and where it is delivered)

Disadvantages of advertising: (not in the text)

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the cost of producing and placing ads can be very high, particularly television commercials

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it can be difficult to determine the effectiveness of advertising

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there are credibility and image problems associated with advertising

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the vast number of ads has created clutter problems and consumers are not paying attention to much of the advertising they see and/or hear

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 and trade activities. Advantages of sales promotion: •

provides extra incentive to consumers or trade members to purchase or stock/promote a brand

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way of appealing to price sensitive consumer

•

way of generating extra interest in product or ads

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effects can often be more directly measured than those of advertising

•

can be used as a way of building or reinforcing brand equity

Disadvantages of sales promotion: •

companies may become too reliant on sales promotion and focus too much on short-run marketing planning and performance

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some 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

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problems with sales promotion clutter as consumers receive many coupons, contests, sweepstakes and other promotional offers

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consumers may become over-reliant on sales promotion incentives which can undermine the development of favorable attitudes and brand loyalty.

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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

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. C.

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. Publicity—nonpersonal communications about an organization, product, service, or idea that is not directly paid for nor run under identified sponsorship. 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. Many of the advantages and disadvantages of advertising pertain to public relations. Publicity is an important communication 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

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low cost way of communicating

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often has news value and generates word-of-mouth discussion among consumers

Disadvantages of publicity:

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lack of control over what is said, when, where and how it is said

•

can be negative as well as positive

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 become such an integral part of the integrated marketing communications program of many organizations and this text views it as a component of the promotional mix. Advantages of direct marketing: •

•

allows a company to be very selective and target its marketing communications to specific customer segments

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messages can be customized to fit the needs of specific market segments

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effectiveness of direct-marketing efforts are easier to assess than other forms of promotion

Disadvantages of direct marketing:

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consumers and businesses receive unsolicited communication which makes them less receptive to direct-marketing

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direct marketing has image problems

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problems with clutter as there are too many direct-marketing messages competing for consumers’ attention

Internet Marketing—interactive media allow for a back-and-forth flow of information whereby users can participate in and modify the content of the information they receive, usually via the Internet. 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 communicate other elements of the promotional mix including sales promotion, direct marketing, and public relations. Advantages of internet marketing: •

can be used for a variety of integrated marketing communication functions including advertising, direct marketing, sales promotion, public relations and selling

•

can be used to target very specific groups of customers with a minimum of waste

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messages can be tailored to appeal to the specific interests and needs of the target audience

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a higher degree of customer involvement when customers are visiting a web site due to its interactive nature

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possible to provide customers with a great deal of information regarding product and service descriptions and specifications, purchase information and more

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tremendous creative potential as a well-designed web site 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 of internet marketing: •

concern that 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.

•

clutter on the Internet which makes it difficult for advertising messages to be noticed and/or given attention.

• F.

audience measurement for the Internet is still a problem as is measuring the effectiveness of banner ads and other promotional messages on the Internet.

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 of personal selling: •

direct contact between buyer and seller allows for more communication flexibility

•

can tailor and adapt message to specific needs or situation of the customer

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allows for more immediate and direct feedback

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promotional efforts can be targeted to specific markets and customers who are best prospects

Disadvantages of personal selling: •

high cost per contact ($155 to $300, depending on the industry)

•

expensive way to reach large audiences

•

difficult to have consistent and uniform message delivered to all customers

Participants—the organizations that participate in the integrated marketing communications process are shown to give an introduction to various industry members and their responsibilities. However, marketers are also looking for agencies that can offer a range of integrated marketing communication capabilities to their clients and help them compete in the rapidly changing world of advertising and promotion. 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 interactive agencies are playing an increasingly important role in the promotional process.

III.

INTEGRATED MARKETING COMMUNICATIONS

The transition from traditional promotional management to IMC planning has evolved over time with different interpretations regarding the change. These three sections provide background information to illustrate the new perspective, however the debate highlighted in the second section can potentially fuel a student debate. A.

The Evolution of IMC—marketers previously built strong barriers around 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, companies moved toward integrated marketing communications (IMC), which involves coordinating the various promotional elements along with other marketing activities that communicate with a firm’s customers. Subsequently, marketers asked their ad agencies to coordinate the use of promotional tools rather than relying primarily upon media advertising. Agencies responded by acquiring public relations, sales promotion, direct marketing firms, and interactive agencies and touting their capability to meet all of their clients’ IMC needs. Companies also looked beyond advertising Chapter 1 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 1-6

agencies and used other types of promotional specialists to develop and implement components of their promotional plans. A task force from the American Association of Advertising Agencies (4As) developed one of the first definitions of integrated marketing communications. 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. B.

Renewed Perspective of IMC—One leading IMC scholar suggests that IMC has reached the stage of being a strategic business process due to multiple audiences for communication and demands placed upon marketing communication to measure its outcomes clearly for accountability. This point raises the issue as to whether IMC is legitimately a new concept and business activity or new terms to describe previous promotional practices. Instructors can allow for debate on this point, although students may not appreciate the subtly of the issue early in the course.

Importance of IMC—companies can no longer be tied to a specific communication tool; rather they should use whatever contact methods offer the best way of delivering the message to their target audiences. A successful IMC program requires that a firm find the right combination of promotional tools and techniques and coordinate their use. There are a few reasons why IMC has become very important for most firms: •

Audience Contacts—An IMC perspective encourages planners to consider a variety of target audiences for the organization in which certain tools may be more appropriate than others for delivering the most relevant message.

•

Consumer’s point of view—as a marketer, it is important to keep concepts distinct to allow communication with other people within an organization when making decisions. However, consumers do not distinguish between various forms of persuasive communication-many promotional tools appear as “advertising-like” messages.

•

Relationship marketing—the focus of market-driven companies is on developing and sustaining relationships with their customers. This has led to an emphasis on relationship marketing, which involves creating, maintaining, and enhancing long-term relationships with individual customers as well as other stakeholders for mutual benefit. Marketers are giving more attention to the lifetime value of a customer because studies have shown that reducing customer defections can increase future profit.

•

Consumer adoption of technology and media—the growth of the internet with many different interactive experiences, expanded media vehicle alternatives through cable/satellite television, the explosion of mobile devices, and many other alternatives has led to new promising avenues for marketing communication. These trends fuel the need for planners to consider all avenues for marketing communication in face or reaching many target audiences.

•

Planning efficiency and effectiveness—IMC planning is expected to contribute to better overall marketing communication plans that lead to more efficient media spends. Will various agencies and personnel involved all specialists contribute to the decisions.

Promotional management 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 across the promotional mix elements

•

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

It is useful to explain the Integrated Marketing Communications Planning Model presented in Figure 1-7. The steps are as follows:

•

Review the Marketing Plan

•

Assess the Marketing Communications Situation

•

Determine IMC Plan Objectives

•

Develop IMC Programs

•

Implement and Control the IMC Plan

IMC PLANNING: ORGANIZATION OF TEXT

This begins a continuing reprise throughout the book as a concluding section for all a chapters to illustrate how some of the content can be applied to IMC planning. To illustrate the approach, Chapter 1 describes how the book is organized around the planning framework presented in Figure 1-7.

Teaching Suggestions This initial chapter is designed to provide students with an overview of advertising and promotion, and a brief look at the role of promotion in the marketing mix. It is important to define the six elements of the promotional mix, discuss their role as marketing communication tools, and discuss their advantages and limitations. Our view of the promotional mix goes beyond the traditional communication tools of advertising, sales promotion, public relations and personal selling as we include direct marketing and Internet marketing. Direct marketing and the Internet are now common methods by which marketers communicate with their target audiences and we feel they are best viewed as distinct IMC tools. You should introduce the concept of integrated marketing communications and discuss its evolution. 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, not everyone agrees with it. An excellent discussion of the arguments on both sides of this issue is presented in a report of the Task Force on Integrated Communications prepared by Tom Duncan, Clarke Caywood and Doug Newsom titled Preparing Advertising and Public Relations Students for the Communications Industry in the 21st Century. A copy of this report can be obtained by contacting the Association for Education in Journalism and Mass Communication at the University of South Carolina in Columbia, South Carolina. Chapter 1 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 1-8

During an introductory lecture there is latitude to discuss 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 evaluates the regulatory, ethical, 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 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.

Vignette 1. Why would consumers accept this approach for communicating food quality? McDonald’s approach with digital media is an example where a major brand exterted greater control of message delivery after experiencing difficulties with its initial social media experiences. By addressing consumers’ questions, McDonald’s directed the content of its message in a way that attempted to clearly focus on the quality of the food, something it had done significantly for a considerably time period. It also attempted to reinforce its brand by showing that it practiced marketing honestly and ethically with its truthful behind-the-scenes stories. These two ideas present higher involvement methods of encouraging the target audience to accept that McDonald’s was in fact an authentic food marketer; something that might have been difficult to achieve with previous low-involvement messages. 2. Do the results highlighted indicate a successful or unsuccessful campaign? This question gets students thinking about all the decisions a promotional planner faces on a regular basis and whether the decision are effective or not. It provides the instructor an opportunity to review the IMC tools and allow an open interpretation regarding effectiveness. One could believe that 8 million YouTube hits is good, about 25% of Canada which suggest very significant reach, although some hits could come from other locations and may be multiple views of some frequent visitors. The amount of processing; 4.5 minutes and the reading of 12 questions imply substantial message exposure compared to what might occur with TV ads.

IMC Perspective 1-1 1. Explain why one of the four marketers was most successful. All four managers are clearly successful having been recognized by Strategy Magazine. The objective of this perspective is to illustrate the jobs marketers who are responsible for marketing communication decisions to students as part of their career aspirations. Students will likely form an opinion on the types of decisions made or the nature of the business. An important criteria to reinforce is that students should try to make a link of the decisions to how they might have been most effective. This chapter begins the idea permeating the book that it is important to understand how all marketing communication decisions are evaluated for effectiveness.. Chapter 1 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 1-9

IMC Perspective 1-2 1. Why would digital communication tools be a useful source of information for food consumers? For many consumers, food is a high involvement decision since it affects long-term health and nutrition; consumers would be interested in uncovering the actual ingredients among other things. Additionally, consumers look to have greater connections with food brands since they part of their everyday lives and would presumably be more interested in participating in public relations activities or sales promotions via instant internet communication.

Answers to Review Questions 1. Why is marketing communication important for communicating value to consumer? Communicating value is a central tenet in the definition of marketing, so it is imperative for marketers to use marketing communication tools effectively to influence consumers’ value perceptions via product, price and distribution messages. Message about product include how the produce fulfills needs via its characteristics, brand identity, and brand equity. Marketing communication plays a prime role it showing consumers the key delivery of value (e.g., Keg example of offereing superior dining and food quality). Brand identity is a combination of the name, logo, symbols, and packaging design that is experienced at any point of contact that consumer has with a brand via marketing communication. This assists consumers in understanding how it fulfills their needs and contributes greater value. The combined effect of these two points contributes to brand equity where consumers see a brand as superior. Marketers go beyond traditional media advertising to communicate value. Consumers have contact with or receive information about a brand through in-store media such as point-of-purchase displays; articles they read, see and/or hear in the media. Companies build brands that via interactive media like web sites to communicate with customers or text messaging to mobile phones. Companies are also turning to branded entertainment as a way of connecting with consumers and making their products and services part of movies and television shows. Marketers are creating short films and other forms of entertainment that can be shown on their web sites. 2. How do smartphone brands use each marketing communication tool for communicating messages? Advertising on TV allows smartphones to set an overall image for the brand, and these video messages can be linked anywhere virtually to allow greater exposure to digitally-based target audiences. Additional product or service messages communicate salient attributes or benefits at the most relevant point in time (e.g., new featured with updated phone launch). Price promotions are featured on older models when updated smartphones are released. Often smartphone brands are involved with public relations activities for noteworthy causes to enhance their profile. As expected, smartphone brands have an extensive digital presence with websites for comparison purposes and customer service explanations. Social media communication for a variety of purposes have occurred in which student can readily identify and explain their potential effectiveness. This questions permits the opportunity to explore a complete IMC plan for an individual brand to see all the decisions in action for a product that it seems virtually all students have experience with. 3. Illustrate how integrated marketing communications differs from traditional advertising and promotion. What are the reasons more marketers are taking an IMC perspective to their advertising and promotional programs? Chapter 1 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 1-10

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 web sites 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. 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. 4. What parts of the IMC planning model are similar to and different from a marketing planning model? Similarities include the need for a situational analysis, setting of objectives, the development of programs that have both strategic and tactical elements, and finally the implementation and control phases. The differences include the domain (communication vs. marketing mix), the specificity of the situation analysis is related to the communication problem or opportunity. 5. How is the structure of the book consistent with the content of an IMC plan? An IMC plan should begin with an understanding of advertisers agency partners, and a decision of the target audience (Chapter 3) and an understanding of how the audience would receive the message (Chapter 4) so that the brand manager can set IMC objectives (Chapter 5) to direct the brand positioning strategy (Chapter 6). This strategic orientations give direction for the creative strategy (Chapter 7) and creative tactics (Chapter 8) of the message, which can be evaluated (Chapter 9), and planned (Chapter 10) and delivered via media (Chapters 11, 12, 13), or strengthened via sales promotion (Chapter 14), public relations (Chapter 15), directed marketing (Chapter 16) and the internet (Chapter 17). Ethical guidance of all decisions of the plan is summarized (Chapter 18).

Answers to Application Questions 1. Consider how a university or college communicates value in its marketing communication to its prospective students and current students. In what ways are the two approaches similar or different? Communication to current students is done extensively via online portals. Information regarding courses, educational resources etc. are at students’ fingertips on a second-by-second basis. Any activities of culture, sport or education origin are easily obtained via numerous digital avenues (website, social media). Essentially, marketing communication via students is a strong representation of what occurs with long-term, repeat purchasing consumers in a relationship marketing setting. Chapter 1 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 1-11

In contrast, communication to prospective students occurs via personal communication via highschool visits and campus visists, direct mail of brochures etc., and online communication to the public portions of the institutions website as students shop around for the best fit for their needs. The idea of this question is for students to see that there are unique messages and media directed to customer and non-customers, although there still remains considerable overlap since an institution would want to project a consistent overall image to both groups. 2. Identify all the possible marketing communication tools that a favourite brand or performance artist is using. Try to explain why these tools were selected. In what ways did the tools support one another? How dis thy not support one another? Was each tool effective or ineffective? This application question encourages students to put into context all the marketing communication that they would have been most exposed to, and therefore, more likely to be able to apply the concepts of this chapter. Instructors are encouraged to ensure that students find as many IMC tools used as possible, and push them to fully explain how the tools work or do not fit together. The question also begins the task for students to try and figure out what effectiveness is and how to estimate it prior to seeing the actual concepts in chapters 4 and 5. 3. Find examples where all promotional tools have the same “look” and “feel” and others where there is a different look and feel. Why did these decisions occur based on relevant situation analysis variables? Instructors can find good examples to show such at Telus and Koodo where there is consistent imagery for the phone service. Telus is especially good to reference since it had a consistent nature creative for its phone, but has now decided to us different creative for its TV service and other aspects of its marketing communication in terms of public relations and customer service. Thus, this shows how some parts of the plan is consistent while others is different. The explanation is largely due to different competitive spaces, the nature of consumer adoption of technology, and the company’s maturity as it develops into a full-fledged telecommunications organization. 4. Why is it important for those who work in the field of promotion to have an appreciation for and understanding of all elements of the promotional mix and not just the one in which they specialize? Marketers use many promotional tools to communicate with their customers. The promotional mix elements have to be viewed as component parts of an integrated marketing communications program. An individual promotional 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, advertising agencies no longer confine their services to creating and placing ads. Many agencies are involved in sales promotion, public relations, 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. 5. How does one of your favourite brands link or integrate its different IMC communication tools? Is it done effectively? Students can address the digital connections here with advertising. For example, what messages and media are used to persuade consumers to investigate online brand communication via social media or Chapter 1 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 1-12

websites. Students also might want to observe the connections of the brand’s commitment to a social cause with its social media activities. Similarly, investigations to a contest or another sales promotion might be useful with its connection to Facebook or Instagram. The important point is for students to actively see how brands are connecting their communication for exposure to consumers.

Additional Questions (not shown in text) A. Consider all the marketing communication tools (i.e., advertising, sales promotions, public relations, direct marketing, Internet marketing, and personal selling) that are used to market a new car that a graduating student might be expected to buy. Explain why each tool would be effective to create awareness. Integrated marketing communications play a very important role in the marketing of automobiles. Many consumers, particularly young people, base their purchase decisions on product related attributes such as price, quality, reliability, durability and performance, as well as on factors such as style and brand image. A variety of IMC tools are used to provide consumers with information about new cars as well as to create an image that will appeal to the target market for the car. Advertising on television as well as in magazines can play an important role in providing, creating and reinforcing an image of a car that is cool, fun, and hip to drive. Direct marketing can be used to build a database of customers who enter a contest on the car maker’s web site and/or request more information about the car. These customers can be sent information about the car and occasionally receive direct mail pieces. The customer can be taken on a cyber journey to learn more about the car. The car maker can also mail a DVD to consumers who request more information about the car. The car maker can also generate a considerable amount of publicity through press releases and various public relations activities. Finally, promotional efforts can be extended to the dealerships to support the personal selling effort. B. Why would brands combine their advertising message and sales promotion offer in the same print ad? Many free-standing inserts in newspapers contain ads with coupons. Consumers may perceive them as “ads”, despite the fact that it contains a discount on their next purchase. These types of ads have a communication effect on consumers because they provide information and/or imagery. They also provide an incentive to buy which is a basic objective of sales promotion. Brands combine advertising and sales promotion to achieve multiple objectives for both communication and for behavioural change/reinforcement. C. What is meant by the concept of integrated marketing communications? How might a firm that is using integrated marketing communications differ from one that looks at advertising and promotion in a more traditional way? Integrated marketing communications is a concept of communications planning that involves coordinating the various promotional elements and other marketing activities that communicate with a firm’s customers. Companies who use integrated marketing communications recognize the added value of a comprehensive plan that evaluates the strategic roles of a variety of communication disciplines including advertising, direct response, sales promotion, and public relations and combining them to provide clarity, consistency, and maximum communications impact. Companies that view advertising and promotion in a more traditional way often build barriers around various marketing and promotional functions and plan and manage them separately with different budgets, different views of the market, and different goals and objectives. These companies may be sending different messages to the market through their various marketing and promotional activities Chapter 1 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 1-13

or relying primarily on one promotional mix element such as media advertising. Companies who take the IMC approach identify the most appropriate and effective methods to contact and communicate with their customers. D. What are customer contact points? Select a company or brand and discuss the various contact points which marketers can use to reach consumers of this product. 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 web site may be the most important influence for a high tech brand such as a consumer electronics product. E. Discuss the way various aspects of product planning and strategy relate to advertising and promotion. Product planning involves a number of decision areas that relate to advertising and promotion. First of all, a product (or service) should be viewed as a bundle of benefits or values that satisfies the needs of the consumer. These needs are not just functional but may include social and psychological benefits as well. Advertising is used not only to communicate functional attributes and characteristics but also to stress symbolic features such as brand image, which is often more important than functional or utilitarian attributes. Product planning also involves branding and packaging decisions. Choosing a brand name is very important from a promotional perspective because of the role brand names play in communicating product attributes and meaning. Decisions to line extend brand names to new products are also relevant to advertising. Packaging has become increasingly important, particularly in our self-service retailing environment. With thousands of items competing for consumers’ attention and many purchase decisions being made at the point-of-purchase, packaging has become an important aspect of product strategy. Design factors such as size, shape, color and lettering all communicate with consumers and create impressions that contribute to and/or reinforce brand image. Packages may also carry sales promotion messages such as coupons, information on contests or sweepstakes or premium offers. F. Sports sponsorship, a public relations tool, continues to grow at an increasing degree in the IMC plans or major brands. Explain how this is a good investment of marketing resources. Publicity refers to nonpersonal communication regarding an organization, product, service or idea that is not directly paid for nor run under identified sponsorship. Public relations is a management function that among other things attempts to control and manage the nature of the publicity an organization receives. Publicity and public relations differ from other elements of the promotional Chapter 1 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 1-14

mix in that their role is often more supportive in nature rather than being the lead elements of a promotional program, although there are exceptions to this. Sports sponsorship is advantageous since it generally has the benefits of both public relations and publicity. The imagery with all the communication of the sponsorship acts positively for public relations purposes while the extensive media coverage provides additional exposure from a publicity perspective. Investing in one tool, and having the effects of another makes for a good investment as it increases frequency and possibly reach depending upon the extensiveness of the publicity. In general, it should provide a more positive ROI. G. Will newer direct media like e-mail and smartphones eventually replace direct mail in the future? Direct marketing is a system of marketing by which an organization communicates directly with its target audience with the goals of generating a response and/or a transaction. It involves a variety of activities including the development management of a database and the use of direct-response media. Direct communication has grown due to many factors. One major factor is changing lifestyles, particularly the increase in two-income households which has resulted in greater discretionary income but less time for traditional in-store shopping. The availability of credit cards and toll-free numbers has also facilitated the purchase of products and services from direct-response ads. Advances in technology is another factor that is contributing to the growth of direct marketing as many marketers are using computers to develop and better manage their data bases and improve the efficiency of their direct marketing programs. The rapid growth of the Internet is another factor contributing to the growth of direct marketing as companies are encouraging consumers to visit their web sites and place orders online. So clearly, direct communication is a mainstay of marketing and the question of whether the directresponse media will move from mail arriving at one’s household to completely electronic, and more individual appears possible. Students who are heavy users of electronic communication will likely figure this is bound to happen since they so much exposure to this compared to direct mail. And with the green movement, some might consider that less paper will even more fully desired in the future. Other students will note the importance of the database for direct communication to occur and suggest that a full change over will be extremely difficult since the addresses are not as available or linked easily with postal mailing areas. As this suggests, it is an interesting debate to consider what the future holds. H. Describe how can the Internet be used to execute the IMC tools described in this chapter? The Internet is 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 web sites to enter them. Many companies are using the Internet for direct marketing 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 Chapter 1 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 1-15

sending of press releases can now be done online. Many companies also maintain press releases on their web sites which can be accessed by the media and other relevant publics to learn more about these companies and their products and services. I.

Discuss the role integrated marketing communications plays in relationship marketing. How might the customization of advertising and other forms of marketing communication be possible? Relationship marketing is the process of creating, maintaining and enhancing long-term relationships with individual customers as well as other stakeholders for mutual benefit. Integrated marketing communications can play an important role in relationship marketing. Various integrated marketing communications tools such as advertising, sales promotion, public relations, direct marketing, interactive and Internet marketing, and personal selling can be used to create more effective and efficient ways of reaching customers and building and maintaining a relationship with them. Many companies are using media advertising to position themselves as organizations that want to build and maintain relationships with customers rather than just sell to them. They are also striving to understand their customers’ needs and preferences and developing marketing communications that are tailored to those desires. They are delivering differentiated messages to target audiences through established and new media channels based on customer characteristics (demographics, life-style, and purchase information) and tracking relationships to monitor the cost of acquiring customers and the lifetime value of their purchases. The mass customization of advertising and other forms of marketing communication is becoming practical with the development of new technology. With respect to advertising, new digital-TV recording devices or personal video recorders (PVR) save programs to a massive hard drive that can hold up to 100 hours of programming. Using a phone line, users can download programs schedules and choose shows they want to watch when they want to watch them. Content providers will be able to push programming directly to end-users, potentially on a pay-per-view basis. PVR companies will be able to take certain commercials out of a program and replace theme with ads that are of more interest to specific types of TV viewers. Viewers may also be able to click on ads that are of interest to them or to purchase products right off of the television screen. Mass customization of other forms of marketing communication is already taking place, particularly through the Internet. Many marketers now have web sites where consumers can choose specific content areas that are of interest to them, request information, communicate their comments and have their questions answered.

IMC Exercise This exercise is designed to give the student the opportunity to think more about the concept of integrated marketing communications and how it might be used by a company. Choose a specific company and discuss how this firm can use the concept of integrated marketing communications in developing a promotional program for one of its products or services. You should analyze all of the company’s promotional mix elements including advertising, direct marketing, interactive media, sales promotion, publicity/public relations and personal selling and discuss how each one is used in the marketing communications program. You should also consider how other marketing mix elements such as the brand name, package, price and other factors communicate with the company’s target audience. Is this company using all of the promotion mix tools in its marketing communications program? Are they integrated and sending a consistent image and message?

IMC Comprehensive Project The purpose of the IMC comprehensive project is to have each student (or student teams) develop an integrated marketing communications plan for a product or service as they proceed through the course. The text is built around a detailed model of the IMC planning process that is presented in Figure 1-7 that can be used as a framework for this plan. Students can update their plan as each chapter and topic area is covered. This will encourage the students to apply the course material and develop an appreciation for the process a product manager, account executive or marketing communications manager goes though in developing a promotional plan. The project will also help students gain an appreciation for the various sources of information available that can be used as part of the promotional planning process. By the end of the course each student (or team) should have a detailed notebook containing the plan for his/her product or service that can be turned in for evaluation. Specific assignments for the IMC project will be presented with each chapter. These IMC project assignments can be given as a general guideline of what they should be covering in this section of the plan. IMC Project Assignment for Chapter 1 The assignment for Chapter 1 is to familiarize you with the IMC planning process presented in Figure 17. Students should study the IMC planning model so they can gain some insight as to what will be involved in developing the IMC project. Each student or team should choose a national, regional or local brand a product or service for which they will be developing their IMC plan. You should submit your choice to the instructor with a brief statement as to why you have chosen this particular brand. Your instructor should approve your choice before you begin working on the project.

CHAPTER 2 ORGANIZING FOR INTEGRATED MARKETING COMMUNICATIONS Chapter Overview The purpose of this chapter is to familiarize the student with the ways that organizations organize for purposes of developing and executing integrated marketing communications programs. A description 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 important for students to understand that a variety of different organizations may play a role in the development of a company’s IMC program.

Learning Objectives 1. Identify the role of the advertising agency and the services it provides. 2. Describe methods for compensating, and evaluating advertising agencies. 3. Contrast the role and functions of specialized marketing communications organizations. 4. Evaluate the perspectives on the use of integrated services across agencies or within one agency, and agency-client responsibilities and partnerships.

Chapter and Lecture Outline I.

ADVERTISING AGENCIES

Advertising Agency Decision

Companies can employ the services of an external advertising agency or use an in-house agency.

In-House Agency —companies set up their own internal ad agencies. The design varies from as small as an advertising department to 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. This option is usually chosen so that costs are minimized and control over the agency’s activities is maximized.

Advertising Agency —external agencies provide a variety of services to their clients, including those discussed in the previous section. Though 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. Advertising Agency Industry Figure 2-3 captures the state of the major players in the Canadian advertising agency industry. Most agencies are an amalgamation of other agencies like sales promotion, digital, PR etc. and are part of large international consortiums. Not captured in the table are smaller regional or local agencies that remain independent. However, these firms presumably represent a substantial portion of the money spent on agencies.

These agencies offer their clients a full range of services including account/client services, planning and research services, creative services, digital creative services, production services, media services, , specialized services (e.g., sales promotion, direct, PR, interactive). •

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.

•

Planning and research services—many full-service agencies provide a variety of marketing services to their clients and maintain departments such as research, strategy and planning. These departments assist the other services by ensuring that the marketing communication strategy addresses the communication issue accurately.

•

Creative services—agency personnel in this department include artists and copywriters who are responsible for the creation and execution of the client’s 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. Digital creative specialists are now part of many marketing communication plans as customized messages for Internet media may be required.

•

Production services—dedicated staff may be responsible for the physical development of ads in all or select formats. 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.

•

Media services—the media department is very important since many clients are consolidating their media buying to save money and improve media efficiency. This department analyzes, selects and contracts for media space and time on behalf of clients.

•

Specialized services—as implied in the term, full-service agencies, provide a variety of additional services to their clients so that a complete IMC plan can be delivered that includes all tools (e.g., sales promotion, PR, direct, digital).

Attention should be given to the two 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. Agencies can 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. II.

AGENCY COMPENSATION

The services that advertising agencies provide 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 is typically 15%. The commission system is criticized since it ties agency compensation to media costs and encourages agencies to rely on commissionable media (i.e., TV) that is more expensive than non-commissionable media. However, some prefer this system because it is easy to administer and forces agencies to compete on bases other than price. 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.

Fee arrangements are of two types: a fixed-fee method where the agency charges a basic monthly fee for all of its services and credits to the client any media commissions earned. Under a feecommission 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. Chapter 2 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 2-2

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.

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

Evaluation of 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. An increasing trend among larger firms is to formalize this process.

Reasons for 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 lose clients. Current issues of Marketing Magazine will be useful in providing the instructor with examples of account changes and the reasons the clients decided to change agencies.

III.

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.

Creative boutiques—these types of agencies specialize in and provide only advertising creative services. Because of their specialty of creative ideas, clients looks to these types of agencies of new inspiration to portray their brands or for specific messages to more focused target audiences.

Media buying services—are specialists at working with media companies and packaging offering to clients to meet their media strategy and tactic decisions.

Sales Promotions Agencies—are companies specializing in sales promotions. Services provided by large sales promotion agencies include promotional planning, creative, research, tie-in coordination, fulfillment, premium design, and contest/sweepstakes management.

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.

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.

Interactive Agencies—develop web sites, kiosks, Internet ads, and other forms of interactive advertising.

IV.

IMC PLANNING: AGENCY RELATIONSHIPS

A 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. Advantages and disadvantages of these arrangements include: A.

Integrated IMC Services—It has been argued that IMC is nothing new, particularly in smaller companies and communication agencies that have coordinating promotion tools. 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 Chapter 2 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 2-3

•

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

Agency-Client Responsibility—Another topic covered in this section is 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.

Agency-Client Partnership—A summary of recent research on the nature of agency-client relationships is presented with a number of survey findings. This material can be selectively used to give an idea as to the present situation.

Teaching Suggestions Students are usually unfamiliar with how companies organize for advertising and promotion, and the role that various organizations play in this process. While most students are 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. 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 such as Marketing Magazine, Info Presse, Advertising Age, AdWeek, and BrandWeek. You can also access information from these publications online at www.adage.com and www.adweek.com. For excellent articles and sources of information on sales promotion students should be referred to Promo magazine, which can be accessed online at www.promomagazine.com. We suggest that use of the outline provided here be supplemented by additional articles from the media listed above. We have also found strong student interest in identifying which current advertisements have been created by various agencies. Most major agencies have excellent websites that contain client rosters, examples of their advertising, information about their advertising philosophy, approaches to branding and other IMC content. In addition, books written by those in the business on the advertising world are also well received. There are some very interesting books on the advertising industry that could be suggested readings for students. Some of these provide insights into the workings of the advertising world while others discuss the various perspectives that agencies operate from. Some suggestions include: •

Rosser Reeves, Reality in Advertising

•

Kevin Goldman, Conflicting Accounts (The Creation and Crash of the Saatchi & Saatchi Advertising Empire)

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David Ogilvy, Ogilvy on Advertising

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David Ogilvy, Confessions of an Advertising Man

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Eric Clark, The Want Makers

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John Oliver, The Image Makers

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John O’Toole, The Trouble With Advertising

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Martin Mayer, Madison Avenue, U.S.A.

Vignette 1. As the owner of Sid Lee, would you sell the agency to a major super agency or retain your independence? This question gets to the heart of the matter regarding an issue that many successful innovators face which is to stay independent and entrepreneurial or become part of big entity and draw upon the resources of a larger organizational structure. The advertising industry, like any other, faces this same issue and the Sid Lee example provides an opportunity to explore this issue in light of other smaller firms going in the direction of selling. Clearly, there is no right answer, but an opportunity to develop arguments as to whether the creativity would continue if it did not remain independent.

IMC Perspective 2-1 1. Do you agree that the marketing communication identified by the agencies is worth recognition? This is a relatively simple question in that it reviews the vignette’s facts, whereby DDB is responsible for very innovative creative executions that have led to important and relevant communication and business results. This is consistent with the criteria for winning the Cassies and generally considered the right approach for advertising since it is consistent with the PRB for agency remuneration. An additional key point for students to realize that some of the most creative communication observed in Canada is the work of marketing suppliers (i.e., agencies) and not the actual managers of the products advertisers. While this is relatively elementary of instructors, it is quite illustrative for many unfamiliar students. Students should have no trouble identifying a couple key points for each winner along the lines of uniqueness and clever message for a particular target audience. The question encourages an open-ended debate to generate discussion that hopefully would lead to some consensus on the criteria for selecting creative campaigns. It acts as an entry point for much of the material over the next few chapters and can generate some excitement for the early material in the text and the course. Each snippet gives some idea of originality and allows students to describe how it is unique or how it could help solve a communication problem or take advantage of a communication opportunity. Instructors could look for examples of each of these to round out the discussion. The question is another lead in to the positioning and creativity that is so important in the first half of the text.

These examples show that a media agency is critical for arranging special execution of the creative strategy and therefore shows the strong interdependency of both media and creative. This point reinforces the idea of IMC very well since deciders from all major agencies should be “at the table” to ensure consistency across all elements of the strategy.

Answers to Review Questions 1. How are the characteristics of a full-service agency contrasted with the characteristics of specialized communication agencies? Full service agencies provide their clients with services including planning, creating and producing the advertising, account planning, marketing research, developing media strategies and selecting and purchasing media. Some full service agencies also provide non-advertising related services including strategic market planning, direct marketing, promotional programs, interactive marketing and web site design, and public relations. The importance of the services provided by a full service agency will depend upon the client. Some companies want agencies that are very strong in the creative area and can develop ads that strike a responsive chord with consumers. Companies that are competing in markets where brand image and identity is very important may put a major emphasis on creative capabilities in selecting and agency. Some companies want agencies that are very strong in media strategy and buying and can maximize their media expenditures. Specialized agencies offers particular services that clients may value over the same service provide by a full service agency due to stronger competency. For example, creative boutiques have developed in response to some companies’ desires to use only the creative talent of agency. 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. 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. Similarly, media specialist companies provide an important service by specializing in the analysis and purchasing of media time and space. Also, because media specialist companies purchase large amounts of time and space, they often receive large discounts and can save a client money on media purchases or provide them with more exposure from a media budget. Many agencies, as well as their clients, have recognized that it is very difficult to staff and operate a media department that can provide the same level of service as media specialist companies. Thus, agencies have been unbundling media buying from the services they offer clients. 2. Why is compensating with the performance by results approach optimal in comparison with other methods? Agencies are historically compensated in three ways: through commissions from the media, fee arrangement or percentage charges. Compensating agencies through media commissions occurs when the agency receives a specified commission from the media on any advertising time or space it purchases for the client. Under the fixed-fee method the agency charges a basic fee for all of its services and credits to the client and credits any media commissions earned. Agencies are also compensated through a fee-commission combination, whereby the media commissions received by the agency are credited against the fee. The cost-plus system occurs when the client agrees to pay the agency a fee based on the cost of its work plus some agreed-on profit margin. These methods have given way to an improved performance-based system where advertisers use 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 Chapter 2 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 2-6

measures such as evaluations of the agency’s creative work. As more marketers adopt an integrated marketing communication perspective and move away from traditional mass media, changes in compensation systems are taking place. This may include a combination of compensation systems such as a negotiated set fee or media commission rate as well as incentives. There are several reasons why many companies are moving away from the traditional 15 percent commission system and using an incentive-based method of compensating their agencies. One of the major reasons for this change is that companies are demanding greater accountability from their agencies and feel that an incentive-based compensation system is one way of achieving this. 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. For many companies, advertising plays a major role in determining the sales success of their product or service. Incentive-based compensation systems also encourage agencies to look beyond traditional mass media advertising and to consider how other IMC tools that might be more effective in driving sales. There are a number of reasons why an agency might be reluctant to accept an incentive-based compensation system. A system in which the agency is compensated based on the brand’s performance in the marketplace has the potential to be a fair system, but may be fraught with problems as well. If the basis for evaluation is tied to communications objectives (as will be discussed later in this text) the system has may be acceptable to the agency. On the one hand, tying the compensation to market performance measures such as brand share and/or sales could be unfair. As the student will learn later in this text, it is very difficult—if not impossible—to tie market share and sales figures directly to advertising. For example, while the advertising may be working very well, other marketing variables may hinder sales and/or market share performance. Excellent advertising will not compensate for poor product quality, over pricing or a poor distribution system. Thus, if one were to see poor performance of the brand in the marketplace, the advertising agency might be punished for problems beyond their control. On the other hand, many agencies see incentive based compensation methods as a way of differentiating themselves and proving to clients that they are confident in their ability to develop advertising that will have a favorable impact on sales. Since clients are expecting more accountability from their advertising and promotional programs, and agencies may feel that their willingness to work under an incentive based compensation system will increase their likelihood of getting a company’s advertising business. 3. What are the similar and dissimilar functions of each of the specialized marketing communication agencies? All agencies share a similar function of providing marketing communication recommendations to resolve the communication issue faced by its client. Each is also tasked with offering a customized service with expertise that may not be readily found elsewhere. Furthermore, each has a responsibility of ensuring that their staff is well versed in the latest trends and tools to provide optimal service. While the core service may be consistent to some degree, each agency offers a specialty that others cannot match and this specialization suggests different processes for delivering service and a unique skill-set to ensure client satisfaction. 4. What are the issues of using one full-service agency versus multiple specialized agencies? 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 2 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 2-7

the promotional elements such as advertising, direct mail, event marketing, sales promotion, interactive marketing and public relations are handled by one large agency.

Answers to Application Questions 1. The chapter distinguished between full service and specialized agencies. Using Figure 2-1 as a guide for different agency names based in Canada, examine the websites of different types of marketing communication agencies. Identify which type of services each type offers. Using the websites as the main source of information, which agencies would be best suited to be hired? This Internet application questions encourages students to investigate and see what creative work is done by different agencies. In doing so, the services offered by each should be readily seen, thus demonstrating what is occurring in the field. The part of the questions suggests to students early on that they can and should be thinking critically of all marketing communication recommendations that they observe while studying this material. 2. Which type of compensation system that an agency faced most often from its clients is an environment where a young advertising graduate would most like to work? This is a projective question where students could be describing where they would like to work in the industry. Some might like the pay by performance approach since they enjoy the added pressure and this system places on the creative supplier. Presumably, the environment might be a bit more entrepreneurial and offer great opportunity for career advancement. Others who have certain skills may appreciate the fixed fees, noting that they would like to be recognized for producing their work. Whatever the answer, the key point is for student to look at all facets of how an agency operates to decide where they may like to consider working. 3. Again, using Figure 2-1 as a guide for different agency names based in Canada, examine the websites of different specialized marketing communication agencies. Identify which type of services each type offers. Using the website as the main source of information, which agency would you be best suited to be hired? This exercise is an opportunity to achieve the goal of introducing students to all sources of marketing communication services. It is much like question 1 and can be a useful exercise for in-class discussion or mini-presentations where students showed each other the work of different agencies. 4. Given the evaluation of different agencies in the above questions, which approach is recommended for smartphone brands? For breakfast cereal brands? For energy drink brands? Multiple agencies could be suitable for smartphone brands since there are so many target audiences to direct marketing communication towards across a multitude of segmentation variables with a product still in a growth phase. This could suggest more focused campaigns requiring customized IMC tools to provide a convincing message. Breakfast cereal is a mature product category with less opportunity or need for multiple target audiences. Combined with the fact that many brands have existed for decades, a single agency with one point of contact for all marketing communication may be more suitable. Energy drinks present and interesting option to consider both options, however, in the case of Red Bull and all of their varied marketing communication activities, it suggests a multiple agency approach. While the Sid Lee vignette mentions the agency’s involvement with Red Bull the vast international operations of Red Bull would suggest it using numerous agencies.

Additional Questions (not in text) A. Discuss some of the reasons why traditional advertising agencies have been developing more IMC capabilities. What changes might these agencies have to make to improve their service? 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. 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 other areas. 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. The decision as to whether to expand service offerings may not be as easy to make as one might wish. The changes in the advertising marketplace—that is monies shifting from advertising to direct marketing, promotions and other areas may necessitate this expansion just to survive. Certainly the trend, even among smaller agencies, to provide these services is evidence that they recognize that they need to bring these monies “in house.” Beyond the requirement of the agency side, the client is now becoming more sophisticated and demanding. These clients are now recognizing the need to provide an integrated communications mix, and if it is not provided by their agency they will seek such services elsewhere. While all advertising agencies may not necessarily become full service or super agencies, they may eventually have to form working relationships with other collateral agencies or face losing business. Many smaller agencies have already established such working relationships, and have found them to be of benefit to the agency as well as the client. B. Discuss the pros and cons of using an in-house agency. What are some of the reasons why companies might change from using an in-house agency and hire an outside agency? 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. 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 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 Chapter 2 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 2-9

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. C.

Discuss the various reasons why marketers often choose to switch advertising agencies. Find an example of a company that has recently changed advertising agencies and analyze the reasons given for the change. The relationship between a client and an agency is influenced by a variety of factors. 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. An advertiser may decide to switch agencies for a number of reasons. 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 or 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.

IMC Exercise Find several examples of companies who have switched advertising agencies recently. Conduct some library research using sources such as Marketing Magazine, Strategy Magazine, The National Post, Advertising Age, AdWeek and The Wall Street Journal to determine the reasons why the company decided to change agencies and their rationale for choosing their new agency. Discuss the implications of your findings with respect to client-agency relationships. Find examples of advertising and other promotional programs that were developed by the old agency and examples of ads developed by the new agency. Do you think the advertising campaign and messages being developed by the new agency are better and/or more appropriate for the company than those of the old agency? Why or why not?

IMC Comprehensive Project The assignment for this chapter is for the students to determine how they will organize for advertising and promotion both internally and externally. IMC Project Assignment for Chapter 2 Your assignment at this stage of the project is to determine how you will organize your company for advertising and promotion. You must develop an internal organization chart and specify whether you are going to use a centralized or decentralized system and whether you will use an in-house agency or hire an outside agency. If you decide to hire an outside agency you should specify what type of criteria you will use for selecting an agency. Do you plan on using a full service agency or a creative boutique? What type of agency compensation system do you plan to use and why? How will you evaluate the performance of the agency? Attention should also be given as to whether you will be using any specialized marketing Chapter 2 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 2-10

communication services such as direct-response agencies, sales promotion agencies and public relations firms. Would you prefer to use a large agency that has all of these integrated services capabilities?

CHAPTER 3 CONSUMER BEHAVIOUR AND TARGET AUDIENCE DECISIONS Chapter Overview The purpose of this chapter is to examine the field of consumer behaviour and to demonstrate how knowledge and understanding of the consumer can be used in developing promotional decisions. This chapter utilizes the consumer decision-making process model as a framework for examining consumer behaviour. The influence of psychological concepts such as motivation, perception, attitudes and integration processes are examined at the appropriate stages of the model. Attention is given to the three major variations in the consumer decision-making process: routine response behaviour, limited problem solving and extended problem solving. Consideration is given to how advertising and promotional strategies differ depending on the type of decision making process consumers are using. The chapter includes a description on how to make the initial decision of a promotional plan, namely, the target audience. This final section reviews the use of segmentation to determine the most appropriate profile of the target audience and highlights the significance of using current purchase behaviour as the key segmentation variable to initiate this decision.

Learning Objectives 1. Describe the consumer decision-making process and how it relates to marketing communication. 2. Distinguish internal psychological processes, their influence on consumer decision making, and implications for marketing communication. 3. Contrast how the consumer decision-making process varies for different types of purchases and the effects on marketing communication. 4. Compare the similarities and differences of target market and target audience. 5. Identify the options for making a target audience decision for marketing communication. 6. Express why a profile of the target audience is important for message, media, and IMC tool decisions.

Chapter and Lecture Outline I.

THE CONSUMER DECISION-MAKING PROCESS

A brief introduction to consumer behaviour 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 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.

Consumer behaviour 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. 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. 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 3-1 of the text shows the various steps in this process such as need recognition, information search, alternative evaluation, purchase decision, post-purchase evaluation as well as the relevant internal psychological processes that occur at each stage such as motivation, perception, attitude formation, integration and learning. A.

Need 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.

Consumer Motivation—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. One approach 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 needs

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safety needs

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social/love and belonging needs

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esteem needs

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self-actualization needs

The implications of Maslow’s hierarchy for developing advertisements that appeal to different types of needs should be discussed. 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 of 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: •

•

Selective exposure—consumers choose whether or not to make themselves available to information.

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Selecting information—determining whether incoming information will be attended to and how much attention it will be given.

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Selective attention—consumer chooses to focus attention on certain stimuli while excluding others.

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Interpreting information—the process by incoming information is interpreted and assigned meaning.

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Selective comprehension—interpreting information on the basis of the consumer’s own attitudes, beliefs, motives and experiences.

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Retaining information—the storage of information in consumer’s memory.

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Selective retention—consumers do not remember all information they receive due to the clutter of many advertising messages

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. There are a number of important factors and processes that are important during the alternative evaluation stage: 1. The evoked set is a subset of all the brands of which the consumer is aware. A goal of marketers is to ensure that their brands are included in the evoked set of consumers. 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 refer are more intangible, subjective and personal.

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 behaviour. Marketers’ keen interest in attitudes is based on the assumption that they are related to purchase behaviour.

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 material, and various sales promotion tools. Chapter 3 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 3-3

Integration Processes—an important aspect of the alternative evaluation stage is the way consumers 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.

Postpurchase 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 postpurchase doubt a consumer may experience after making a purchase choice. Consumers often look to advertising for supportive information regarding the choice they have made.

II.

VARIATIONS IN CONSUMER DECISION MAKING

Types of 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: 1. Routine response behaviour—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 behaviour 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. 2. 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. 3. 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.

Group Decision Making 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 Chapter 3 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 3-4

disassociating, products, services or certain behaviours with certain types of groups. Many purchase 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 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). III.

TARGET AUDIENCE DECISION

The marketing planning process involves the steps shown in Figure 3-5. The marketing strategy is directed towards the target market. The target market is 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. It is used a guide to determine the target audience decision, a primary consideration at the start of the promotional planning process.

Market Segmentation—the target market process 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. A number of ways of segmentation are available (Figure 3-6) to the marketer including: •

Geographic—the market is divided into geographic units with alternative marketing strategies targeted to each

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

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Socioeconomic—division involves variables such as income, education, and occupation.

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Psychographic—markets are divided based on the values, lifestyle, personality, culture, and social class. •

Values- as demonstrated by VALS and PRIZM

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Lifestyle—activities, interests, opinions (AIO).

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Personality—enduring characteristics, e.g., introvert.

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Culture—culture refers to the complexity of learned meanings, values norms, and customs shared by members of a society. Subcultures refer to smaller groups or segments in a society that possess similar characteristics that set them apart from the larger cultural mainstream. Subcultures may be based on age, geography, race, religion, racial, lifestyles, and ethnicity.

•

Social Class—social class refers to relatively homogenous divisions in a society into which people sharing similar lifestyles, values, norms, interests, and behaviours can be grouped. Social class structures in Canada are generally based on occupational status, educational attainment and source or income. Social class is important to marketers Chapter 3 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 3-5

because consumers within social stratums often exhibit similar values, life styles and buying behaviour and provide a natural basis for market segmentation. •

Behaviouristic—this form of segmentation divides consumers into groups according to their brand loyalty, user status, usage rate, situation or benefits sought. These characteristics are then usually combined with one of the previously mentioned bases to develop segment profiles. Behaviouristic segmentation also considers both the purchase and the usage situation.

Target Market Selection—having conducted the segmentation analysis, the marketer will be faced with the dilemma of trying to know which segmentation variables are most critical, how many should be used, and how much detail is required for marketing mix decisions. From a promotional planning perspective, the priority of each type of segmentation variable has to examine carefully to determine which takes priority.

Target Audience Options—R&P state that the primary and most logical factor for initially defining a target audience is the current behaviour of consumers. R&P identified two customer groups and three non-customer groups. 1. Customer groups: •

direct communication to brand loyal customers who regularly buy their firm’s product.

•

consumers habitually purchase from a few favourites or those brands within their evoked set for some product categories; thus, favourable brand switchers are a second customer group highlighted by R&P.

2. Non-customer groups: •

New category users are those customers that are not yet purchasing within a product category.

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Other brand switchers purchase a few different brands within a category.

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Other brand loyals purchase only one brand and are completely loyal.

Examples of ads and other IMC tools are useful to demonstrate how this approach works. It is fairly obvious to discern whether a message is directed to customers or non-customers, however some students have difficulty making the distinction. Discussion allows instructors to also note examples where it may be less obvious. The additional profiling variables of demographic and other segmentation variables can be highlighted. Multiple examples from one brand can show how a firm could have more than one target audience to reinforce the point in Chapter 1. IV.

IMC PLANNING: TARGET AUDIENCE PROFILE

The implications of consumer behaviour and target audience decision are summarized with a conclusion on the importance of using the segmentation variables appropriately so as to give direction for decisions in the areas for message creation, media placement and IMC tool usage. This planning section allows students to see how the IMC plan will unfold with a complete profile of the target audience.

Teaching Suggestions Because of the consumer emphasis dictated by the marketing concept, consumer behaviour has increased in importance, and has found its way into virtually every aspect of marketing, including advertising and promotion. Thus, it is very important for the student to understand that advertising and promotion strategies are designed for the purpose of influencing customer behaviour. Promotional planners require understanding of consumer behaviour 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 behaviour of their target customers depends in large part on how well they understand their purchase patterns and behaviour. The chapter links consumer behaviour with the target audience decision. Segmentation approaches are reviewed as the concepts are relevant for both marketing and promotion decisions. Students will be familiar with using segmentation for target market decisions of a marketing plan; however, promotion often requires more precise identification and profile for its intended recipient, or target audience. This important distinction is highlighted and the instructor should be careful to use examples where we can clearly see a specific target audience in the ad, that is obviously consistent with who the brand may be targeting with its overall marketing plan. Some students may have covered some of this material in a basic marketing or consumer behaviour 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.

Vignette 1. How does each varied creative help Kraft? (Question in book is from Fourth Edition-mistake) 1. Using the background provided in the vignette, how do market communication planners use the information from market research to make promotional decisions? (Question for Fifth Edition-new) The data indicates a profile for of young consumers in terms of lifestyle, their media exposure, usage of social media and brand effects. Planners can use this information for estimating many message and media decisions for an annual plan. Lifestyle data gives an opportunity to figure out messages content. The media data assists in knowing how to deliver the message. Finally, the brand effects data allows promotional planners to understand whether they decisions performed well.

IMC Technology Perspective 3-1 1. How does in-store communication with digital technology change consumer behaviour? Shopping will likely become much more experiential as consumers use technology to evaluate features more easily and with greater depth and involvement. This may lead to consumer having stronger confidence in the purchasing, and the longer time spent in one location interacting with technology may lead to fewer visits to competing stores. This perspective is more of a description to show students technological changes and allow them to consider how technology in general influences behaviour in marketing.

IMC Perspective 3-1 1. How many variables should a promotional planner consider when segmenting and profiling a target audience? Chapter 3 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 3-7

These examples illustrate audiences with different cultural backgrounds or ethnicities depending upon one’s point of view of the best way to describe consumers. Underlying this target audience profile variable is the fact that consumers will be customers or non-customers. This example brings to the forefront the complexity of the target audience decision as multiple variables are generally required. This point is further reinforced with question 6 in the review questions.

Answers to Review Questions 1. What are the stages of the consumer decision-making model? Why are they important for planning marketing communication? Marketing communication can be directed to each stage of the model. Ads can highlight need recognition initially (e.g., TV) while additional information can be found at the brand’s website (e.g., information search). Comparisons with other brands could be obtained at independent review website (e.g. JD Power) that influence the alternative evaluation stage. Finally, direct communication on mobile devices indicating a promotional offer from GPS alerts could influence purchase while direct mail pieces can maintain satisfaction levels after purchase. Furthermore, the nature of the message can evolve at each stage as well. Thus, the model is useful for planning the basic marketing communication decisions of message and media, that can be extended to other IMC tools including events etc. 2. What are the primary psychological processes associated with each stage of the consumer decisionmaking model? How does marketing communication influence each stage? Motivation is relevant since it gives direction for consumers to take action. The decision-making process starts with need recognition stage where consumers understand the requirement to take action to resolve their consumption situation. Marketing communication draws attention of the many reasons why consumers may want to consider buying a good or service such as dissatisfaction, or sensory enjoyment. Perception occurs in the information search stage where consumers sense, select, interpret and retain information. Marketing communication is active for all four aspects of the perceptual system. Messages include attention getting properties so they are noticed. Body copy and headlines in print ads for example assist in allowing consumers to select information. Video associated with a TV message tell a story so that consumers are able to interpret and understand how the product fulfills needs. Finally, concluding message points like voice-over or supers encourage consumers to remember the message just presented. Attitudes formation is relevant at the alternative evaluation stage since consumers are incorporating all the information received to fully understand how much they like or value each brand. All facets of marketing communication should continually reinforce or establish the consumers’ attitude to the brand with the appropriate balance of visual and verbal information. Integration occurs more readily at the purchase decision stage as consumers must ultimate pay for the good and service, and therefore tradeoff all the information received and conflicting attitudes to each brand to make a conclusion on which brand will fulfill needs. Marketing communication tries messages that will allow consumers to rely on overall assessment of their evaluation so that decision can be made more quickly and easily. Finally, satisfaction is a feature of post-purchase evaluation since it is the ultimate outcome of marketing. At this stage consumer assess whether the product performance met expectations or is Chapter 3 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 3-8

sufficient compared to another standard of comparison. Marketing communication tries to reassure consumers that their decision was sound and that they should feel good about their purchase (e.g., follow up letters from car manufacturers). 3. How do the stages of the consumer decision-making model differ with the three types of problem solving? The three variations of the decision making process are (1) routine response, (2) limited problem solving and (3) extensive problem solving. Marketing communications will differ in each. Routine response behaviours are close to habits. As a result, they require little external search (if any) and there is little or no reliance on communications. The role of advertising and promotions is more of one of reinforcement, and of reminding the consumer that it is time to purchase. The role of providing information for evaluation is minimal. Limited problem solving involves both internal and external search behaviours. As a result, the role of marketing communications increases. Consumers are more likely to have recognized the problem, and are using advertising and other forms of communication to provide information for evaluation. Consumers are also more likely to employ a variety of sources of information in the process, and the marketer wants to be sure that his/her product is considered in the evoked set. The consumer’s most extensive use of communications is likely to occur in the extensive problem solving situation. Decisions are given much more thought, external search is more involved, and there is a much greater reliance on advertising, sales persons, friends, family, etc. as input into the decision. As a result, the responsibility of communications is increased as the marketer wants to have the information readily available to consumers when and where they want it. 4. When defining a target audience for communications, why is it a good idea to use consumer behaviour with respect to your brand as the primary variable before using variables such as demographics or lifestyle? The behavioural variable is considered first for two reasons. First, it links the communication plan to the marketing plan more specifically. Secondly, actual behaviour signals or leads to sales, something to which most advertising campaigns hope to achieve as an end result. Most good advertising reflects the underlying purchase motive of the target audience. The purchase motive is related to behaviour because consumers act upon their needs during a goal seeking decision process. Thus, the expected behaviour of the target audience is a prime consideration. 5. What are the five customer groups? Explain in terms of beverage products like soft drinks or beer. From the point of view of Coca-Cola, advertising could be directed to those who only drink CocaCola when drinking a cola product (e.g., brand loyals). Alternatively, the brand could target those who regularly switch between Coca-Cola and Pepsi (e.g., favourable brand switchers). Looking at the other side of customer groups, Coca-Cola could target Pepsi drinkers (e.g., other brand loyals) or those who drink Pepsi and RC Cola, or perhaps a generic cola product like PC (e.g., other brand switchers). Finally, those who do not drink cola may be targeted (e.g., new category users), or those who do not even drink soft drinks (e.g., new category user). Of course these two non-category user groups are derived from different market partitions. An important point to note is that specific brands should be identified so that there is an application of the model. 6. Why is a complete profile of a target audience important for marketing communication? Chapter 3 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 3-9

A complete profile of a target audience is necessary for message, media and IMC tool decisions. Knowing the background of the target audience in terms of specific segmentation variable (e.g., psychographic) allows the planner to know how to construct the persuasive message with accurate visuals and imagery that will resonate. Similarly, knowing the background on variables like geography or usage allows managers to know which media and media vehicles to use to reach the target audience for exposure purposes. Finally, knowing other variables like lifestyle allows the planner to estimate the correct IMC tool to use in terms of public relations or social media.

Answers to Review Questions 1. Explain the difference between functional, experiential and psychological benefits. Why might the messages recommended in the IMC plan for smartphones focus on each separately or together? Functional benefits are concrete outcomes of the product’s characteristics while experiential benefits are related to how consumers feel through product usage. Managers deciding upon the messages can select either to emphasize or show the connection between the two. Auto commercials are a good way to explore this connection. For many aspects, instructors can highlight ads that show how a safety feature works for example (functional). Another ad might show the reassurance (feelings) of the safety feature. Finally, a third ad could show both parts and make a clear connection between the two. It is important for students to see that for virtually any message, there is an alternative that could have been considered which opens debate as to whether the most effective was selected. 2. How are ads or brand messages experienced in social media influenced by consumer’s selective perception system? Hopefully, student apply the perception concepts appropriately and realize that the first step of communication is the same no matter what media is used to deliver the message. There are is still the availability of selective exposure where consumers will actively avoid messages. Selective attention is no doubt still relevant as consumers will decide what stimuli to attend to and what stimuli not to attend to. 3. Considering a group purchasing situation you have previously experienced, like going out for the evening. What role did each person play during pre-purchase, purchase, consumption, and postpurchase. Research has shown that the family can both directly and passively influence the consumer decision process. The amount of influence they may exert will depend on the product category, the level of involvement of various family members with the product or product class, relative resource contributions, etc. Family members may also assume various roles in the decision process, such as: Initiator—different family members may initiate the purchase decision process. For example, a teenager who is very much into music may request the family consider the purchase of a new music system. The mother or the father may initiate the idea for a new family car, etc. Information provider—different levels of expertise in product categories may lead to various family members assuming the role of information provider. For example, as teenagers become more involved with the Internet, they may be called upon to provide information into a variety of areas. For example, they may be asked to search the Internet for vacation destination, music equipment or other products or services and provide information back to the family. The father may be the primary information provider for the family car, while the mother may have most of the input on furniture. Chapter 3 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 3-10

The influencer—each family member may have their own criteria in mind in the purchase decision process. The father may want an economical car, the mother an SUV for functional purposes, the children something more sporty to impress their friends. Again, depending on their involvement and expertise, various family members may be able to exert more or less influence. Another example might be a stereo system. If the teenager is more involved in music than other family members, they may have more interest and be more able to exert more influence than those with less product expertise. The decision maker—who actually makes the purchase decision? It used to be that the mother had influence at various stages for autos, but the father actually made the final decision. In many families, this is no longer the case. In two car families, the mother may have her car, and the father his, both of whom made the decision as to what it would be. In families where children work, they may actually purchase their own cars, preferring to do so to make their own decisions rather than have the parents make it for them. The purchasing agent—regardless of the various roles assumed, the parent(s) may actually be the purchasing agent. When children are not of age to make the purchase, do not qualify for financing, or for other reasons, the parent may act as the purchasing agent to expedite or culminate the purchase decision. The consumer—in the case of the family car, vacation or stereo all family members may ultimately be consumers. For other products, perhaps computers, all may use the product, but some may use it more than others. In others, some family members may be involved in the decision making process, but never use the product (the child researches the vacation, but doesn’t actually go along). 4. In what situations is the target audience and the target market the same? In what situations is the size of the target audience larger or smaller than the target market? The target market is the focus of the entire marketing mix while the target audience is the focus of a particular communication tool or part of a communication program. In many instances, the target audience is smaller than the target market. For example, if a firm runs an ad and promotion to entice consumers to switch to their brand, they are not reaching the complete target market since this would include its own customers. For small firms or firms with a brand new product, both the target market and target audience may be exactly the same. In this case, the firm is not trying to advertise to a particular target audience to increase their usage or alter their purchasing behaviour. The target audience is often larger than the target market for a product in many public relations activities. By their very nature, public relations often times attempt to influence a broad community, of which many of the people would not be actual purchasers of the product. 5. Examine the ads in this chapter and identify the target audience the ad is directed toward using the model of five customer groups. Suggest other relevant segmentation variables to further profile the target audience. Also identify the relevant segmentation variable to pinpoint the target market. This question raises the point that marketers use a variety of segmentation variables to identify their target market, and that many can be considered for executing their marketing strategy. Likely, students will be able to observe that some variables tend to be more common. Furthermore, while a variable or two may be used for segmenting, additional variables are relevant to further describe the market to give more precision for the marketing decisions. For target audience, if students adhere to the R&P idea, they will begin to realize that the customer status (i.e., customer or non-customer) is a strong way to begin one’s promotional planning since the content of the message can be executed more exactly to influence the next purchase. Chapter 3 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 3-11

6. Which segmentation variables are more useful or appropriate for profiling a target market for an automobile like the Mini? Similarly, which are more useful or appropriate for profiling the target audience for an automobile like the Mini? This question raises extends the points made in question 5 with an additional application with a particular brand. The exact target market variables selected is reasonably varied and the point to make is that the student should use some information to make a logical conclusion. One might suggest that personality or values may play a prominent role, as would geography as city a consumer maybe most likely. Mini has such low volume it must resort to always targeting new customers in its communication, so it will likely try to attract other brand switchers. Although a good case could be made that much of their advertising encourages those with a certain personality to purchase a brand new car for the first time.

Additional Discussion Questions (not in text) A. Explain how consumers might engage in each of the processes of selective perception described in the chapter. Provide examples. Consumers may engage in selective perception for a variety of reasons, and in a number of different ways including: Selective exposure – Consumers may selectively decide what they will allow themselves to be exposed to. For example, if a consumer knows information will be provided that may lead to dissonance or the potential for inconsistency, they may consciously avoid the information. If one just purchased a new Ford, having selected this model over Chevrolet, they may avoid advertisements for Chevy’s to not create further dissonance. Changing stations during commercial breaks on television or radio, or leaving the room, skipping over ads in magazines, or simply ignoring banner ads are all forms of selective exposure. On the other hand, consumers may actually seek out information as well. Accessing the Internet to obtain more information, reading Consumer Reports, etc. are also forms of selective exposure. Selective attention—some consumers may stay in the room during commercials, but not pay attention to them. Consumers will be more inclined to pay attention to ads when they are in a search and/or evaluation stage of the decision process and the ad is relevant to this decision. For example, if you were in the market for a new car stereo, you might be more inclined to pay attention to commercials, print ads and publicity regarding brands, sales, etc. Once the purchase has been made, the consumer may engage in selective attention to these messages. Selective comprehension—there is no guarantee that the information provided by an advertiser will be comprehended in the manner intended. Consumers may distort information to meet their needs, or take away a different meaning than intended. For example, a consumer is torn between two attractive alternative automobiles. One gets 9.2 litres per 100 kilometres highway, the other 7.8. Depending on which car is purchased, the differences in gas mileage may be distorted. If the higher of the two was bought, the 9.2 may be made out to be significantly higher than 7.8. If the lower mpg car was purchased, the difference would seem to be much less. Selective retention—using the example of the two cars just above, what is remembered may be a result of selective retention. “Oh, I don’t remember the difference in mpg, but I recall it was only slightly higher” or “I remember there was a significant difference. My car got 1.4 litres per 100 kilometres more, and over a year this would amount to $200 in savings”. Consumers have a tendency Chapter 3 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 3-12

to forget that information that is inconsistent or contrary to what they want to believe, and may be more likely to recall that that reinforces their existing beliefs, values, and/or attitudes. B. After buying a new car, a customer receives many pieces of direct mail such as a driving magazine or information on automobile care from the manufacturer. Explain why this is effect or ineffective communication. This is likely to be very effective communication as it contributes to building the relationship between the care company and its current customer. The customer is further informed about the features and benefits of their purchase and the customer receives important information for maintaining the value of their asset in a very significant financial investment. Most customers would likely be interested in articles or pictures of newer car models despite owning their current car since the purchase is typically extensive problem-solving activity that one would like to be prepared for. C.

Analyze the purchase of a cereal from a family decision making perspective. Discuss the roles various family members would play in the decision process and how advertising and promotion could be used to influence them. The purchase of a brand of cereal often involves the influence and actions of multiple family members. If there are children in the household, they are likely to be the primary users or consumers of the cereal and may also be influencers as well if they make their preferences known to their parents. One of the parents may be the actual purchaser of the cereal since they do the shopping for the family. The parent(s) may take the influence of the children into consideration when making the purchase. They may, however, ignore the children’s influence if they do not agree with it (for example the parents may not want to purchase cereal that has a lot of sugar). Advertising will be directed to various family members. Ad for adult cereal may appear on adult-oriented TV shows or in magazines. Commercials for cereals targeted to children will appear on children’s programming such as cartoon shows. Sales promotion efforts such as coupons are likely to be targeted toward the mother either through flyers in newspapers.

D. Use the basic model of consumer decision making to analyze the purchase process a consumer would go through in purchasing a laundry detergent versus a new computer. Discuss the role advertising and other forms of promotion would play at each stage of the decision process. The purchase of laundry detergent would be characterized by routine response behaviour since this is a product the consumer has probably purchased many times before. The decision making process would consist of little more than recognizing that one is running low on detergent and replenishing the supply during a shopping trip. The consumer will spend little effort engaging in external search or alternative evaluation as the purchase process for such products is relatively automatic. Decision making will be minimal if the consumer is loyal to a particular brand of detergent. If the consumer is not loyal to any particular brand, s/he may be influenced at the actual point-of-purchase through shelf displays, price deals or other types of promotion. Advertising will be important in getting a brand of detergent into the consumers evoked set and keeping it there. For a new brand, advertising may be particularly important in generating awareness and interest. Sale promotion techniques such as samples and coupons will also be used to encourage consumers to try new brands or switch brands. The purchase of a new computer will be characterized by limited or extended problems solving, depending on the consumers level of prior knowledge or familiarity with alternative brands. The consumer will go through each stage of the consumer decision making process and spend considerable time and effort on external information search and in identifying and evaluating alternatives. Advertising will play a very important role in providing consumers with information Chapter 3 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 3-13

about computers and what they should be looking for in evaluating various alternatives. Direct marketing may also be used to send consumers information that will be helpful in evaluating a brand and making the purchase decision. Personal selling efforts by in-store sales personnel will also be very important since consumers may rely on knowledgeable sale people to learn about the various alternatives and make a choice. E. Explain how reference groups influence buyers’ behaviours. Give an example of how both aspirational and disassociateive groups might have an impact. Reference groups are defined as “two or more individuals who share a set of norms”. As such, these groups can be both aspirational—those to which one might wish to aspire—to disassociative—those to which one does not wish to be associated. As such, these groups may pose both a boon and a threat to marketers. For example, aspirational reference groups may serve as a goal, or an image to which consumers might aspire. The growth of the athletic shoe market—particularly the expensive basketball shoes like Nike Air- have benefited, as young athletes aspire to play like pros. People aspire to own certain types of cars, or live in certain areas to let others know that “they have arrived”. On the flip side, disassociative groups can also be motivating. Many of use do not wish to be identified with the likes of drug users or alcoholics. Obesity has almost become an obsession, as consumers join health clubs, jog and purchase diet pills and programs so as not to be seen as fat. These disassociative groups then serve as a group which is to be avoided through the purchase of products, services or just specific behaviours. Finally, disassociative reference groups can hurt marketers. Many auto buyers see the Volvo as a family car of someone in the suburbs or the BMW as a “Yuppie” car. Others see specific name brands as associated with “snobs”, etc., and (whether these true or not) do not wish to purchase these brands and become affiliated with these groups. F. Explain how the screening processes involved in selective perception might impact a viewer of TV commercials. Consumers may engage in a screening process known as selective perception. This process may be enacted through selective exposure, selective attention, selective comprehension, and/or selective retention. The problem that this screening process may present is that the advertisers’ ad may not have the impact desired due to the fact that these processes are being enacted. For example, viewers may decide not to expose themselves to the information provided in an ad or commercial by skipping over it, changing stations, etc. Even if the consumer is exposed to the ad, there is no guarantee that he or she will attend to it. Consumers may pay attention to some ads, while ignoring others, or may pay attention only to information that is considered relevant or of interest to them. Consumers may also distort or comprehend information provided in ads in a way other than the advertiser intended, again in an attempt to support their previously held beliefs. Finally, consumers do not retain all of the information provided in the ads, perhaps even selectively forgetting discrepant information. Consumers may use selective screening processes to assure themselves that they made the proper decisions by selecting only supportive information, and screening out any information that might create dissonance or conflict. Perhaps the most effective way for advertisers to avoid the selective perception processes is to design more effective advertisements. By more effective we mean more interesting, more attention-getting, and more informative ads. Given the high volume of ads to which the consumer is exposed, it is Chapter 3 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 3-14

critical that the ad break through the clutter. If the ad is not noticed and does not attract the interest of the viewer, higher order processing (comprehension and retention) will never take place. G. How is it possible for a brand to communicate to both customers and non-customers in an IMC plan? Brands can select different media for advertising or different IMC tools entirely to reach customers and non-customers. For example, if a customer’s personal information is in a data-base, customized promotional offers or advertising messages can be delivered directly. Alternatively, television or other media that reaches a wider audience that would include many non-customers can be used to attract those not currently buying the brand. In each of these cases, the selling message can be tailored specifically. For example, references to past experiences can be part of the message to customers while messages to non-customers might make competitive references or mention sources of dissatisfaction for those considering switching from their current brand. H. Discuss the three variations of the consumer decision-making process. What is the importance of communications in each type? The three variations of the decision making process are (1) routine response, (2) limited problem solving and (3) extensive problem solving. Obviously, the role of marketing communications will differ in each. Routine response behaviours are close to habits. As a result, they require little external search (if any) and there is little or no reliance on communications. The role of advertising and promotions is more of one of reinforcement, and of reminding the consumer that it is time to purchase. The role of providing information for evaluation is minimal. Limited problem solving involves both internal and external search behaviours. As a result, the role of marketing communications increases. Consumers are more likely to have recognized the problem, and are using advertising and other forms of communication to provide information for evaluation. Consumers are also more likely to employ a variety of sources of information in the process, and the marketer wants to be sure that his/her product is considered in the evoked set. The consumer’s most extensive use of communications is likely to occur in the extensive problem solving situation. Decisions are given much more thought, external search is more involved, and there is a much greater reliance on advertising, sales persons, friends, family, etc. as input into the decision. As a result, the responsibility of communications is increased as the marketer wants to have the information readily available to consumers when and where they want it. I.

What are some factors one must consider in determining how to segment the market? A number of factors must be considered in the segmentation process. The more the market is segmented, the more precise is the marketers’ understanding of it. However, the more segmented it becomes, the less individuals there are in each segment. Marketers must determine how far to take this process. Secondly, the marketer must consider whether the segment will support a marketing effort. There is always a trade-off between knowledge and specialized program offerings and the ability of the market to support such efforts. Marketers must also determine if the segment is accessible. That is can the segment be reached with a communications program, can the organization offer such a program, and can it afford to do so? Finally, once a segment has been determined, the marketer must establish the basis upon which it will compete in that market. A number of segmentation strategies might be considered. Chapter 3 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 3-15

J. In what way are French-speaking and English-speaking consumers the same target market for a brand but different target audiences. A product that has gender as the key segmentation variable (i.e., shaving products) will not require language as a segmentation variable for the overall marketing strategy. However, market research might suggest different loyalty patterns between languages/cultures within Canada. For instance, a brand may find strong brand loyalty among French-speaking consumers and concentrate of stronger repeat purchasing with its current customers. In contrast, a brand may experience more switching among English-speaking consumers and concentrate of re-trial with those that have moved away from the brand recently. K. Explain the concept of an evoked set. Why is this concept important to marketers? Give examples of an evoked set, and how marketers might attempt to influence consumers to gain consideration. When one considers the numerous options for purchase in almost any product category, the choices may become overwhelming. One way that consumers manage this situation is to consider only a subset of the alternatives available, leading to an evoked set. Often referred to as a consideration set, this subset of brands are those that will be actively considered in the purchase decision process. This is an important concept for marketers to understand, in that if their brand does not get included in the evoked set, it is not likely to be purchased. Or, should the consumer become dissatisfied with a brand currently in the evoked set, it might be removed, eliminating it from future purchase consideration. Consider the purchase of a new car. The choice of alternatives runs from low end entries like Hyundai, Kia, etc. to expensive luxury and sports cars—not to mention SUV’s and others. It is highly unlikely that a consumer would consider the entire range of possibilities. The list would be narrowed down given decision criteria to a much smaller grouping, based on purchase criteria. It may lead to consideration of only Japanese cars, American cars or German cars. It might be limited based on price or past experiences. Whatever the criteria used, the entire list of cars will not be considered. Marketers attempt to gain entry into the evoked set through positioning against others in the category, marketing communications and other marketing tools. Their goal is to get the brand/product to be considered. In other instances, the marketer is concerned with maintaining customer satisfaction, recognizing that consumers will buy again, and may or may not consider the existing product in the evoked set. L. How is it possible for a brand to communicate to both customers and non-customers in an IMC plan? Brands can select different media for advertising or different IMC tools entirely to reach customers and non-customers. For example, if a customer’s personal information is in a data-base, customized promotional offers or advertising messages can be delivered directly. Alternatively, television or other media that reaches a wider audience that would include many non-customers can be used to attract those not currently buying the brand. In each of these cases, the selling message can be tailored specifically. For example, references to past experiences can be part of the message to customers while messages to non-customers might make competitive references or mention sources of dissatisfaction for those considering switching from their current brand.

IMC Exercise Have the class collect ads that reflect some of the aspects of consumer behaviour discussed in the text such as stages of the decision process, Have them bring the ads to class and explain which aspect it reflects and how marketers might be appealing to this particular aspect of consumer behaviour. Each of the so-called generations—Generation Y and X have their own unique values, lifestyles, etc. Have students discuss these, and then bring in examples of ads designed to appeal to each.

IMC Comprehensive Project At this stage of the project students should be analyzing the consumer decision making process for their product or service and considering different segmentation variables that will be useful. IMC Project Assignment for Chapter 3 Analyze the marketing situation analysis for the product or service you have chosen. You can use the marketing and promotions process model shown in Figure 3-5 as well as some of the factors shown in Figure 1-5 from Chapter 1 as a guideline to conduct your situation analysis. For the consumer analysis, describe the consumer decision process for your product/service as shown in Figure 3-1. Explain what factors are relevant at each stage. What are the implications of your situation analysis for the development of your IMC plan? How will the market for your product/service be segmented? Which segments will be targeted and why? What will be your target audience for your IMC programs?

CHAPTER 4 COMMUNICATION RESPONSE MODELS 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. The chapter is devoted to examining the target audience or receiver and the process by which consumers respond to advertising and other promotional messages. 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 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. The end of the chapter attempts to resolve the debate with a model more suitable for decision-making.

Learning Objectives 1. Explain the elements of the communication process and identify the role of marketing communication. 2. Contrast traditional communication response models and alternative response hierarchies. 3. Develop the response processes of receivers of marketing communication through two models of cognitive processing. 4. Illustrate a response model for managerial decision making. 5. Construct ideas on how the knowledge of response models can be used for IMC planning.

Chapter and Lecture Outline I.

A MODEL OF THE COMMUNICATION PROCESS

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 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 advertising and promotional messages for foreign markets. A model of communication that represents the elements of the communications process is shown as Figure 4-1 that include: Chapter 4 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 4-1

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 can 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:

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Personal Channels which 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.

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Nonpersonal channels are those which 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.

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. The target audience may consist of individuals, groups, niche markets, market segments, or a general public or mass audience. 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.

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.

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. Chapter 4 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 4-2

II.

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 market might influence this process. This section begins by covering three traditional response hierarchy models and then discussing alternative models of the response process. A.

Traditional Response Hierarchy Models—Figure 4-2 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)

•

The Hierarchy-of-Effects Model (awareness→knowledge→liking→preference→conviction→purchase

•

The Information-Processing Model (presentation→attention→comprehension→yielding→retention→behaviour)

Implications of the Traditional Hierarchy Models —the hierarchy models are useful to promotional planners from several perspectives. They delineate the series of 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. All 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 behaviour. 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.

Alternative Response Hierarchy Models—research and theorizing 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 4-3 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 that behaviour and learn or process information that supports their attitudes and behaviour. The dissonance or attributional hierarchy consists of a “do → feel → learn” sequence. This hierarchy may occur when consumers are trying to reduce post-purchase 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 concept of involvement has received a great deal of attention for consumer behaviour and advertising researchers. Involvement has received so much attention since it is viewed as a variable that can help explain the way consumers process information and make purchase decisions. A problem that has plagued the study of involvement has been defining and measuring the construct. III.

COGNITIVE PROCESSING OF COMMUNICATIONS

The hierarchical response models were for many years the 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 4-4 depicts the three basic categories of cognitive responses identified by researchers and their relationship to attitude and intention constructs. These include: 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 is an important determinant of advertising effectiveness.

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 4-5 of Chapter 4 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 4-4

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. Classical conditioning, known as a behavioural learning theory, can help explain how the peripheral route works. Behavioural learning theory emphasizes the role of external or environmental stimuli in causing behaviour while minimizing the significance of internal psychological processes. Classical conditioning 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. IV. RESPONSE MODEL FOR MANAGERIAL DECISION MAKING A.

Importance of a Managerial Model—Professors Demetrios Vakratsas and Tim Ambler reviewed more than 250 journal articles and books in an effort 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.

Managerial Model Approach—This chapter continues with Rossiter and Percy’s perspective presents a managerial framework to make promotional decisions that account for the academic and practitioner research on advertising over the past fifty years. Its similarity to the more theoretical conclusion is readily observed. The experience element is captured by R&P’s view that the target audience based on previous purchase behaviour of a brand be the foremost characteristic initially considered in establishing a communications plan.

Processing of Messages— The processing of marketing communication messages is illustrated in Figure 4-7. Moreover, the cognition and affect considerations are noted in the processing stage as are the high and low involvement processing consistent with the more recent approaches for understanding audience responses to marketing communication messages.

Communication Effects of Messages—The communication effect of marketing communication messages are also shown in Figure 4-7 indicating once again the relevance of cognition and affect as the brand attitude effect is comprised of both elements in its measurement. It is also evident in category need, and need fulfillment is energized via consumer motivation; a psychological process with strong emotion. The brand components shows the managerial applicability with specific effects for an individual brand manager rather than communication in general. Chapter 4 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 4-5

Teaching Suggestions This chapter is designed to introduce the student to the fundamentals of communication. It 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. 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.

Vignette 1. Why was the Subaru executive so concerned about the BRZ being noticed? Exposure of a brand is critical in developing awareness for a car since there are so many to choose from. So the manager understands that as much exposure as possible will have stronger chance of consumers recalling the brand when it is time to shop for a car, or recognize it when going from dealer to dealer while planning the test drive. The importance of it being noticed in the context of the creative is equally important for consumers to be exposed to “hot” message in order for the right brand associations are formed. 2. Was the approach selected a good way to get noticed for this type of car and this brand? This example shows the value of creative advertising to ensure the optimal response from the target audience. In this case the creative in intertwined with the media which magnifies the overall effect of processing the “hot” message and retaining it when shopping for a car.

IMC Perspective 4-1 1. Do you agree with the criticism of these ad reviewers? Each of the criticisms stem from the concern that the creative is ineffective in communicating a compelling motive, and once that is missed in ad message consumers are reluctant to comprehend it sufficiently to be persuaded in the intended direction that the brand expects. This illustration assists in pointing out how students can form opinions when evaluating ads from the point of view of the target audience. This skill in critical for fully understanding how advertising works and having the ability to express why advertising will not be expected to work. Chapter 4 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 4-6

IMC Technology Perspective 4-1 1. How do these technological innovations affect how consumers will interpret marketing communication messages? This question raises the issue of whether processing marketing communication messages will be altered with new ways of receiving messages. Certainly comparisons over time across different media might suggest some differences, but they will likely suggest some similarity. While the processing of TV ads seemed new and novel sixty years ago, eventually the models of explaining the response included the well-established print and TV. Similarly, banner ads on the internet seemed novel twenty years ago, but eventually we see that consumer process these much like other low involvement media for the most part, unless the audience is highly involved during a shopping stage. In the end, technology gets adapted, and the delivery of a marketing communication message is experience much like other technology as it becomes common and accustomed to.

Answers to Review Questions 1. Recall the elements of Figure 1 and identify them for all aspects on an IMC plan – advertising, sales promotion, direct marketing, public relations, and Internet marketing. 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 behaviour. 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 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. 2. Explain why the three response models of Figure 4-2 are limited in planning for an IMC campaign? Chapter 4 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 4-7

The three models assume a strict order of cognition, affect, and behaviour, something a major review article in Journal of Marketing cited in the chapter suggests is not supported in numerous studies. In addition, the models do not indicate when the stages are occurring, such as when the message is received (i.e., watching television) or when consumers are going about their day-to-day lives. Both of these criticisms are addressed in the subsequent models presented in the chapter. Another way to see how the models are in effective is to consider the following. Each of the response processes could occur at each of the decision-making stages. For example, consumers could see some ads while at the need recognition stage and have a cognitive and affective response and then plan to look at the product in the store. This decision towards a store visit is the behaviour which is actually occurring at the information search stage, the one after the need recognition stage. Consumers could receive a brochure at the store, read it at home and continue along in their information search stage. Again, responding to the communication occurred while in a particular stage of the decision-making process. 3.

Explain what is meant by a central versus peripheral route to persuasion and the factors that would determine when each might be used by consumers in response to an advertisement. 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. Factors that would determine when each might be used by consumer in response to an advertisement 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.

4. What are the key difference between the traditional response models and the response model shown in Figure 4-7? The primary difference is that the former assumes a similar cognition-affect-behaviour response sequence while the latter presents a contingency model where by the sequence is influenced by the topical involvement and the perceived product differentiation. The key implication of the sequence change is that advertising and promotion play different roles and have different primary effects depending upon whether the consumer responded one way versus the other. The R&P model build on the previous models by clearly articulating the difference between the immediate reactions of the receiver while experiencing the message and the longer-term results of the communication of the brand. Consequently, there is a need to conceptually represent both dimensions of attitude theory at both places in time. 5. Why is it important to use a response model that is more applicable to managerial decision making? Planning for advertising is dependent on understanding how the target audience will respond to the marketing communication message, however a manager needs to translate or view these responses as potential options to influence when making marketing communication decisions. Furthermore, marketers require a degree of parsimony in using an approach that is clear for focus decision-making. Chapter 4 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 4-8

Academic contingencies and fine embellishments of model may help explain some variation across major samples to generalize theory, but in the end a manager needs to make concrete decisions.

Answers to Applied Questions 1. Consider ads found in social media like Facebook, Twitter and YouTube and assess whether the model in Figure 4-1 is useful for explain how marketing communication works in these digital contexts. As argued in the text, Figure 4-1 still stands the test of time and is still very applicable for digital media since it has the clear feedback and response mechanism. Students should be able to apply all aspects of the model to any form of digital communication, it is only a matter of seeing how it work by thinking through problem like this to see that the key parts remains. 2. Assume that you are the marketing communications manager for a brand of paper towels. Discuss how the low involvement hierarchy could be of value in developing and advertising and promotion strategy for this brand. For a company selling a low-involvement product such as a 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. An advertiser of a low 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. Advertisers may also use VIPs or visual image personalities that may lead to more involvement with and higher identification and retention of advertisements. 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. 3. Select an ad you think would be processed by a central route to persuasion and one where you think the peripheral processing would occur. Show the ads to several people and ask them to write down the thoughts they have about each ad. Analyze their thoughts using the cognitive response categories discussed in the chapter. 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. Students should be encouraged to select examples of advertisements that they feel are representative of each route to persuasion and to explain why the ads would be processed either centrally or peripherally. They should also show the ads to some friends 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), Chapter 4 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 4-9

ad execution related thoughts, or source-oriented thoughts (bolsters or derogations). You might have a few students show the examples they have chosen of ads that might be processed by a central or peripheral route and have the class analyze the cognitive responses they gathered for these ads. 4. Find an example of a print ad and evaluate it using the cognitive response model shown in Figure 4-4. Identify the specific types of cognitive responses that the ad might elicit from consumers and discuss why these might occur. Students should be encouraged to find a print ad and evaluate it using the cognitive response model shown in Figure 4-4. 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 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. 5. Red Bull has numerous IMC activities including its TV advertising, events, and promotional activities. Check the Red Bull website and any other online material for background, and apply them to the matrix in Figure 4-8 to validate whether each activity assists in planning for IMC. Red Bull presents an interesting example to apply Figure 4-8. Across many of its IMC tools there is a distinct source, message and channel to a multitude of target audiences. For example the imagery of its TV ads with cartoons is distinctly different that the imagery of Red Bull Crashed Ice. Furthermore, the exposure procedures and the type of processing and resulting communication effects are correspondingly appropriate for each tool as well. In short this planning matrix allows managers to see which are the controllable decisions to effect an influence on outcomes that the manager deems important.

Additional Discussion Questions (not in text) A. What is meant by encoding? Discuss how the encoding process differs for radio versus television commercials. 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 consumer hears the radio message, they will make the connection to the TV commercial thus reinforcing the video images. B. What is meant by involvement in terms of advertising and consumer behaviour? How might marketers determine the degree of involvement consumers have with their products and services? Chapter 4 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 4-10

Involvement can be viewed as the amount of personal relevance a product or service, purchase decision or even an advertisement has to a consumer. Involvement is a function of various person factors (needs, interest, values), object or stimulus factors (differentiation among alternatives, source or content of communication) and situational factors (purchase use or occasion). Scales have been developed to measure involvement with products and services and can be used by marketers. For example, Judith Zaichkowsky developed a personal involvement inventory that uses 20 semantic differential items to measure the construct. (See “Measuring the Involvement Construct,” Journal of Consumer Research, Vol. 12, December 1985, pp. 341-352. C. Find an example of a print ad and evaluate it using the cognitive response model shown in Figure 4-4. Identify the specific types of cognitive responses that the ad might elicit from consumers and discuss why these might occur. Students should be encouraged to find a print ad and evaluate it using the cognitive response model shown in Figure 4-4. 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 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. D.

Why are personal channels of communication often more effective than nonpersonal channels? Personal channels of communication are often more effective because information received from a personal source tends to be more persuasive than is information received from nonpersonal channels such as the mass media. A message from a personal source, such as a salesperson, can be more flexible and powerful than a nonpersonal message. When a personal channel is used, the communicator can adapt the presentation to the specific needs of the receiver and can respond to his/her reactions. Consumers also often tend to have more confidence in personal communication via social channels (i.e. word-of-mouth) since these sources are often viewed as more trustworthy and unbiased and information from a personal source is perceived as more concrete and vivid.

Discuss how the advertising and promotional implications differ for companies selling high- versus low-involvement products. For a company selling a high-involvement product the consumer is likely to go through a standard learning or learn → feel → do response hierarchy. 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 decision-making purposes. Informational displays at point-of-purchase or presentations by salespersons in the store can also be valuable and effective sources of information. For a company selling a low-involvement product 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. An advertiser of a low 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 Chapter 4 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 4-11

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. Advertisers may also use VIPs or visual image personalities that may lead to more involvement with and higher identification and retention of advertisements. Sales promotion techniques such as sampling and couponing may also be used to encourage first time trial. If the product performs well the consumer should form a favorable attitude the probability of repurchasing it will increase. F. Discuss the various forms feedback might take in the following situations: •

A consumer has just watched an infomercial for a revolutionary new exercise machine on latenight television. In a direct-response advertising situation such as this, feedback occurs in the form of an immediate action by the viewer such as calling an 800 number to purchase the product or requesting additional information such as a product brochure or video. Direct-response advertisers generally measure effectiveness on the basis of number of inquiries and actual sales generated by the messages.

•

An avid book reader has just logged onto the website of a company such as Amazon.com. First of all, the hit or visit to the website will be recorded. These company can also measure the various content areas visited on the site as well as click throughs to banner ads and other links. Of course the main type of feedback these e-tailers are interested in is sales. They can track whether a purchase was made as well as the number, type and title of the books. Those who have made a purchase may also provide feedback in the form of online ratings and reviews of books that can be shared with other consumers.

•

TV viewers watching a show one evening see a commercial for Calvin Klein jeans. In this mass communications situation feedback is not readily observable since the marketer is not in direct contact with the message recipients. Feedback can be obtained through research-based methods such as measuring recall or recognition of the ad as well as measuring affective and cognitive reactions to either the ad or the product.

IMC Exercise Choose a print ad from the newspaper or a magazine and evaluate them using the various elements of the basic communications model presented in this chapter. Your analysis should address the following areas: •

a discussion of the source used in advertisement and why s/he is or is not appropriate for the message

•

the way in which the message is encoded including the use of visual and verbal elements.

•

a discussion of the channel or medium in which the ad was placed, such as the particular newspaper or magazine, and why this publication was chosen by the advertiser.

•

the process by which the message might be received or decoded by the target audience. Choose one of the response hierarchy models discussed in the chapter and discuss how the source and message might influence various stages of the model. What type of feedback that the advertiser might use to evaluate the effectiveness of the message. Chapter 4 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 4-12

What is your overall opinion of this ad from a marketing communications perspective? What changes, if any, would you recommend to improve the communication effectiveness of the ad?

IMC Comprehensive Project Students should be encouraged to consider how an understanding of communications and the response process can be of value in developing the IMC plan for the product or service they have chosen. The specific assignment is as follows: IMC Project Assignment for Chapter 4 Use the information from this chapter to analyze how consumers in the target audience for your product or service will respond to various elements of your IMC program such as advertising, sales promotion, direct marketing or your web site. Which of the response hierarchy models discussed in the chapter is most applicable for this product or service? Specify the various stages in the response process through which consumers will have to pass before purchasing your product or service.

CHAPTER 5 OBJECTIVES FOR THE IMC PLAN Chapter Overview This chapter examines the role of objectives in the planning and evaluation of the IMC program. Many managers use sales as the basis for setting objectives. However, many promotional planners believe the role of advertising and other promotional mix elements is to communicate so its effectiveness should be based on how well it communicates. The chapter reviews three approaches to communication objectives: the DAGMAR model, an application of more comprehensive response hierarchies, and new IMC approaches. The chapter then discusses the Rossiter and Percy perspective of communication objectives.

Learning Objectives 1. Distinguish among marketing, behavioural and communication objectives and identify the value of setting each type of objectives. 2. Describe the historical approaches for setting communication objectives for advertising. 3. Evaluate the options setting behavioural objectives and apply them when constructing a promotional plan. 4. Choose among the options for setting communication objectives and apply them when designing IMC recommendations. 5. Assemble the best combination of behavioural and communication objectives for each stage of the consumer decision-making process.

Chapter and Lecture Outline Many companies have difficulty setting realistic objectives that will guide the development of the IMC program. Many companies either fail to use specific marketing communications objectives or set ones that are inadequate for guiding the development of the promotional plan or 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. I.

OBJECTIVE SETTING

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: Communication—Specific objectives serve as communication devices and facilitate the coordination of 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 Chapter 5 – Advertising & Promotion, 4th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 5-1

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. B.

Marketing 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. C.

Sales Objectives Debate

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. Problems with sales objectives: •

achieving sales could be a function of other marketing mix variables such as product design or quality, packaging, distribution, or price.

•

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.

Appropriate use of sales objectives: •

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, however the carryover effect could be strong

D. Behavioural Objectives Behavioural objectives link the marketing objective to the communication objectives by specifying the specific action expected to be taken on the part of the target audience. The idea of gaining sales can occur through different means depending on whether the brand desires greater purchases from current customers (i.e., repeat) or new purchase from non-customers (i.e., trial). Given a different action is required, a different message is required for influence which implies more unique communication objectives. Chapter 5 – Advertising & Promotion, 4th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 5-2

Communication 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 4 as a basis for setting advertising objectives. Communications objectives 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. II. FROM OBJECTIVES

COMMUNICAITON

RESPONSE

MODELS

COMMUNICATION

A. DAGMAR (Defining Advertising Goals for Measured Advertising Results) is a model developed by Russell Colley in 1961 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 4. While hierarchical communication effects form the basis of DAGMAR, there are other specific communication tasks that advertising might be expected to perform or help accomplish. A major contribution of DAGMAR was Colley’s specification of what constitutes a good objective. Four characteristics of good objectives were noted: •

Target audience—a good objective should specify a well-defined target audience. The target audience is usually identified in the situation analysis.

•

Concrete and measurable—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.

•

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 favourable attitudes or number of consumers intending to purchase the brand, etc.

•

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.

Comprehensive Response Model Applications—Lavidge and Steiner hierarchy of effects model shown in Figure 5-2 is more specific than the DAGMAR model and provides a better way to establish and measure results. This particular model has been used as a basis for analyzing the communication response processes of consumers and has been the foremost application for setting communication objectives. Setting communication objectives with a model like this is the same way that a pyramid is built; by first accomplishing lower-level objectives such as awareness and knowledge or comprehension (see Figure 5-3). Similarly, the information processing model offers an approach for setting objectives, of which specific measures can be applied to assess effectiveness.

Application Conclusion—Progress on the use of these models in practice by professionals is mixed, and the chapter argues for the importance of adopting a more applied model (e.g., R&P) for managerial decision-making.

III.

SETTING BEHAVIOURAL OBJECTIVES FOR IMC

The R&P’s approach is to have a clear behavioural objective for each target audience in terms of trial, repeat purchase, shopping, and repeat consumption. A.

Trial Purchase Objectives—Brand trial purchase is defined as a consumer’s first purchase of a brand. A manager may look to expand sales by setting various trial objectives. A brand trial objective is relevant in many scenarios for virtually any business looking to expand its customer base. A brand re-trial objective occurs when consumers have not bought for some time. Category trial is an option where a manager attracts users to the brand from outside its immediate competitive space within a product category. Finally, switching from another brand is an additional situation where trial may be relevant for a manager.

Repeat Purchase Objectives— Repeat purchase is defined as a consumer’s continued purchase of a focal brand within a specified time period. Marketing communication tools can influence frequency, amount or timing.

Shopping Objectives—Action that consumers take that will lead to a higher probability of purchasing the brand are indicative of objectives with respect to shopping that a manager may include in a plan. For example, most people find it imperative to visit a car dealership prior to buying a car. Digital communication has opened the door for marketers to have all sorts of shopping-like experiences that bring their target audiences one step closer to actual purchases.

Repeat consumption Objectives—For many fast moving goods there is ample inventory within a household, and some marketing communication is designed to encourage continued usage of a product that has been purchased. This is tricky idea that some students have difficulty with as they can mix up buy in with consuming.

IV.

SETTING COMMUNICATION OBJECTIVES FOR IMC

R&P summarize four communication effects (Chapter 4) that an ad, advertising campaign, or IMC plan may have on consumers. These are stated as objectives, as follows: A.

Category need pertains to whether the target audience feels the need to purchase within the actual product category. Options include omit, remind, or sell.

Brand awareness is a universal communication objective. This means that every single point of communication should contribute to a target audience’s understanding and knowledge of the brand name. Options include recall, recognition or both recall and recognition.

Brand attitude is another universal communication objective. Like brand awareness, every aspect of a firm’s IMC program should contribute to some aspect of the overall evaluation of the brand from the perspective of the target audience. Stated as specific benefit, attributes to be communicated. Also, more general beliefs and emotions or affect can also be established.

Brand purchase intention consists of two options: •

Brand purchase intention is assumed.

•

Brand purchase intention is generated.

IV IMC PLANNING: OBJECTIVES FOR BUYER DECISION STAGES One important role of marketing communications is to help the target audience move through the steps of the consumer decision-making process. This process is assessed for each target audience and a conclusion is made as to which communication objectives are most relevant for each stage. Refer to Figure 5-5 as an illustration of how this works.

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 stresses the difference between marketing and sales versus communication objectives and behavioural objectives. The DAGMAR model relies heavily on the response hierarchy models discussed in Chapter 3. 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. The chapter ends with a description of the behavioural and communication objectives from the Rossiter and Percy perspective that have a few noteworthy features. These place greater importance on the brand manager responsible for promotional communication. Managerial options for each are identified as a Chapter 5 – Advertising & Promotion, 4th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 5-5

guide for making objective-setting recommendations. More specific behavioural objectives, connected to the target audience, are clearly delineated. There is greater importance placed on the central concept of brand attitude that accounts for both cognitive and affective characteristics. The perspective can be used to set objectives for all levels of communication decisions.

Vignette 1. Why did Hellmann’s change the focus of the message over time? Hellman’s designated this marketing communication as the “Real Food Movement” and while the idea of a movement may be unexpected in marketing communication for consumer goods, the idea does suggest a broader communication beyond a singular IMC program. A movement would naturally entail an evolution or greater elaboration of the initial message to influence consumers’ behaviour from the first step to subsequent steps. Students may see a similarity with the “Campaign for Real Beauty” since we have a similar word used. However, the word “real” had important brand connotations for Dove as it has been advertised a “beauty” bar for decades, and the association to real beauty appeared an realistic extension since it often showed the bar as being natural for woman. Thus, students might criticize the program as being pretentious or something along these lines. Nevertheless, if the brand wants to start a movement, the message required an idea of growth or development indicating a message change. 2. What behavioural and communication objectives does it appear that Hellman’s achieved? Hellman’s appears to be encouraging trial, moving consumers from food that is less healthy to food that is clearly healthier. This is useful in regards to what is occurring in the food industry at the time, (e.g., McCain’s). All the activities seem strong and innovative for awareness and attitude purposes, and the involving activities likely encourage category need and or purchase intention as consumers are now more involved with the brand.

IMC Perspective 5-1 1. Are the ideas expressed regarding good advertising consistent with the response models of advertising? The experts are relatively consistent in supporting the models. There is mention of a clear message to a target audience. There is also an understanding of cognitive and affective responses. Creativity to encourage processing is identified. Behavioural effects in terms of purchase are acknowledged. While managers work in an everyday language, the general concepts of response models are understood, but it is the hope of students to further their careers by working in applied setting yet still make sense from a conceptual point of view when they speak and plan. 2. How is it possible to ensure good advertising with some of the new ideas presented? A key point to make is the universal application of the communication model of Chapter 4 that is applicable with new technology, and that the establishment of communication objectives described in Chapter 5 is required and no matter what changes might occur in the technology to deliver messages.

IMC Perspective 5-2 1. Why is it important for promotional planners to consider specific communication tools at each stage of consumer decision making? Consumers have different information needs at each stage of the decision-making process. Certain tools can provide information more easily than others. Consumers also seek different types of brand Chapter 5 – Advertising & Promotion, 4th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 5-6

experiences at each stage and may be keen on emotional involving tools at certain stages compared to others. Since consumers’ communication needs vary at each stage, planners should consider which tool will achieve the right objective at each stage.

Answers to Review Questions 1. Discuss the value of setting objectives for the integrated marketing communications program? What important functions do they serve? Specific goals and objectives are the foundation upon which integrated marketing communications decisions involving advertising and other promotional tools should be made. They serve as communication devices and facilitate the coordination of activities of those working on the campaign. They also serve as a guide to promotional planning and decision making and provide a benchmark or standard against which success or failure of the campaign can be measured and evaluated. 2. What are some of the problems associated with using sales objectives as the only measure of advertising performance? Can you think of any situation where it may be the best and only measure? The most obvious problem with sales objectives is that sales are a function of other marketing variables like product, price and distribution. Since advertising and promotion have a primary communication effect on consumers prior to their purchasing a product, it is important to have the communication specified as objectives in order to assess whether it is effective or not. The other most significant concern is the fact that advertising has a carry-over effect where its effects could lead to sales well after the exposure. The second part of the question is open-ended to spark a debate as to whether sales are ever the only measure of advertising success. A couple of scenarios presented in the chapter can be evaluated as to whether these are realistic possibilities. 3. Some claim that promotion is all about communication, so we should only focus on communication objectives and not worry about behavioural objectives. Convince them otherwise. Behavioural objectives are required if one accepts that the target audience’s current behaviour is prime factor in constructing the message. Behavioural objectives help define the target audience further and they provide a bridge between communication objectives of the promotion plan and the marketing and the marketing objectives of the marketing plan. For example, if trial is required, then the message might want to focus on imagery of consumers going through the decision-making of buying the product for the first time. Alternatively, if repeat purchasing is required, then the message might pertain to the continued satisfaction of buying once again, or how the brand is better than others to prevent switching out of the brand. 4. If a firm cannot afford large market research studies to quantitatively assess whether communication objectives have been achieved, why should the firm bother setting communication objectives? Communication objectives are still valuable because they guide the rest of the communication decisions. They provide the criteria for managers and agencies to make the appropriate strategic and tactical creative decisions. They can also provide guidance for media and sales promotion decisions. There is also some literature on doing market research very inexpensively that goes beyond traditional sources that large firms use, so tracking of campaigns can be feasible even without resources. 5. A firm is running a campaign with advertising, sales promotion, and public relations. Why might it have communication objectives for each IMC tool? Chapter 5 – Advertising & Promotion, 4th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 5-7

This is an application of the model presented at the end of the chapter and picks up on the Rogers example where every part of IMC has some effect. Since consumers go through the decision-making process, at each stage they may be influenced by communications from various sources (i.e. ads, sales promotions, public relation). Ads could generate awareness and initial favourable attitude about a car. Upon researching the vehicle, ratings and reviews from car publications may solidify the attitude and lead to sales. Sales promotions like financing or rebates could lead to a stronger purchase intention.

Answers to Applied Questions 1. In meeting with your new boss, he informs you that the only goal of advertising and promotion is to generate sales. Present your argument as to why communications objectives must also be considered. The bottom line for for-profit organizations is to increase market share, sales or both. Thus, for many managers, the goal of advertising is to generate sales. Managers frequently ask the question, “If I increase my advertising budget by X%, what will the impact be on sales?” While the ultimate goal of the promotional program may be to increase sales, there are a number of reasons communications objectives must be considered as well: •

Communications objectives are intermediary objectives often required to generate sales. Creating brand awareness, and favorable attitudes may be required before the consumer purchases. The hierarchy models demonstrate that purchases are not always spontaneous, and that consumers must be moved through a hierarchy of goals.

•

Communications objectives are measurable, while the relationship between advertising and sales is often difficult to exactly determine. It’s not that we can’t measure sales, but rather that establishing a measurable impact is very difficult.

•

Other factors beyond advertising contribute to sales. There is an old saying that nothing will kill a poor product faster than good advertising. In other words, if a company has a good advertising program but the product is not good, then sales will not increase. Likewise, if the product is not available due to distribution problems, then the impact of advertising will not be known, or if the price is too high, sales will not be affected. Finally, an excellent marketing program may be negatively impacted by market conditions. Weather, recessions, and other factors may result in a loss or no change in sales even though the advertising program is effective.

•

Not all advertising is designed to increase sales. Creating brand or corporate image, generating awareness, appeasing stockholders, etc. are just some of the reasons why companies advertise. Cause-related marketing and advocacy advertising are additional reasons why companies may advertise other than directly influencing sales.

2. Assess what the behavioural objectives would be for each ad in this chapter. Ads that imply trial include 2, 3, 6, 8, 9, 10, 11, 12. Ads that imply repeat purchasing include 5, 7, 13, 17, 18, 21. Some might debate a couple, but the point is that most ads imply a behaviour to see the target audience from a current brand behaviour standpoint. 3. Assess what the communication objectives would be for each ad in this chapter.

All should be contributing to awareness and attitudinal communication effects. Students should study each ad to see if the brand is well identified and whether the message clearly influences the target audience’s attitude in any particular regard. Some ads appear to influence category need, 9, 11, 12, 15, 17, 22, others appear to influence purchase intention, 6, 7, 8, 10, 14, 17. 4. After assessing he objectives for some of the ads of this chapter, go to the brand’s Internet site or social media offerings and determine if the objectives are the same or different. This is an application exercise. It is intended to show students that firms could have different target audiences across different IMC tools or it could show that the firm is using these two tools to reach the same target audience. In some cases, the advertising is directed to one target audience through selective media purchases, but since the web is universally accessed it could have sections directing various target audiences.

Additional Discussion Question (not in text) A. What are the differences between marketing objectives and communications objectives? Why do so many managers confuse the two? Marketing objectives are statements of what is to be accomplished by an organization’s overall marketing program within a given time period. They are usually stated in terms of specific, measurable outcomes such as sales volume, market share, profits or return on investment. Communication objectives are statements of specific communication tasks that are to be accomplished such as creating awareness, brand knowledge and interest, favourable attitudes and image, purchase intentions and the like. Many managers confuse the two types of objectives because they approach their advertising and promotional programs from a sales perspective and tend to view sales or some related measure as the only meaningful objective of advertising. They tend to think in terms of how the promotional program will influence sales and end up reducing communication objectives to sales-related measures. B. What is meant by an advertising carryover effect? Discuss the problems carryover creates for managers who are trying to determine the impact of their advertising on sales. Many experts agree that advertising may have a lagged or carryover effect. That is, the results of the advertising may not be immediately felt. For example, many ads are stored to memory, and acted upon at a later time. This effect may cause problems for marketers who are trying to assess the impact of these ads in the short run. If the ad is run now, but effects are not felt until later, it may be difficult to show that the advertising had an impact. Management, impatient as they sometimes may be, may not wish to consider spending waiting for the effects to happen. When the carryover effect is added to the other problems associated with using sales objectives, it makes the job of proving the impact of advertising’s effect n sales even more difficult for the ad manager. C.

You are in a meeting to discuss plans for a new advertising and promotional program for your company. The vice president of marketing opens the meeting by stating there is only one objective for the new campaign—to increase sales. How would you respond to this statement? Obviously the vice president of marketing is viewing the role of advertising and promotion as that of generating sales. Some managers take the position that the reason a firm spends money on advertising and promotion is to sell its product or service. They believe that monies spent on advertising should Chapter 5 – Advertising & Promotion, 4th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 5-9

produce measurable results such as increases in sales volume or market share. The problem with this perspective is that the manager is ignoring all of the other factors that may influence sales such as competition, the state of the economy, product quality, service, price and channels of distribution. The manager must recognize that it is often very difficult to show a direct relationship between advertising and sales. Moreover, the impact of sales are not always immediate as there may be some lagged or carryover effect operating. The manager must be made to realize that advertising and promotion can be working quite well and there still may be some problem with sales. Thus, consideration should be given to evaluating the effectiveness of the promotional program in terms of other measures such as the accomplishment of communication objectives. D.

You are the advertising manager for an established brand of laundry detergent and have just fought hard to have the promotional budget for the brand increased by 10 percent. You have just received a report for the latest quarter that shows sales did not change despite the increase in advertising spending. The marketing vice president is concerned about the lack of increase in sales and wants you to explain the problem. How might you respond? The marketing vice president appears to be concerned because the increase in advertising spending did not result in an immediate increase in sales. The advertising manager’s response should note that it may be unrealistic to expect an immediate impact on sales since it may take a little time for the increased spending to have an impact in the marketplace. S/he might note that advertising for laundry detergent is likely to have some type of lagged or carryover effect such that the effects of the increased spending may not be realized immediately. It would also be important to consider what other developments may have occurred during the latest quarter and how they may have affected sales of the detergent. For example, did competitors increase their level of advertising or sales promotion activity? Were any new brands introduced during this period? The advertising manager may also want to stress the need to look at the increased spending from a communications perspectives as well as just a sales perspective.

E. What are the strengths and weaknesses of using traditional hierarchy models for setting communication objectives? The traditional hierarchy models have a couple of key strengths. They provide an understanding of consumer’s response to advertising. They also guide the steps for planning advertising objectives. Firms could focus on certain stages for making communication objectives (i.e. awareness). However, there are two important limitations. It is difficult to believe that consumers go through the steps in the prescribed cognitive-affective behaviour process for all purchases. Furthermore, it is difficult also to believe that consumers could not be having both affective and cognitive responses at the same time. F. How is the framework discussed in the last section similar to and different from setting communications objectives based on the traditional hierarchy models? Discussion of the hierarchy models often implied that this represented how consumers purchased products, especially with the concluding behavioural stage. So marketers are left with reconciling the consumer purchase decision process discussed in Chapter 3 with the traditional hierarchy models. The communication models that followed in Chapter 4 tried to account for variations in consumer purchasing behaviour and account for communication effects. As an alternative, the model at the end of this chapter applies the communication framework on the traditional consumer purchase decision model. It recognizes that firms have unique attitudinal objectives depending upon where a target audience is in the process.

G. In what situations would brand awareness be the only communication objective for an advertising campaign? This is a bit of a trick question and sets up a debate that you may like to pursue. The model presented argues that all communications should contribute to awareness and attitude. If it does not contribute in some manner, then it is by definition, not effective. If this is true, then there are no situations where a firm would spend money on ads only for awareness. Often we hear in news reports that a firm or organization is running an awareness campaign. This is, in fact probably a short way of saying that yes, we are trying to increase awareness and influence attitudes. If students propose situations where some attitudinal component is not addressed, it is fairly certain that they have not thought hard enough to see that the ad could be contributing to the overall liking of the brand by the target audience – the heart of brand attitude.

IMC Exercise Professor Tom Duncan suggests that promotional planners should use zero-based communications planning when developing their integrated marketing communications programs. This approach involves determining what tasks need to be done and which marketing communications functions should be used and to what extent in accomplishing them. He suggests that in addition to advertising, various other promotional tools such as publicity/public relations, sales promotion, direct marketing or even packaging may be the basis for the “big idea” around which the IMC program will be developed. Find an example of how a marketer has used a specific promotional mix tool other than advertising as the basis for the “big idea” for an IMC program. For example, you might find an example where a company has used innovative packaging, sales promotion or publicity as the lead element of their IMC program. Why do you think the company chose to lead with this specific promotional mix element? Discuss how other promotional mix tools were used in developing the overall IMC program.

IMC Comprehensive Project At this point, students should be prepared to develop specific advertising and promotional objectives that will guide the development of their IMC projects. IMC Project Assignment for Chapter 5 Specify the objectives for your IMC program. Describe how your objectives have evolved from the marketing and promotional situation analysis you conducted for your product or service. Explain whether you are using sales or communication objectives and the rationale for your choice. Do your objectives satisfy the criteria specified by the DAGMAR model? Carefully state the behavioural and communication objectives of your target audience. Is it possible to state objectives for different stages of the decisionmaking process?

CHAPTER 6 BRAND POSITIONING STRATEGY DECISIONS Chapter Overview This chapter bridges the strategic orientation of the marketing plan and the copy platform that summarizes the creative strategy decisions of creative specialists. In doing so, it examines the decisions and process associated with the topic of brand positioning strategy. Promotional planners receive direction from the situation analysis and decisions of the strategic marketing plan and must translate that information into communication strategies for its target audiences. In turn, promotional planners must work with creative specialists to ensure that the communication strategies are executed with appropriate creative messages. Brand positioning strategy is a key decision involved that links marketing strategy to creative strategy and is the primary consideration of this chapter.

Learning Objectives 1. Identify the concepts of market positioning strategy and market position. 2. Apply the positioning concept in an advertising context by defining brand positioning strategy and brand position. 3. Illustrate how to formulate the brand positioning strategy decisions 4. Demonstrate brand positioning strategy opportunities. 5. Interpret brand positioning strategy decisions in other contexts.

Chapter and Lecture Outline I.

POSITIONING

The first part of the chapter is devoted to reviewing the market positioning concept as a means of understanding the brand positioning concept. The decision-making process for brand positioning is also examined. A. Market Positioning Strategy—A strategic marketing plan evolves from an organization’s overall corporate strategy and serves as a guide for specific marketing programs and policies. From a promotional standpoint, planning specialists use the information contained in the marketing plan to create the promotional plan. A key piece of information is the strategic direction of the marketing mix as suggested by the market positioning strategy. Firms will write a marketing positioning statement in their marketing plan to accurately communicate a market positioning strategy. As the firm develops its market positioning strategy, it may consider many combinations of product attributes that research has shown to be acceptable to the target market. Promotional planners will consider thr market and competitive information in this document to understand the context of the market positioning decisions and the subsequent brand positioning decisions. Positioning has been defined as “the art and science of fitting the product or service to one more segments of the broad market in such a way as to set it meaningfully apart from competition”. Positioning is a guiding idea in the strategic marketing plan that is a result of identifying alternative market opportunities (i.e., areas where the company feels there are favorable Chapter 6 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 6-1

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. Implementation of the marketing plan yields varying outcomes. One critical one is the idea of market position, the resulting consumer understanding of where a firm’s product is located in the overall market relative to it main category competitors and related category substitutes. The airline service example in the text attempts to draw these ideas out B.

Brand Positioning Strategy—A brand positioning strategy relates to the image of the product or brand relative to a competing brand. It is a key decision prior to determining the most effective message of the advertising or the IMC. The reactions that consumers have to promotions are referred to as the brand position. The brand position is understood along the lines of salient attribute and/of salient benefits and is often diagramed with a diagram illustrating where the brand is in relation to other brands within a given competitive space.

Brand Positioning Strategy Decision Process— the development of a positioning strategy involves six distinct steps 1. Develop a Market Partition2. Determine competitors' positions 3. Assess brand position 4. Determine brand positioning strategy 5. Monitor brand positioning strategy 6. Monitoring the brand positioning strategy

II.

BRAND POSITIONING STRATEGY DECISIONS

Market Definition Positioning by end benefit—setting a product apart by stressing a specific characteristic (i.e., attribute) or benefit offered. The Schick example shows how the portrayal of attributes was less important than the claim of particular benefits. While these were seemingly identical, the consumer perceived them much differently. Positioning by brand name—price/quality characteristics are stressed that lead to consumers to conclude that some brands are premium or more basic/mainstream. For example, some products set themselves apart by assuming a very high price/quality association, while others become "price products." Positioning by usage situation—teaching consumers how to use a product in various situations is a way to grow sales for both new and established product as shown in the text. Positioning by product category—the Via Rail example provided in the text in reflects this strategy in which the product is positioned against others that while not exactly the same, provide the same class of benefits.

Differential vs Central Positioning While a differential positioning is the classical or typical approach, a newer idea suggest that a brand may not claim benefits in relation to being superior to a competitor, but rather claim as if they are the best in the category with their claim defining the category. This is a less common approach but can be seen with useful examples from brand leaders. A couple of suggestions in the text attempt to support this idea. Brand Benefit vs Users Positioning In this approach, the product is positioned at a particular group of users. The ads provide good examples to demonstrate this strategy in practice as do the examples for the other products identified. C.

Target Audience Brand Attitude—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:

III.

•

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

Consumer Purchase Motive—this highlights the importance of accounting for consumers motives while positioning advertising messages. Eight more managerially useful motives are suggested that are grouped into two types, informational and transformational. Examples of Canadian companies using each of the eight motives are provided along with an indication of how the more traditional aspects of positioning are also used. Instructors are encouraged to find other examples to illustrate these concepts. •

1. Informational motives are those in which a consumer perceives deficit in the current state and seek a product that will return them to a more “normal” state.

•

2. Transformational motives are those in which a consumer perceives themselves to be in a “normal” but desire to be improved or enhance positively through the purchase of a product.

Declining sales or changes in market conditions or other factors may lead a firm to reposition the brand. The first section identifies critical analysis that led to recent repositioning strategies for many well-known brands. An intention of this section is to illustrate that one key insightful point may be a key driver in the need for a change in the brand positioning strategy. When using marketing communication to reposition, we can consider brand repositioning in the four decision areas, market definition, differential advantage, target audience, purchase motivation. Often times, brands are not planning to change their price point differential or alter the product or move into alternative distribution avenues, yet would like to build sales or gain market share via advertising or some other IMC tool. The examples in the text highlight brands that have successfully respositioned the brand solely through marketing communication. IV

IMC PLANNING: BRAND POSITIONING EXTENSIONS

The final section shows that unique brand positioning strategies can be developed for specific target audiences. For example, some messages designed to attract new category users would suggest one kind of brand positioning while messages intended to retain existing loyal customers might suggest an alternative brand positioning. The rest of the section extends this idea to suggest that the brand positioning idea can be extended to the different buyer decision making stages and to corporate brands.

Teaching Suggestions This reorganized chapter takes students away from a complete review of the marketing process and marketing strategy decisions. Instead, it highlights a few basic marketing points as it examines the strategic communication decision of brand positioning. The transition from a broader market positioning of the marketing strategy to the narrower brand positioning strategy of the IMC plan is challenging to communicate to students. One method is to investigate the distinction between target market and target audience thoroughly. The difference in these concepts distinction is subtle. It is important for instructors to illustrate some of the examples in the text or refer to their own. Naturally, the distinction is difficult to observe practically in some instances, and there may not be any differences for some cases. So it is wise to find examples that are more obvious than ones where it may be less apparent. The chapter has also tried to provide a more structured and theory supported perspective of positioning. Considering the significance of using the positioning concept to set the direction of a communications strategy, instructors can use either of the developments to give stronger grounding for their students. The use of attitude change strategies and the importance of linking the consumer motives to positioning are the two avenues for further explanation.

Vignette 1. Why is the focus of the positioning on the barcode so successful for this product category and brand? This example shows how a brand will make a legitimate claim that is believable. The benefit claim fits within the attitude model part of the brand positioning for target audiences who are presumably new category users as the market expanded for these types of products. An additional point to identify is how the creative in advertising or marketing communication is used to make brand benefit claims (or attribute claims) that contribute to the brand positioning strategy. The living barcode clearly conveyed the uniqueness of the product that assisted in the differentiation and allowed the brand to define the market via its brand name; paving the way for a very identifiable positioning.

IMC Perspective 6-1 1. Why are these advertising claims so important for marketing these brands of beer? These four examples show how advertising contributes to a brand positioning strategy. Much of the marketing plan of beer remains relatively unchanged year to year compared to the marketing communication, so the message or brand claims become significantly important for differentiation purposes. In short, the benefit claims and mix of IMC tools become the main competitive marketing tools to compete upon.

IMC Perspective 6-2 1. Does it make sense for G to represent the brand beyond the attribute of hydration? The marketing strategy for G took a new direction and represents an alternative market positioning strategy. This is mostly an opinion issue that students can take sides upon based on interpretation of a couple of situational facts, but a key point to emphasize is that the brand positioning from a target audience perspective presented many interesting avenues for G. The brand took an unexpected direction by moving to a new sport to promote; something which other brands have done. 2. What potential risks will G encounter with this new move? An important risk is that many consumers may not fully accept the innovation and still believe the brand is for hydration, thus wasting significant resources. Considering the maturity of the product category, the potential for no innovation may be just as costly and new consumers entering the category could gravitate to other brands, eventually eroding the 70% share.

Answers to Discussion Questions 1. Describe how the market positioning strategy adopted for a brand would need to be supported by all other elements of the marketing mix. Positioning requires consistency among all marketing mix elements. For example, it is difficult for the consumer to perceive that the very best brand/product can also be the least expensive. A high priced perfume or cologne would certainly lose some of its image if distributed in a discount store. High quality, high priced products advertised in low cost media might find that their image suffers. For most consumers, high quality usually means a higher price (and vice versa), upscale (selective or exclusive) distribution, and quality representation in advertising. Trying to go away from these consistencies may lead to confusion and detraction from the positioning. The same holds true for products at other ends of the price/quality spectrum. To maintain margins, intensive distribution may be required, price discounts, coupons, and other deals may be used more frequently, and less expensive media may be employed. 2. Why is it useful to distinguish between brand positioning strategy and brand position? As noted in question 3, a brand positioning strategy is the planned image while the brand position is the resulting image that the target audience believes about the brand. A manager would naturally like the brand position to be identical to the brand position at the end of the planning period to demonstrate success; however this may not be the case as the message might get misunderstood or not be the right message. Alternatively, a brand position might actually be stronger than anticipated with an audience for which the brand was not targeted, thus indicating an unexpected success. Chapter 6 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 6-5

A brand positioning strategy relates to the planned image of the product or brand relative to a competing brand for a given competitive space as defined by certain category characteristics. Marketing communication decisions largely impact this projected image that is decided upon by the brand manager in conjunction with agency personnel and is generally written in the IMC plan. In contrast a market positioning strategy is written within the marketing plan and is dependent upon the whole marketing mix and is derived from the corporate plan regarding a particular product-market. 3. What problems would a brand encounter if it communicated with an incorrect motive? Communicating an incorrect motive can lead to weaker brand effects. For example, a fashionable retailer of men’s clothing (e.g., Harry Rosen) could suggest that men would save time by visiting their store since many men do not enjoy shopping (e.g., problem avoidance). However, this motive is not the correct one as social approval or some other positive motive would be more likely, or at least incomplete satisfaction with one’s current retailer could be plausible. In each case, a better ad would be created and understood by the target audience. 4. What factors would lead a marketer to the use of a repositioning strategy. Probably the most common factors leading to repositioning would be a loss of sale, a growing market, and/or the entry of a new product into the marketplace. Other factors might include an erosion of the product image, a desire to enter new markets and/or even management desires. In any of these cases, advertiser would look to a new target audience or perhaps a new message that had a different motive. The CASSIES identified in the chapter propose a key feature of the situation analysis that likely contributed to the repositioning strategy. 5. Why is it important to consider unique brand positioning decisions at each of the buyer decision stages? Is it feasible to implement this approach for all product categories? Since brand positioning strategy is the direction the brand would like a target audience see the brand, it is quite likely that users and non-users would have different purchase behaviours; thus necessitating unique messages with varying levels of information to convince them of either repeat buying or trial. The feasibility of this approach is dependent on factors such as size of each audience and the costs to develop the messages and media costs. With lowers costs for both of these via social media, it is entirely possible that brands could consider such an approach.

Answers to Applied Questions 1. Explain how McDonalds’ market positioning strategy has changed with the new developments in its menu and outlets. McDonald’s altered its menu in a healthier and more tasteful (e.g., coffee) and interior to make it a more welcoming environment that is attracting adults instead of its traditional base of families. Ronald has taken much less prominence in its promotion and imagery with the change. In short, McDonalds’ strategy is less of a family fast food restaurant but more of a quick service casual restaurant. Its corporate imagery during Olympic sponsorship for examples reinforces this view as well. This has implications for its brand positioning strategy for its individual campaigns as many of them are designed to attract consumers to switch to the brand form various other formats. For example, it tries to regain customers from Tim Horton’s with much of its messages of late. 2. Examine the social media presence of a brand and assess whether it clearly identifies a brand positioning strategy. Chapter 6 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 6-6

This exercise directs students to investigate a topic of interest. Students will likely select a brand they consume and use themselves as a representation of the target audience. With this in mind, the student will implicitly think about how the positioning is occurring with social media vs. what they may have been accustomed via TV or other mass media. Answers should clearly remark upon all four decisions for a brand positioning strategy and give an indication of effectiveness. 3. Explain why a central positioning strategy is feasible. Do any brands currently use this approach in their marketing communications? A central positioning is a newer idea, and in a world with Ipads, it seems that the idea is clearly an option for brands to consider and attempt. As expected, really only one brand in a product category would attempt such a strategy, but it would be an interesting debate if students could identify a product category where two brands attempted the strategy. The option is entirely feasible as the ipad example suggests where the brand attempts to “own” the category as its marketing communication messages indicates that the market is defined via brand name. 4. Develop market partition diagrams for beverages. What respositioning options are available for any brand? This question asks students to apply Figures 6-8 to 6-11 to a different product category other than the automobile market such as soft drinks. A product type partition would include; cola and non-cola or diet and non-diet as an initial breakout. An end benefit partition might include refreshing or thirstquenching among others of a similar nature. A usage situation partition could see soft drinks as a mixer or a beverage for drinking with a meal etc. Finally, Coke and Pepsi view is clearly seen in the brand name partition. For either of these brands, all four option may be applicable for various target audiences, and in all likelihood, both brands have used all four type of partitions for different campaigns over time. 5. How can brand positioning decisions be applied to new category users and brand loyals users of smartphones? The attitude towards the product category for new category user and brand loyal is fundamentally different since the former does not consume and is therefore less knowledgeable thereby requiring more extensive communication. This fact suggests a message of an educational nature in order for a brand attitude and category attitude to be established. Encouraging repeat purchasing for a brand loyal is important and brands would use their existing positive (presumed) attitude and use messages to ensure consistency or slight improvement. In both scenarios, an appropriate message is required that will be within the latitude of acceptability for the brand to thrive.

Additional Discussion Questions (not in text) A. Many organizations segment on the basis of demographics. Discuss three products that might segment on this basis, and then explain what other segmentation criteria they might also employ. Many firms have found that demographics may be more of a descriptor of a segment than a basis for segmentation itself. On the other hand, there are clearly some products that have segmented on demographics and have been quite successful. Autos—BMW has successfully targeted women. Volvo has focused attention on families, and Cadillac has segmented on both age (38-45) and sex (females). One might also argue that each of these has focused on lifestyles as well. Chapter 6 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 6-7

Fast foods—most fast food shops segment on the basis of age, with most going after the 18-45 year groups. At the same time, others they have also employed lifestyle segmentation (fast service) and benefit segmentation (quality of food, fat content, etc.) Snowboards—snowboards have definitely targeted the younger generation (the vast majority of snowboarders are young, and most young prefer snowboarding to skiing). Snowboard manufacturers have also appealed to lifestyles and attitudes—successfully targeting Generation X and Y’ers. In sum, it might be said that all demographic segments have other bases for segmentation, as it is not the fact that one is of a certain sex or age that serves as the reason for using a product as much as it is the benefit or use of the product itself. B. Marketers have increased their efforts to reach ethnic markets. Explain why this may be occurring. Bring to class examples of ads targeted to various ethnic groups. Marketers are increasing their efforts to reach ethnic markets as part of their market segmentation strategies. Many marketers have come to the realization that ethnic markets represent important market segments that can be targeted most effectively with specific marketing and promotional programs. There are media vehicles that reach specific ethnic markets such as Chinese, Italian and Greek and the consumption patterns and decision making criteria of these groups are often different from the mass market. Students should be encouraged to find magazines or newspapers that reach specific ethnic markets and bring in examples of some of the ads that appear in these publications. C. Assume that you are the advertising manager for a new hot cereal product. Perform a competitive analysis for your brand giving attention to the various forms of competition noted in the text The various forms of competition discussed in the text range from direct brand competition to other product forms to more indirect forms of competition such as product substitutes. A new hot cereal product would compete against other brands of hot cereal such as Quaker Oats Oatmeal, TOTAL Oatmeal, and Cream of Wheat. Hot cereals also must compete against the vast number of traditional ready-to-eat cold cereals. Competition for a hot cereal also comes from other hot breakfast products such as pancakes, waffles and French toast. The fact that many companies offer easy-to-prepare versions of these products that can be heated in a microwave or toaster makes them an important form of competition for hot cereals. Of course there are numerous other breakfast foods such as eggs, fruit, pastries and the like that a firm competing in the breakfast market must consider. D. Establishing brand image is often difficult for new companies. Explain what these companies must do to establish a strong brand image. As noted in the chapter, developing an image requires positioning. The chapter notes that there are six questions that must be answered to develop a position. In reviewing these, it becomes obvious that to create an image, the organization must determine what it wants to be, how it is different from competitors, and whether or not it can claim and maintain that image. The image then must be supported by an integrated marketing communications program, with each element designed to reinforce the image. Many companies fail to achieve a distinct image in the marketplace for a variety of reasons. First, all communications efforts do not support this image, due to inconsistencies. Secondly, the brand or corporate identity does not contribute to the overall image. Most importantly, building an image takes time. Companies that have been successful in building and/or changing their images have invested Chapter 6 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 6-8

much time and effort into this endeavor, and have stayed with one consistent strategy through thick and thin. E. Discuss the various attitude change strategies recognized by the multiattribute model. Discuss how an airline could use some of these attitude change strategies in their advertising and marketing programs. The multiattribute model provides insight into several ways marketers can influence consume attitudes. Each of these strategies might be used by an airline to influence the attitudes of flyers toward their airline. Each will be discussed. The first strategy is increasing or changing the strength or belief rating of the airline on an important attribute. The airline should identify which attributes are important to flyers and emphasize them in their ads. For example, most airline flights are priced similarly so they focus their marketing and advertising on the quality of their service. They run ads that stress the high quality of customer service they provide at all levels of the flying experience. Another strategy is changing consumers’ perceptions of the importance or value of an attribute. An airline may want to emphasize a particular feature or benefit and why it is should be important to flyers. For example, many airlines talk about their frequent flyer programs and encourage consumers to accumulate miles by being loyal to them. Adding a new attribute to the attitude formation process is another strategy recognized by the multiattribute model. An airline may find a new service or benefit it wants to provide to consumers that isn’t currently offered by competitors. For example, some airlines have increased the amount of leg room they offer in coach class while others offer wider seating. A final strategy is changing perceptions of belief ratings for a competing brand. An airline may identify an area where a competitor is weak or vulnerable and note this in a comparative ad. For example, one airline may have a better offering of flights between two cities or may have a better ontime arrival record. These advantages could be pointed out in a comparative advertisement. F. Why is the brand attitude model important for brand positioning strategy? The model is important since it provides a way of understanding and computing a target audience’s attitude to a brand. It is comprised of general cognition and affect towards the brand and individual cognitive and emotional element as well. These are manifested with beliefs about brand attributes (or benefits) and their importance. Once the decision maker has laid out all the possible attributes, and possibly obtained marker research ratings on them, the focus turns to which one or ones that need to be improved through communication to improve the overall brand effect. A few strategies to do this are shown in the text to plan for individual components to change.

IMC Exercise Find examples where an advertiser is having multiple brand positioning strategies. Suggest to students to find communications for a brand that are directed current customers (e.g., switchers) and other communications for the same brand that are directed to non-customers (e.g., new category users). Ask the students what makes the positioning unique for each target audience to support the brand position and what make the positioning similar to help support the overall market position.

IMC Comprehensive Project Students should be considering various positioning options at this stage so that the creative strategy and tactics have an appropriate strategic direction. IMC Project Assignment for Chapter 6 Develop market position and brand position diagrams for the brand you are marketing. Identify certain opportunities for developing an improved brand positioning strategy decision. What attributes or benefits should the brand claim in its new advertising campaign? What method of positioning is most relevant in terms of consumer or competition? Identify the most relevant motive to base your positioning. What sources of information should be use as for the creative to support the brand positioning strategy?

CHAPTER 7 CREATIVE STRATEGY DECISIONS Chapter Overview Promotional planners receive direction from the situation analysis and decisions of the strategic marketing plan and must translate that information into communication strategies for its target audiences. Further, promotional planners must work with creative specialists to ensure that the communication strategies are executed with appropriate creative messages. This chapter is devoted to the specific creative strategy decisions in advertising; creative theme, message appeal, and source characteristics. Approaches used for determining the creative theme that forms the basis of an advertising campaign are described. Different types of message appeals are presented and theoretical conclusions from academic research are provided. Adaptation of a model of source characteristics and its implication for advertising is explored.

Learning Objectives 1. Summarize the idea and importance of creativity in an advertising context. 2. Describe the creative strategy planning process. 3. Identify the approaches used for determining the creative theme that forms the basis of an advertising campaign. 4. Summarize the different types of message appeals that advertisers use to persuade their target audience. 5. Identify the source or communicator options a marketer has for a promotional message. 6. Apply source and message appeal options for different ad executions.

Chapter and Lecture Outline One of the most important components of an integrated marketing communications program is the advertising message. There are a myriad of ways to convey an advertising message, however, underlying the messages is a creative strategy determining what the advertising message will communicate and creative tactics dealing with how the message strategy will be executed. The focus of this chapter is on the development of creative strategy while tactical issues are covered in Chapter 8. I.

ADVERTISING CREATIVITY

It is relevant to define the concept of creativity and explain its importance to see how it is a critical part of the promotional program. We examine the concept of creativity in general and see how it works in advertising. A.

Definition of Advertising Creativity—creativity is one of the most commonly used terms in advertising as those who develop advertising messages are referred to as “creative specialists”. Advertising 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.” Chapter 7 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 7-1

We are concerned with advertising creativity, which refers to “the ability to generate fresh, unique and appropriate ideas that can be used as effective solutions to communications issues.” Creative advertising ideas that are appropriate and effective require relevance and divergence. Relevance pertains to ad to consumer relevance and brand to consumer relevance so that processing and communication effects can take hold. Ads that hold no relevance for consumers are typically avoided or ignored. Seemingly in contrast though, divergence is important to break through the clutter of competing ads by as it offers a novel or unexpected scenario via originality, flexibility, elaboration, synthesis, artistic expression. B.

Importance 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. 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. Attention must also be given to the issue of creative versus effective advertising as ads may be critically acclaimed from a creative perspective but fail to help the sales of the brand. Differing views of advertising creativity are seen among creative specialists as art directors and copy-writers can disagree on this matter, in addition, advertisers, students and the general public often differ in their views on creativity. Research concludes that processing effects and communication effects are two key indicators of effective creativity.

II.

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 often hire advertising agencies to develop and implement their advertising campaigns because they are specialists in the creative function of advertising and are prepared for the creative challenge. 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. Planning creative strategy follows a general process that guides the development of the advertising campaign. Various types of research and information provide input and insight into the creative process. We discuss the concept of copy platforms that summarize the creative strategy recommendations of the creative specialists that guide the development of advertising campaigns. A.

Creative Challenge—individuals 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.

Creative people in agencies may 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, managers are more comfortable with advertising that is straightforward in communicating with customers and gives them a reason to buy. B.

Creative Process—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 suggests that creative thought evolves in four stages Preparation. Read background information Incubation. Get away and let ideas develop Illumination. See the light or solution Verification. Refine the idea and see if it is an appropriate solution. Models of the creative process offer an organized way of approaching an advertising problem. These 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. A key factor is also the involvement of all participants including client personnel, creative specialist and account planners.

Account Planning—account planner drive the creative process from the perspective of the client and coordinate the research so that creative and media specialists have sufficient information to make decisions that are effective for the client’s needs.

Research in the Creative Process—specific research occurs at each of the stages of the creative process. 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 •

General preplanning input—informal fact-finding techniques and general preplanning input. Various ways of gathering background information might be discussed.

•

Product/service specific preplanning input—this involves different types of studies, usually quantitative, such as attitude, market structure and positioning, perceptual mapping and psychographic studies.

•

Qualitative research—techniques such as in-depth interview or focus groups with customers or ethnographic studies. Focus groups are a research method whereby consumers (usually 10 to 12 people) from the target audience are led through a discussion regarding a particular topic.

•

Evaluative research—at the verification stage of the creative process specialists evaluate ideas that come from the first stage, reject any that may be inappropriate, and refine those Chapter 7 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 7-3

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 E.

Creative Brief—a creative brief 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 copy platform outline is shown in Figure 7-2.

Advertising Campaign—a main characteristic of a campaign is multiple executions to tell the story of the brand and to allow consumers an understanding of the brand message. Generally, a minimum of three executions are run for marketing communication to be considered a campaign in comparison to a singular ad placement. This notion of three is not proven, but generally understood and is more of a practical suggestion based on observation.

III.

CREATIVE THEME

Most advertisements are part of a series of messages that make up an advertising campaign, which consists of multiple messages, often in a variety of media that centre on a single theme. The creative theme is a critical decision as it sets the direction for the development of the individual ads that make up the campaign that should reflect the market positioning strategy and establish the brand positioning strategy for the intended target audience. A campaign theme should be a strong idea, as it is the central message that will be communicated in all the advertising and other promotional activities. A.

Origin of Creative Theme—an important part of creative strategy development is determining the central theme that will become the big idea for the ad campaign. There are several different approaches that can be used for developing the big idea and as the basis of creative strategy. Some of the best known and most discussed approaches include: 1. The unique selling proposition—this concept is described in Rosser Reeve’s Reality in Advertising. It’s 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—Leo Burnett believed advertising should be based on a foundation of consumer benefits with an emphasis on the dramatic element in expressing these benefits. 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. Positioning is often the basis of a firm’s creative strategy when it has multiple brands competing in the same market. Chapter 7 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 7-4

These approaches to determining the major creative theme 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 pointed out that other creative approaches and styles are available and are often used in advertising. B.

Campaign Slogans—The campaign theme is usually expressed through a slogan or tagline which briefly summarizes the idea in a few “catchy” words. Guidance on the selection of the best type of slogan are connected to brand attitude, brand awareness, strategic direction or aestethics.

Creative Consistency—it is generally recognized that successful creative themes tend to have consistency so that the target audience instantly understands that it is connected to a specific brand and when a particular execution is part of its respective campaign. The issue of consistency is summarized with examples in terms of time, executions, media, promotional tools and products. Of course there are also situations where companies struggle to find a creative formula that works effectively.

Canadian Creative Themes—the essence of a Canadian edition is captured in this part of the chapter that attempts to illustrate the importance and the success of unique creative themes for brands marketed in Canada. Instructors can raise the issue as to whether students agree with the conclusions of the culture research and whether the results imply the need for unique Canadian creative themes. A description of the Canadian awards can be contrasted with international competitions or merely described and winners shown, so that students are familiar with success.

IV.

MESSAGE APPEALS The message 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 rational appeals and emotional appeals.

Rational appeal—this type of appeal focuses on the consumer's practical, functional or utilitarian need for the product or service and/or specific reason for owning a particular brand. Examples of a product- or service-related appeal that would fall under the category of a rational appeal are discussed including: •

Feature appeal

•

Comparative appeal

•

Price appeal

•

News appeal

•

Popularity appeal

•

Reminder appeal

Emotional appeal—this type of appeal relates to consumers' social and/or psychological needs for purchasing a product or service. Emotional appeals are popular as marketers observe via research that many purchase decisions are made on the basis of feelings and emotions since rational, functional-based differentiation between brands may be difficult. Examples of negative and Chapter 7 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 7-5

positive emotions that can serve as a basis for an emotional appeal are shown in Figure 7-3 of the text and can be reviewed. C.

Fear appeal—is used to create anxiety in the audience and arouse individuals to take action. Fear can stress negative consequences that may occur if behaviour is not altered such as ads that warn people not to smoke 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). A fear appeal 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 7-4 and should be discussed. Attention is also given to an alternative approach to the curvilinear explanation of fear—the protection motivation model.

Humour appeal—are used 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 distracter. Problems with a humourous appeal include the possibility of drawing attention to the ad but at the expense of message content. Effective humour 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. Top advertising executives’ opinions of the pros and cons of humour are summarized in Figure 7-5 and should be discussed.

Combined Rational and Emotional Appeal—purchase decisions are often made on the basis of both rational and emotional considerations. Thus rational and emotional appeals may be combined in the advertisement to attempt to influence both types of purchase motives. Sometimes, teaser advertising combines both rational and emotional appeals by talking about a brand but not actually showing it to build curiosity, interest, and/or excitement about a brand.

SOURCE CHARACTERISTICS The source of a marketing communication can be viewed as a multifaceted concept since 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 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 we use 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. This scheme recognizes three basic categories of source attributes with each involving a different process by which the source influences attitudinal or behavioural change in the message recipient. Chapter 7 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 7-6

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 behaviour through a process known as internalization whereby the receiver desires to have an objectively correct or “right” position on an issue. 1. Source expertise is an important dimension of credibility through spokespeople such as doctors or professionals who endorse a brand. Celebrities may be seen as experts in some instances (e.g., sport equipment). Authoritative spokespeople with certain a certain demeanor may also be perceived as experts. 2. Trustworthiness is another important dimension of credibility through spokespeople who demonstrate characteristics in which the message would be more believable. Using corporate leaders as spokespeople—companies believe the use of their president or CEO is the ultimate expression of the company’s commitment to quality and customer service. 3. Limitations of credible sources—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.

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. 1. 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. A common cognitive response to ads with a similar person as the target audience is something along the lines of “I can see myself in that situation”. Ads with a similarity source characteristic often feature a person who looks like an “everyday” person.. 2. Likability—marketers use source characteristics that enhance the brand in every imaginable way such as looks, personality or behaviour. A common technique used by advertisers to draw attention to an ad and enhance its effectiveness is the use of 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 but not the product or advertising message. 3. Familiarity—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” due to their familiarity 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 Chapter 7 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 7-7

course, their purchase behaviour toward the brand the celebrity is endorsing. Familiarity is also observed with people or situations that are common, like the typical office worker or a normal family situation. 4. Issues in using celebrities—Despite the prevalence of using a celebrity, a number of factors must be considered in using celebrities as a spokesperson 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 audience’s Receptivity—attention must 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. d. Risk for Advertiser—a risk to the brand occur if the celebrity’s behavior is inappropriate in some manner that is not agreeable to the target audience. 5. 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 a celebrity projects to consumers. An insightful perspective on celebrity endorsement based on meaning transfer has been developed by McCracken. His model, which is shown in Figure 7-6 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. VI.

IMC PLANNING: MESSAGE AND SOURCE COMBINATIONS

Examples are highlighted where advertisers use varying combinations of source and message appeals thus suggesting a planning template shown in Figure 7-9. The idea of the IMC planning section is to indicate the variety of choices promotional planners have within the basic creative strategy concepts.

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. Since the creative message is so critical to the goals of so many parties involved, and since the creative has a significant connection to positioning, this chapter has attempted to demonstrate the connection more Chapter 7 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 7-8

obviously than other texts. 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 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. This chapter is devoted to the three primary decisions that constitute the creative strategy. It is important to make sure the basis definitions are communicated, but it is especially important to investigate actual ads for two purposes. First, students generally need help identifying the decisions that an advertiser has used in a print ad for example. Thus, basic comprehension questions can be asked with relevant examples. Second, instructors should explain or generate discussion on the reasons why the advertiser might have made their decision and how the ads in question would be appropriate for achieving communication effects and for reinforcing the brand positioning strategy. Lecture and discussion should definitely use as many examples as possible.

Vignette 1. Why is an emotional connection to a car brand so important? Car purchases and ownership have considerable rational and emotional evaluations associated, so it is expected to find marketing communication laden with emotional content. This is especially true for TV ads for cars since one primary purpose is to encourage dealer visits for a test drive and salesperson interaction. Additionally, these VW ads would likely resonate with current owners and reconfirm their emotional attachment to their VW. Attitudes are comprised with cognition and emotion components as Chapter 4 and 5 illustrated, so car brands like VW will always have a strong emotional messages to influence this important communication objective. 2. Why is it valuable for VW to have many different creative themes across all of its brands? The creative theme contributes to the brand position so if each VW model has a unique brand positioning strategy, this would suggest that that each brand will have its own creative theme. Some car brands have a consistent theme across all their models since there is more a car brand positioning occurring vs. model positioning. This question illustrates how marketing communication influences the brand strategy that car manufacturers pursue and instructors are encouraged to look across multiple brands to uncover what is occurring on this point.

IMC Perspective 7-1 1. Does the evolution of Telus’ creative theme make sense based on its past success? We continue to have Telus examples in the book as it is one of the longest running creative campaigns in Canadian history. And the almost unprecedented movement from one brand name to another makes this case quite fascinating. Some might contend that the imagery had worn out and that Telus had no choice but to venture in new directions, while others might contend that there are so many animals which allow Telus to continue this on indefinitely. As the new messaging shows, Telus Chapter 7 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 7-9

decided that an evolution in the creative theme was deemed necessary. Given the importance of competing on service with an undifferentiated product, one might suggest that it is a good step. Allow students to debate and bring out points regarding processing, communication effects, brand positioning.

IMC Perspective 7-2 1. Do changes to the name and focus of the Cannes awards festival make it more or less enticing for an advertising agency to enter? One would likely argue that the changes are more attractive for agencies since there are more avenues for demonstrating their talent. With Canadian entry fees hitting $600,000, it appears that agencies are gravitating to the new format. An emphasis on creativity is an important step since it recognizes the value of unique message delivery in multiple formats. Another factor to consider is that as other media are added, the Cannes Lions distances itself away from the Cannes Film Festival, making it a much more unique event for the marketing communication industry. Most people will likely agree that the changes are welcomed by providing more opportunities for exposure of fine creative work.

Answers to Review Questions 1

Television commercials can use unusual creativity that has very little relevance to the product being advertised. Explain why creative specialists would recommend such ads and why the brand managers would approve the production and placement. Creative personnel face a major challenge as they must develop ads that will break through the media clutter and grab the attention of the viewer, listener or reader. This can be particularly difficult in the broadcast media and online as consumers watching TV, listening to radio or browsing 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 for any one ad to get 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 get noticed by the consumer. 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 but do get 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 should be challenged to do more than develop irreverent or unusual messages.

2. Describe the types of general and product-specific preplanning input one might evaluate when assigned to work an advertising campaign for a new brand of bottled water. 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 Chapter 7 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 7-10

affecting the beverage market such as the increasing popularity of new age drinks. 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). 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. 3. What is your opinion of advertising awards, such as the Cannes Lions, that are based solely on creativity? If you were a marketer looking for an agency, would you take these creative awards into consideration in your agency evaluation process? Why or why not? There are numerous arguments that can be made both for and against advertising awards that are based primarily on creativity. In defense of awards based on creativity, it should be noted that a major challenge given to the artists, copywriters, and creative directors is basically to be creative. They are given the charge of turning advertising and communication objectives, product/services attributes and benefits, and selling premises into a creative concept that will bring the message to life and capture the attention of consumers. Another argument in favour of the value of creative based awards is that they function as “report cards” from the other creatives who judge them and help the advertising industry set high standards for itself. It has also been argued that creative awards are very motivating to creative people, who often are driven by more than financial compensation, and are a catalyst for creative excellence. There are also problems with creative awards such as the classic argument that an award-winning ad is of little value unless it results in sales of the product. Critics of awards have also noted that agency personnel have become too obsessed with winning creative awards and too much time, energy and money are devoted to entering advertising award competitions. There is also concern that the creative personnel may be more concerned with the award winning potential of an ad than its ability to sell the client’s product. Critics of awards have also noted that there are simply too many of them and they have lost their value and meaning. In fact even the Clio awards have lost much of their credibility and distinction as the “Oscars of advertising”. It is reasonable for agencies as well as individuals to pride themselves on their creative awards. First of all awards recognize that the creative specialists are doing their job very well. Moreover, creative awards can be very important to an agency (and individuals) in terms of recognition, visibility and ultimately more business and income. 4.

Assume that a government agency wants to use a fear appeal message to encourage college and university students not to drink and drive. Explain how fear appeals might affect persuasion and what factors should be taken into consideration in developing the ads. Fear can affect persuasion in both a positive and negative manner. An anti-drinking and driving message with a low level of fear can have facilitating effects if it attracts the attention and interest of students 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 behaviour of college students 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 Chapter 7 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 7-11

may cause students to tune it out, perceive it selectively, counter-argue against it or discount the likelihood of the negative consequences happening to them. One potential problem with anti-drinking and driving messages targeted at students is that young people 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 for this audience. As noted above, students 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 might be 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 non-users of a product than users. Thus it may be more effective to target fear appeals at those students who are not heavy drinkers and encourage them to take responsibility for those students who do drink and drive. The designated driver program and responsible drinking campaigns of liquor and beer companies often do this. 5.

What are source characteristics? What types are there? How do they affect processing of a message and the communication effects of the message? Source characteristics are source credibility comprised of source expertise and source trustworthiness, and source attractiveness comprised of source similarity, source likability, and source familiarity. Each of these five characteristics can influence the processing in varying ways via low or high involvement or their emotional content (e.g., processing) or communication effects (e.g., awareness). For example, a high profile celebrity endorser will likely attract attention and facilitate emotional associations to the brand via the spokesperson. Similarly, the celebrity may allow stronger recall from the brand connection made in the ad with the fame of the person. This illustration shows the kind of logic student should use when making creative strategy decisions. The decision must be justified in terms of how it would link to the effects of the communication.

How is it possible that an IMC program could have multiple sources for the message using both rational and emotional appeals? An IMC program will likely be using multiple media and multiple IMC tools to influence rationally and emotionally. Since the points raised in question five are realistic, the IMC program may use different sources across the media and tools resulting in differing effects. For example, the telecommunication brands often will use a more rational appeal on radio and have an entirely different source than those used in the TV ads where the message may be a combined rational and emotional appeal. Alternatively, aspects of digital messaging may be solely emotional leading to an entirely unique source. These points can carry over to IMC tools where the brand may use different sources for public relations activities. For example, Clara Hughes is the focus of Bell’s Let’s Talk campaign in support of mental health, however she is not a spokesperson for Bell’s regular advertising.

Answers to Applied Questions 1. Find an example of a print ad that you think is very creative and ad you feel is dull and boring. Evaluate each ad from a creative perspective. What makes one ad creative and the other ad bland? Students should be asked to find examples of print ads that they find particularly creative as well as dull and explain why they judge them so. Their analysis should focus on specific aspects of these ads Chapter 7 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 7-12

that make them exciting or interesting versus dull and boring. It is likely that they will find more creative and exciting ads in publications that are targeted to their age group such as Rolling Stone or fashion magazines. Less exciting ads may be found in general interest publications such as Reader’s Digest, and Time and or business publications. 2. The chapter outlined a few campaigns; look on the Internet to research and figure out the most successful Canadian campaign in recent years. Students should likely find CASSIES in their investigations since this is referenced in the section for LO2. They may also find creative awards presented by each media or by the trade publications. The idea of the question is for students to seek out Canadian examples of very good advertising to understand that very good creative is originating from Canada. An additional point to raise is that students should be in tune with the fact that they are seeing Canadian, American and International campaigns on a daily basis and that understanding the source will give a new found appreciation of the styles and messages. 3. Find an example of an ad or campaign that you think reflects one of the approaches used to develop a creative theme such as unique selling proposition, brand image, inherent drama, or positioning. Discuss how the creative theme/idea is used in this ad or campaign. There are four approaches discussed in the text for developing creative theme/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 creative theme and describe the logic of their selection. Instructors should challenge students on why the selection is effective and also investigate whether an alternative approach might have worked as well or better. 4. Describe how a few of the negative emotions conveyed in Figure 7-3 could be used in a campaign for car insurance. Describe how a few of the positive emotions convey in Figure 7-3 could be used in a campaign for smartphones. Anger can be shown in a scenario where the policyholder does not have the proper coverage during a claim and is therefore dissatisfied and the ad can show the frustrated consumer moving to a new brand of insurer. An unexpected negative emotion could be envy where a policyholder sees a friend or relative get certain coverage not part of his or her policy. Contentment is often shown in smartphone ads where consumers enjoy and savor the features of the new version. 5. Find a celebrity who is currently appearing in ads for a particular company or brand and use McCracken’s meaning transfer model (shown in Figure 7-8) to analyze the use of the celebrity as a spokesperson. 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. Chapter 7 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 7-13

6. Actors portraying doctors in ads are often used for rational appeals. In what situation might it make sense to have a doctor for an emotional appeal? What type of emotional appeal would be most logical from Figure 7-3. The purpose of this question is for students to apply the ideas of Figure 7-7. It would be generally unexpected to use a doctor for emotional appeals and that is the idea of Figure 7-7, to allow promotional planners to think beyond traditional means when putting together a creative strategy. In all likelihood, it will be challenging for students to arrive at a scenario where a doctor spokesperson may work for some of the emotions, but the exercise does prove to be a challenge to figure out.

Additional Discussion Questions (not in text) A. Discuss the pros and cons of using a comparative advertising appeal. There are several advantages to using a comparative advertising message. A comparative ad may be a way of gaining attention, particularly when a new or lesser-known brand compares itself to a wellknown brand or market leader. Comparative ads also allow a company to directly communicate the features, attributes, benefits, and advantages of its product or service relative to those of its competitor(s). For a new brand, comparative advertising provides a way of positioning the product in the evoked set of brands the consumer might consider. Potential problems with comparative advertising are that consumers may see these ads as less believable and more offensive than noncomparative messages. Users of the attacked brand may be particularly skeptical about the credibility of comparative claims. There is also the possibility that the use of a comparative message may focus more attention on the competitor’s brand and benefit them more than the sponsoring brand. B.

What are the differences between creative strategy and creative tactics? Why is it important to make a distinction between these two concepts? Creative strategy determines what an advertising campaign and messages will say or communicate. It is best viewed as a process that is 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 execution styles as well as the tactical issues involved in the design and production of advertising. It is important to make a distinction between the two concepts because the creative strategy must be established before the customer tactics are developed.

What is meant by a unique selling proposition (USP)? Find an example of an ad your feel uses a unique selling proposition as its major selling idea. Evaluate this ad against the three characteristics of USP’s discussed in this chapter. The concept of the unique selling proposition (USP) was developed by the famous advertising copywriter Rosser Reeves. The concept of a USP is that it offers the consumer a specific feature or benefit 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.

D. Discuss some of the motives that can be used as the basis of rational advertising appeals. Find examples of ads that use some of these rational motives as the basis for their advertising appeal. Rational appeals focus on the consumer's practical, functional, or utilitarian motive for purchasing a product or service and emphasize specific features and/or benefits or reasons for owning or using a particular brand. Rational appeals are most appropriate for highly involving or complex consumer products. These types of appeals are commonly used when consumers have a high need for information and are likely to evaluate and compare alternative brands. Specific benefits that can be used as the basis for functional motives include quality, performance, efficacy, durability, reliability, dependability and efficiency. Students should have no trouble finding ads that use rational motives as the basis for their advertising appeal. E. What are the stages of the creative process? Do you agree with the notion that advertising creativity can or should follow a definitive process? The stages of the creative process of advertising include: preparation → incubation → illumination → verification/revision. The notion that there is some definitive process to advertising creativity is logical although it should not be expected that every creative specialist will follow this procedure in developing an advertisement. Models of stages of the creative process are valuable as they offer an organized way of approaching an advertising problem. Virtually all creative specialists will want to prepare themselves by gathering background information that is relevant to the advertising problem or by examining research or engaging in fact finding that will help them generate creative ideas or solutions. It is also important to subject creative ideas to verification so as to reject any inappropriate ones and refine and polish those that remain in order to give them optimal final expression. F.

Most marketers choose message sources with high credibility. Discuss some reasons why it may be unnecessary or even detrimental to use a source that is high in credibility. 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 favourable. 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 favourable 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 because of 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.

G. Companies sometimes use athletes with a negative reputation or image as a spokesperson in their advertisements. What risks are they taking? Companies might use a controversial figure for a number of reasons. First of all he or she cuts through the clutter and attracts attention to the advertising message, whether it is in a magazine or on Chapter 7 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 7-15

television. Some companies also feel he or she strikes a responsive chord with younger consumers and is an effective spokesperson for Generation Xers who identify with his cynical, authority-hating and rebellious attitude. They also feel while his or her behaviour can be embarrassing at times, it is not really that bad. Some companies are willing to accept and deal with the controversy that comes with the use of spokespersons with a negative reputation and/or image. However there does come a point where their behaviour creates too problems and can reflect negatively on the company that uses them. For example, most endorsement contracts have escape clauses that allow companies to drop a spokesperson at the first hint of drug use, sexual scandal or criminal charges. Marketers must also consider the audience they are targeting with their advertisements. While younger audiences and Generation X-ers may be willing to tolerate the antics of some spokespersons, older consumers are much less likely to respond to spokespersons who are too controversial. H.

Evaluate the argument that humourous messages may wear out faster than other types of advertising appeals. Do you agree or disagree with this position? Commercial wearout refers to the tendency of a message to lose its effectiveness when it is seen repeatedly. While wearout is a potential problem for any type of commercial, some advertising experts argue that humourous ads may wear out faster because once the consumer sees a funny spot a few times and gets the joke, the ad becomes boring. Wearout can occur because of inattention or annoyance at seeing an ad often. Critics argue that humourous commercials wearout faster because consumers stop paying attention to them and may become annoyed at seeing the ad over and over. Arguments can be made, however, as to why humourous ads will not wearout any faster than other types of commercials and may even wearout more slowly. Many humourous spots are very entertaining and TV viewers enjoy watching them over and over (the basic “I love that commercial” idea). It is probably incorrect to argue that humourous ads wearout any faster than other types of commercials. The rate of wearout probably depends on the individual commercial and consumers’ reactions to it.

IMC Exercise Find an example of three current advertising campaigns that are using at least one of the following source or message factors: •

a celebrity spokesperson

•

a corporate leader such as the president, founder or CEO as an advertising spokesperson

•

a fear appeal message

•

a humourous appeal message

Analyze the advertisers’ use of this particular source or message factor. Why do you think they chose to use this particular source or type of message? Are the spokespersons and/or messages appropriate or inappropriate for this particular brand of product or service? How might the use of this type of source or message impact the way consumers in the target audience respond to the advertising campaign?

IMC Comprehensive Project Students should be prepared to begin focusing attention on the advertising component of their IMC plan. They should be able to use the information in this chapter to begin developing the creative approach and campaign theme for their plan. The specific assignment is as follows: IMC Project Assignment for Chapter 7 You should be ready to begin developing the advertising component of the IMC plan for your product or service. Develop a copy platform that contains the basic creative strategy for your advertising campaign. You can use the copy platform outline shown in Figure 7-2 as a guideline. What is the advertising campaign theme you have chosen for your product or service? Are you using any of the approaches discussed in the chapter such as unique selling proposition, brand image, inherent drama or positioning as the basis for your major selling idea? Identify the message appeal that would most suitable and provide justification based on conclusions from your situation analysis. Determine if you will use any key source characteristics to influence the target audience you have previously selected.

CHAPTER 8 CREATIVE TACTICS DECISIONS Chapter Overview This chapter summarizes three decisions that are critical when developing creative tactics: execution style, message structure and design elements. The chapter then presents a framework for creative specialists and marketers to help them make the appropriate decisions for the creative tactics. The framework uses the target audience’s attitude as the key factor when deciding upon the correct execution style, message structure and design.

Learning Objectives 1. Analyze the creative execution styles that advertisers can use and the situations where they are most appropriate. 2. Explain different types of message structures that can be used to develop a promotional message. 3. Express design elements involved in the creation of print advertising, video, and audio messages. 4. Apply a planning model for making creative tactics decisions. 5. Illustrate how clients evaluate the creative work of their agencies and discuss guidelines for the evaluation and approval process.

Chapter and Lecture Outline I.

EXECUTION STYLE

Creative execution style 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. Usually, execution techniques are combined in presenting an advertising message. For example, slice-of-life ads are often used to demonstrate a product or make brand comparisons. Some of the more commonly used execution techniques include: A.

Straight-sell—relies on a straightforward presentation of information about the product or service such as specific attributes or benefits.

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.

Demonstration—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.

Comparison—involves a direct or indirect comparison of a brand against the competition.

Testimonial—whereby a person speak on behalf of the product or service based on his or her personal use of and/or experiences with it. Chapter 8 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 8-1

Slice of life—shows 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.

Animation—uses characters or scenes drawn by artists or on computer. Animation is often used as an execution technique for advertising targeted at children.

Personality symbol—involves the use of a central character or personality symbol to deliver the advertising message and with which the product or service can be identified. The personality symbol can be a person who is used as a spokesperson, animated characters or animals.

Imagery—shows an imaginary situation or illusion involving a consumer and the product or service. Cosmetic companies often use imagery executions although the technique has also been used in advertising for other products such as automobiles and beer.

Dramatization—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.

Humour—can be used as the basis for an advertising appeal, however, it can also be used as a way of executing the message and presenting other types of advertising appeals.

II.

MESSAGE STRUCTURE

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. A number of message structure considerations are discussed including: A.

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.

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 and nature of the situation.

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.

Verbal/Visual Balance—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.

III.

DESIGN ELEMENTS FOR IMC TOOLS

Once the creative strategy and initial creative tactics decisions have 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. A.

Design for Print Message—three basic components of a print ad include 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

2. Subheads—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. 3. 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. 4. 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. 5. Layout—a layout refers to the physical arrangement of the parts of the ad including the headline, subheads, illustrations, body copy and any identifying marks. B.

Design for Video Message—video messages have several components which must work together to create the right impact and communicate the advertiser's message. 1. Video—video or visual elements are what are seen on the screen. Decisions have to be made regarding the main focus of the visual such as the product, the presenter, action sequences, lighting graphics, color and other factors. 2. Audio—the audio portion includes several elements such as voice, music and sound effects. Voices may be heard 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 voice-over 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 is music which plays various roles and functions such as providing a pleasant background or helping create the appropriate mood or setting. Another important musical element is jingles, which are catchy songs about a product or service that usually carry the advertising theme and a simple message. 3

Production of Video Messages—various elements are brought together in a document known as a script which is a written version of a video message that provides a detail description of its video and audio content. The script indicates the audio components such as the copy to be spoken by voices, music and sound effects. The video portion of the script provides the visual plan. 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 message is ready to move to the production process involving three phases; preproduction, production, postproduction.

Design for Audio Message—audio messages have components which must work together to create the right impact and communicate the advertiser's message. Audio messages are traditionally heard with radio, but technological advancements are making them more prevalent in other domains like podcasts etc. 1. Verbal—the message is organized and structured much like the body copy in a print ad or the dialogue in a video message, however a number of styles are used to fit the verbal only format of audio ads. 2. Sound—the sound portion includes several elements such as voice, music and sound effects, with the latter two becoming very critical for branding purposes.

IV.

FRAMEWORKS FOR CREATIVE TACTICS

Two models are presented that guide the decision for selecting the most appropriate creative tactics. A.

FCB Planning Model—An advertising planning model known as the FCB grid delineates four primary advertising planning strategies – informative, affective, habit formation, and satisfaction – along with the most appropriate variant of the alternative response hierarchies (Figure 8-3).

The R&P Planning Model—The R&P perspective was discussed in previous chapters. Another part of their framework concerns recommendations for creative tactics which are as follows: 1. Brand Awareness Tactics—the first consideration is that the R&P model argues that brand awareness is a necessary precursor to brand attitude. 2. Brand Attitude Grid Tactics—The R&P view of consumer attitudes is also framed as a matrix with the dimensions of involvement and motivation. The creative tactics recommendations for the four brand attitude cells are as follows: 3. Low Involvement—Informational Creative Tactics—ads should have a very obvious benefit claim with an unusual execution style. 4. Low Involvement—Transformational Creative Tactics—three emotional portrayal guidelines are critical for this type of attitude.

5. High Involvement—Informational Creative Tactics—illustrates the importance of information as high involvement implies the requirement of considerable and accurate benefit claims. 6. High Involvement—Transformational Creative Tactics—persuasion through this type of attitude formation requires strong emphasis of the emotion. V.

IMC PLANNING: GUIDELINES FOR CREATIVE EVALUATION

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. There are two basic stages in the development of advertising—creation and production. 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. 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 communication objectives?

•

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 approach 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?

Teaching Suggestions Nearly every student has an opinion about the quality and effectiveness of ads and those that they feel are particularly good or bad. Students should enjoy reading this chapter and learning about the execution styles that can be used by advertisers. An interesting way of beginning the lecture on creative tactics 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 Marketing Magazine pick the best ads each year and feature them in special editions. 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 Chapter 8 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 8-5

production students might be referred to a more traditional advertising principles book such as Contemporary Advertising by William F. 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 some of the books in these areas such as 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.

Vignette 1. What execution style does Skittles appear to be using these “interactive ads”? The absurd activities occurring in the “ads” makes humour the most obvious execution style. A related issue to examine is whether these internet messages are akin to TV commercials allowing us to use the same terminology of execution style to identify a critical creative tactic decision. Naturally the answer to this is a resounding yes since creative specialists refer to all message placements as “executions” and no matter what kind of message or its delivery; there remains a style pertaining to it. This point is important to make as the blurring of media continues, but the essence of advertising principles are consistent. While arguing a humour execution style is realistic, and follow-up point is what kind of message appeal is used. Interestingly, one might argue a rational appeal since the focus in on the rainbow signifying the many flaovers of the candy. 2. Why is this execution style a good idea for a brand like Skittles? The execution style fits perfectly for a low involvement-transformational ad, a unique executional style that is implied very extremely, a singular benefit of flavour repeated many times, and a humourous execution for the target audience to like.

IMC Perspective 8-1 1. What is the motivation for consumers to participate in making an ad? Behind the excitement of brands adopting user-generated content for its advertising messages is the fact that very few consumers actually participate in such activities. The numbers participating are an extremely small number compared to the number of consumers who actually purchase from the brand. Many participants in some contests such as Doritos were people who are trying to break into the advertising industry as a career. No doubt, some consumers are genuinely happy as consumers of the brand and see the idea of sending video as a self-expression of some kind. As such, students will likely see this as a self-actualization motive. Alternatively, if consumers brag about having their video selected, students might argue for a social approval motive. In this respect, brands might be cautioned about using such content as it is not a genuine connection for purchasing and consuming the brand. 2. Are the consumers participating in the development of ads customers of the brands? The first answer addressed this to some degree as we can expect some consumers looking for career aspirations while others are clearly consumers of the brand and look for some kind of recognition. In all likelihood, some consumers may actually see themselves as brand ambassadors, although it seems unlikely they would be using this kind of terminology unless they studied marketing.

IMC Technology Perspective 8-1

1. When someone clicks on an interactive TV ad, is this experience like watching a TV ad, or like watching the brand’s video message on a video-hosting website? Processing messages in our newer multi-media environment is new and fascinating topic that this open-ended question explores. Certainly we are at the forefront of trying to figure out answers to this and other related questions. Student opinions are welcomed, and instructors are encouraged to broaden the discussion to other media including mobile devices etc.

Answers to Review Questions 1. Identify the difference between an advertising appeal and a creative execution style. Why is it important to make this distinction? 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 a rational 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 a rational appeal or for an emotional appeal. Students should be encouraged to analyze the particular appeals and execution styles used in selected ads. 2. What is meant by a one-sided versus two-sided message? Discuss some of the reasons marketers may or may not want to use a two-sided message. A one-sided message mentions only positive attributes or benefits associated with a product or service or a particular issues whereas a two-sided message presents both favourable and unfavourable information or arguments. The advantage of using a two-sided versus one-sided advertising message is that it may enhance perceptions of an advertiser’s credibility. Consumers often know that there are opposing arguments or viewpoints on an issue and an advertiser may be perceived as less biased and more objective if a two-sided message is used. 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. 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 and more credible and thus more effective. 3. Are headlines are more important for gaining attention or reinforcing awareness? 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. Research has shown that the headline is generally the first thing people look at in a print ad, followed by the illustration. Once the headline gets the consumer’s attention and is read, the communication effect kicks in. 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 Chapter 8 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 8-7

body copy and highlighting key sales points. Their content often reinforces the headline and advertising slogan or theme. 4. What are the similarities and differences of creative tactics across the four cells of the planning matrix? The similarities of the creative tactics across the four cells of the R&P framework concern three factors. The first is that all four routes to persuasion have a common structure regarding the emotional portrayal of the motive and the benefit of the brand message. Secondly, within the low involvement quadrants, we see that a couple of the recommendations are quite similar (i.e. number of benefit claims, extra benefit claims). This is also true for the two high involvement cells with respect to the intensity of the benefit claim and the emotional authenticity. Within the informational quadrants, we see that it is not necessary for consumers to like the ad for it to be effective and that unusual creative executions are feasible. Finally, we see the importance of the emotional authenticity as being important within the transformational quadrants. Once the similarities are noted, some of the differences become apparent. While a given cell shares some similarities with another, each has its own specific recommendations for persuading the brand attitude of the target audience. For example, moving from LI/IN to LI/TR we see how the emotional portrayal of the motive becomes more critical. Moving from LI/IN to HI/IN we see how important greater amounts of information are required to persuade the target audience. The best way to illustrate these similarities and differences is to have four ads that each represents one of the four cells. 5. Explain how the guidelines for creative evaluation can be applied to ads seen on the Internet. 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. Research has shown that the headline is generally the first thing people look at in a print ad, followed by the illustration. Once the headline gets the consumer’s attention and is read, the communication effect kicks in.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.

Answers to Applied Questions 1. Look through ads in other chapters and figure out what execution style is used. Do the same for video ads found online. There are so many ads in the earlier chapters that draw on alternative points so this question allows students to take a peek at them once again with a new perspective. Hopefully this provides a good integrative exercise to see how all the decisions operate. Once the execution style is identified, then the student can see the link between the style and the objective for example while examining ads from Chapter 5, or the link of the style and creative strategy decisions while examining ads from Chapter 7, or the link of the style and the positioning decision while examining ads from Chapter 6. Extending this logic, students can look at ads online and perform the same task. 2. What are the limitations of constructing standard print-format ads for Facebook and billboards? Chapter 8 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 8-8

These two ads are put together to show similarities of processing despite the divergent locations. In both cases, the receiver is concentrating on another task and may not divert their attention; the message is very short limiting the processing time; the degree of creativity is restricted with the production characteristics such that the cognitive and emotional associations will be minimized. Subsequent communication effects are therefore restricted in essential processing does not occur. 3. Brands are experimenting with long-form video messages online. Using the design elements discussed in the chapter, contrast this approach with a standard 30-second TV ad. When would a brand use both with in its IMC plan? Brands are using long-form video ads online when they want to re-launch their brand positioning strategy or when they want to creative a distinctive image for those who are seeking unique video messages online since they require a degree of effort to locate compared to seeing an ad on TV. Longform video messages provide greater opportunity for a story to be told thus putting the brand in a more involving context. These kinds of messages are attracting known directors and producers of TV and movies thus creating a newer form of PR compared to the hype surrounding TV campaigns. Brands have the opportunity to run a shorter version of the long-form in cinemas or on TV so that the message is consistent in the public, however, in the end the brand will likely use both formats if they see there is the opportunity to resonate with unique target audiences. 4. Find an ad for each of the four cells of the R&P framework for creative tactics. Identify the design elements that match the guidelines for each cell. This is a fun application exercise where students can compare the list of characteristics found in the latter part of the chapter to the ad that they have selected. It could be a very fun activity in class where students can make mini-presentations. Alternatively, the exercise could be adjusted and instructors could focus on any of the ads in this or any of the other chapters. 5. Apply the guidelines for creative evaluation to a campaign for Telus or Bell or Rogers, and conclude whether it passes all the criteria sufficiently. Similar to question 4, student can have practice arguing how and why the ads are effective based on structured criteria rather than saying trite commentary on whether they liked the ad or not. An important challenge for students when applying the material is to consider the point-of-view of the target audience rather than their own. Of course, students are consumers of the products of these brands, but instructors should bring in the ide of whether the messages are directed to customers or non-customers, and students can then adjust their thoughts accordingly.

Additional Discussion Questions (not shown in text) A. Why do 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? 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. Chapter 8 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 8-9

It is difficult to say whether consumers recognize the celebrities doing the voiceovers in commercials. Actors who have very distinctive voices may be recognized, however most consumers probably do not recognize the celebrities doing the voiceover in 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 the like). The voice characteristics that help make them popular entertainers may also be effective for television commercial voiceovers. B.

Find an example of an advertisement that you feel uses an inappropriate appeal and/or execution style. What type of appeal or creative execution do you feel would be more appropriate? This question requires the student to choose an advertisement that they feel uses an inappropriate appeal and/or execution style and to suggest one that they feel would be more appropriate. The students should be asked to provide some rationale as to why they feel the appeal or execution style of the ad they choose is inappropriate and why the approach they suggest would be better.

C. Discuss the use of slice-of-life execution techniques in advertising. For what types of products and services might this execution technique work best? 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 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. D. Explain how a humour execution style differs from a humour message appeal. A humour execution style is typically used to attract the target audience’s attention for a rational message or adds a demonstration of the more rational message to enhance some emotional responses thus allowing the processing to not be completely cognitive. In contrast a humour message appeal presents the attributes or benefits or emotional consequences of consumption consistently through all design elements and reinforces the positioning of the brand. E. What is transformational advertising? Why is it an importation option for advertisers? Transformational advertising reflects a transformational consumer motive in its execution and provides the target audience receiver of the message with an experience similar to the actual consumption experience. In a sense, the emotion within the advertising is so authentic, it resonates very significantly with the receiver such that he or she feel as if they are behind the wheel of the car advertised for example. F. Discuss the role music plays in advertising. Why might companies such as Microsoft, Cadillac, and Nike pay large sums of money for the rights to use popular songs in their commercials?

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 product or service being advertised. Music can also create a positive mood state that can make the consumer more receptive toward the advertising message. Companies 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.

IMC Exercise 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 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. 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 Marketing Magazine.

IMC Comprehensive Project Students should continue to develop the advertising part of their IMC project using the information in this chapter to help them. The specific assignment is as follows: IMC Project Assignment for Chapter 8 In the previous assignment you were asked to develop a copy platform that specified your campaign’s theme, appeal and source. Your assignment for this chapter is to specify the execution style that will be used to implement your ad campaign. What specific type of advertising execution technique will be used to present your appeal? Provide some rationale for the execution approach you plan to use. Address any relevant issues of the message structure. What specific tactical design elements will be important in developing your print and broadcast messages? Will your creative approach satisfy the guidelines discussed at the end of Chapter 8?

CHAPTER 9 MEASURING THE EFFECTIVENESS OF THE PROMOTIONAL MESSAGE Chapter Overview This chapter discusses one of the most critical—yet controversial—issues in all of IMC. While it seems perfectly logical that managers on both the agency and client side would like to know whether the programs they have implemented are effective, in reality the majority of IMC 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 IMC programs and establishes some of the essentials for proper testing.

Learning Objectives 1. Identify the reasons for measuring promotional program effectiveness. 2. Describe the measures used in assessing promotional program effectiveness. 3. Evaluate alternative methods for measuring promotional program effectiveness. 4. Appraise requirements of proper effectiveness research.

Chapter and Lecture Outline I.

THE MEASURING ADVERTISING EFFECTIVENESS DEBATE

Reasons for Measuring Advertising Effectiveness—three major reasons are offered: 1. avoid costly mistakes 2. evaluate alternative strategies 3. increase the efficiency of advertising in general 4. determine if objectives are achieved

Reasons for Not Measuring Advertising Effectiveness—four major reasons are offered: 1. high cost of conducting research 2. problems with research measures used 3. disagreement as to what to test 4. objections from creative people 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.

II.

DECISIONS FOR MEASURING ADVERISING 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. Chapter 9 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 9-1

What to Test—each of the elements of the promotional program should be examined. Research should be designed to determine the effectiveness of: 1. Creative Strategy decisions—all aspects of the creative strategy can be investigated to determine their communication effectiveness. Advertisers can test different themes for initial approval. The decision to use rational versus emotional appeals or different kinds of emotional appeals can be studied. Moreover, advertisers could assess consumer reaction to many options for spokespersons. 2. Creative Tactics Decisions—all elements of creative tactics are basis for evaluation. Advertiser can test consumer acceptance of a unique or unusual execution style. Various design elements (e.g., music) can also be looked at. 3. Other Promotional Tools—this chapter addresses the effectiveness of the message. Subsequent chapters examine effectiveness issues for the individual tools (e.g., sales promotion) and the media chapter gives students a sense of associated research issues.

When to Test—Effectiveness testing can generally be classified as: 1. Pretesting—Pretesting occurs prior to the implementation of the campaign. 2. Posttesting—Posttesting takes place once the program has been implemented. Figure 9-1 lists some of the many types of tests that fall into each category.

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.

III. METHODS OF MEASURING EFFECTIVENESS The actual testing of ads may take place throughout the campaign. Four types of tests are discussed. A.

Concept Generation and Testing—Figure 9-2 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 9-4 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.

Pretesting Finished Ads—many advertisers prefer to test the ad in its finished form. A variety of both print and broadcast measures may be used. 1. Pretesting finished print messages—a number of methods for pretesting print messages are provided. Some of the more common of these are: a. portfolio tests Chapter 9 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 9-2

b. readability tests c. dummy advertising vehicles d. diagnostic measures 2. Pretesting finished broadcast ads—some common methods for pretesting broadcast ads are: a. theatre 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—these are designed to measure advertising effectiveness on the basis of inquiries generated from ads appearing in print media. b. recognition tests – allows the advertiser to measure the impact of the ad c. recall tests—these attempt to measure recall of specific ads. 2. Posttests of broadcast commercials a. Day-After-Recall—Historically, the most popular method was the Burke Day-After Recall test which provided a recall scores, persuasion measures and diagnostics. b. Comprehensive tests—Figure 9-12 illustrates 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. c. Test marketing—many companies conduct tests designed to measure their advertising effects in specific test markets before releasing them nationally. d. Single source tracking studies—these track the behaviors of consumers from the television set to the supermarket checkout counter. e. 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.

IV.

IMC PLANNING: PROGRAM FOR MEASURING 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 final section, the chapter discusses how the marketer might establish a sound program for conducting effectiveness research. A.

Criteria for Effective Research—a number of problems with existing research methods are discussed with the PACT program (Figure 9-13) used as a standard against which to measure Chapter 9 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 9-3

these methods. In this section, each of the PACT principles is discussed with suggestions as to how each principle might be met. B.

Guidelines for 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: •

use of a consumer response model

•

establish communications objectives

•

use both pretests and posttests

•

use multiple measures

•

understand and implement proper research

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 time module 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 outcomes versus 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 Marketing Magazine, the National Post, Ad Age, AdWeek, and the Wall Street Journal often have articles relating to this subject matter. 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.

Vignette 1. What part of advertising effectiveness does this research measure? A major part of this measurement is attention as the eye-tracking captures where the receiver focuses their reading. To some degree, this might be a step prior as the received might deliberately avoid aspects of the ad and therefore be an indication of selective exposure. Since it is measuring attention, the post-test measures also attempt to determine if awareness is achieved with the recall and recognition measure occur. Some of the questions also indicate a measure of brand knowledge, so one might conclude to some degree preliminary measure of attitude. In short, the technique is useful for discerning processing and some communication effects. 2. Which marketing communication decisions will most likely be tested with this kind of research? Tactical considerations will most likely be tested, like headlines, images and the colours used for varying parts of the ad. Since it is tracking the attention primarily, any visual and verbal element pertaining to attention would be examined closely.

IMC Perspective 9-1 1. Why are advertisers so concerned with measuring emotions and involvement? As the response models and planning tools for communication objectives of chapters 4 and 5 indicate, both emotion and involvement are critical for persuasive and effective promotional messages. Emotional responses are a key processing phase so the measurement is quite important for advertisers Chapter 9 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 9-4

to know whether the intended emotional associations are in fact connected to the brand. Furthermore, the importance of brand benefits is the emotional component of attitude formation from a theoretical standpoint (beliefs x evaluations), so this provides an additional incentive for managers to measure. More recent communication models use involvement as a situational or contingency variable (i.e., high or low involvement) for understanding how the persuasion works, so again, this knowledge is generally very important for managers to assess whether they would choose to run ads or not or know whether the campaign can be deemed a success. 2. Should promotional planners measure these two variables for other IMC tools, such as sales promotions or direct response? The idea of IMC is that all promotional messages, no matter what the contact point, should use a communication response model for planning purposes to determine communication objectives. Furthermore, all contact points are now opportunities for brand building so promotional planners would certainly interested in developing sales promotions that are more involving and connect emotionally with consumers. A glance to the sales promotion chapter will highlight the idea of consumer-franchise building promotions and some of the perspectives illustrate key examples (e.g., Bring Home the Cup).

IMC Perspective 9-2 1. Express your feelings on whether you would volunteer as a respondent to this kind of research. The question places the student in a new role to get an idea of the situations we ask respondents to experience in order to obtain needed information for decision-making. A divergence of opinion would be expected, and instructors can compare the effort and involvement for respondents of this method versus other methods.

Answers to Review Questions 1.

What are the reasons why a company programs?

should measure the effectiveness of their promotional

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 monies 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 people 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.

•

Avoiding 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 the 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.

•

Determining if Objectives are Achieved—Testing can give an indication if the IMC program objectives are attained. Consistent with Chapter 5, an IMC program’s effectiveness can only be assessed with a proper identification and evaluation of its objectives.

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. 2. Discuss the differences between pretesting and posttesting. Give examples of each. 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. Examples of pretests include focus groups, consumer juries, physiological measures, in-home tests, theater tests, etc. Posttests are those that occur once the ad has been placed in the medium and exposed to the public. Posttesting is designed to (1) determine if the campaign is accomplishing the objectives sought, and (2) serve as input into the next period’s situation analysis. Examples of posttests include recall tests, comprehensive tests, diagnostics, inquiry tests, single-source measures and tracking studies. 3. Why might a firm use theatre test, on-air test and physiological measure to pretest its finish broadcast ads? All of these methods are used as a screening to determine whether the ad should be aired in a campaign. Presumably the results would indicate a sufficient number of “duds” if a marketer regularly used one or all of these methods. Over time, it is argued that the total cost of the research would be less than the enormous amounts of money wasted in media expenditures for a “bad” commercial, not to mention the possible lost contribution from annoying current or potential customers. Each research method offers its own unique strengths, since they are lab, field and physiologically based, and a manager would devise a research strategy based on their interpretation and conclusions. 4. Why are the PACT criteria important for testing effectiveness? The PACT criteria ensure that research to measure the effectiveness of ads prior to media release is performed to the highest standards of research as possible. It provides a common understanding in the industry so that are major participants agree to what, when and where to test when assessing ad effectiveness. The criteria are the research requirements related to the performance measures highlighted in the PBR system described in Chapter 2.

Answers to Applied Questions 1. Imagine how a creative director who worked on an exciting, daring, and provocative ad campaign for months would react if the campaign were to be scrapped prior to launch after preliminary research indicated it did not resonate with audiences tested? In all likelihood the creative director would be very upset and question the data. Some key concerns would be the testing methodology in terms of the type of data collected, what was measured, how the data was analyzed, how the results support the decision to not continue with the campaign. The creative director might ask whether it was done by a professional and certified research organization, and also wonder if the sunk costs might be be overcome with a minor roll-out of the ads to gage a market reaction vs. a preliminary lab evaluation. 2. Select a popular ad campaign and explain whether it should have tested different creative strategy options or different creative tactic options? This question acts as an example to allow students to estimate what could have been tested prior to the launch of the campaign. For virtually any campaign, hindsight evaluation could suggest that different theme or appeal be used, and this could be the source of investigation. Alternatively, from a tactical standpoint, different music or dialogue or scenes could be suggested as key tactics that could be tested. An astute student will point out different testing if the ad would have had a different move (e.g., move from information to transformational) which would have likely necessitated a change for both creative strategy and tactic decisions. 3. Explain why you would or would not want to personally participate in each of the studies described? Perhaps the most enjoyable comments will be students’ opinions on the eye-tracking and the other physiological methods. These are much more invasive than completing a survey or participating in a focus group or personal interview. Some interesting views may emerge with those who go to a specialized theatre to watch ads and view “dummy” magazines as these will feel artificial. Essentially this question provides a fun opportunity for students to understand the methods from a personal point of view that might make the learning more enjoyable compared to memorizing. 4. For any of the print ads located in the previous chapters, design a testing approach based on the final section of this chapter? Either the PACT section or the order in which the text is organized should be the basis for structuring this answer. The important point here is that students should have a clear idea of what to prescribe for each step. Using the latter view, students could apply the R&P model to structure what objectives that might have been set for the print ad. Similarly, with a print ad selected, each of the pre and post tests could be investigated that are reviewed in this chapter. The measure is a tricky aspect to the task as students will have to think about key question to track category need, awareness, and attitude. Finally, the student should be able to offer an intelligent suggestion on how the research will assist in making the recommendations on whether the ad will be run or not.

Additional Discussion Questions (not in text) A.

What are some of the problems associated with recognition tests? Some of the problems associated with recognition tests include: •

false claiming—respondents claim to have seen an ad when they did not, either deliberately or by mistake (they may have seen a similar ad elsewhere).

•

interviewer sensitivities—the interviewer biases the respondent by the way the question is asked, encouraging a response, etc. Or, the respondent answers falsely for fear on not knowing, appearing uniformed, etc. Chapter 9 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 9-7

• B.

reliability—both reliability and validity increase with the number of ads tested. The possibility for error in both of these regards is high if only one or a few ads are tested. Discuss how tracking studies might be tied into the hierarchy-of-effects models. Tracking studies are generally used as posttest measures of the ads effectiveness. In these tests, the impact of the ad is tracked over time or in a particular location. The text notes that one of the major advantages of tracking studies is that they can be tailored to each specific campaign or advertising situation. By combining the tracking study methodology with the hierarchy of effects models, the advertiser can specifically measure the impact of a program on communications objectives. Once the campaign has been run (or while it is being run), measures of the number of persons aware of the ad and its message can be taken. In addition, knowledge of the message, the product benefits being stressed and/or the purpose of the ad can also be assessed. In respect to affective reactions, liking, preference, and conviction toward both the ad and the product or service advertised can be measured. While actual purchases may be difficult to attribute to the ad, it is very possible (and common) to measure behavioral intentions. Each of the hierarchy models could be used in this manner, with each step constituting a dependent variable.

Describe some physiological measures of advertising effectiveness. Give examples of companies that might find these measures useful. The text describes a number of physiological measures used to measure effectiveness. A summary is provided here: •

pupil dilation—measures dilation and constriction of the pupils to stimuli

•

galvanic skin response—measures the skin’s resistance or conductance to current based on reactions to ads and/or commercials.

•

eye tracking—following the viewer’s eyes as they read an ad or watch a commercial to determine where attention focuses, and what may be attracting attention.

•

brain waves—alpha waves and hemispheric lateralization measures are taken to determine electrical frequencies occurring in the brain in response to advertising stimuli.

Obviously, a number of companies could make use of these methodologies. While some of these may have more application that others—as well as more validity—it would be up to the individual organization t determine which is most useful to them. For example, Coke has use eye tracking to determine where the respondents’ eyes focus (as has Wrigley’s gum). Insurance companies might use GSR/EDR to determine anxiety created by an ad, and advertisers employing sex in their appeals might use any one of the above. D.

What is a theatre test? What measures do these tests provide? Theatre tests are pre-test lab tests used to measure the potential effectiveness of finished television commercials. A variety of companies offer such tests, but perhaps the most well known is Prevue House in Los Angeles. In theatre testing, participants are asked to come to a theatre-like setting to evaluate ads (often disguised in respect to intent). Theatre tests provide a number of measures including: •

interest in and reaction to the commercial

•

overall reaction to the commercial based on an adjective checklist

•

recall of various aspects of the commercial

•

frame by frame reactions throughout the commercial

While a very commonly employed methodology, theatre tests are now without their critics. These critics contend the measures lack validity, are too artificial, and may suffer from group dynamics. Their biggest concern is the likelihood of testing bias. Proponents argue that the tests provide the opportunity for control, and provide norms for evaluation against other similar ads. They cite the large number and variety of companies making use to this methodology as a support for their position. E.

Discuss the concept of single-source research. What advantages does it offer the marketer? An increasingly popular method of measuring the effects of advertising is through the use of single-source methods. Two of these methods, BehaviourScan, and ScanTrack have been available for a number of years and are very popular. Single-source methods attempt to track the behaviours of consumers from the television set to the check-out counter, measuring the impact of various commercials on product purchases. These measures may be used as pretest or posttest measures, as is discussed in the chapter. Many marketers feel that single-source measures will change the way that ad effectiveness studies will be conducted if they are successful. Part of the reason for this is that they offer many of the advantages of other commonly employed measures, but provide more insights into the possible behavioral effects that advertising might evoke. More specifically, the single-source methods hope to be able to determine advertising effects on sales. At the same time, single-source methods have their critics. Some researchers feel that these methods only measure short-term effects of advertising. Others feel that the data provided is just too complex to be of significant use. The cost of acquiring single-source data is also very high at this time. In sum, there is little doubt that single-source methods hold a great deal of promise for measuring the effects of advertising. These measures offer many of the advantages of both lab and field measures, and provide the capability to measure actions that come closer to showing the effects of advertising on sales. As these systems move out of test markets, and can be used to explain more of the mass market, their value will increase, while costs may go down.

Discuss the differences between a pretest and a posttest. 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. Posttests are those that occur once the ad has been placed in the medium and exposed to the public. Posttesting is designed to (1) determine if the campaign is accomplishing the objectives sought, and (2) serve as input into the next periods’ situation analysis. As shown in Figure 9-1 these tests may also take on a variety of forms.

What is a day-after recall score? How can it make or break an ad? This test measures consumers’ recall of television commercials, using two recall scores: (1) unaided recall, and (2) aided recall. The unaided score reflects the number of viewers who could recall a previous night’s commercial without being aided. The aided score uses prompts to assist in the recall effort and is not as strong a measure. A low DAR score may mean that the ad was not recalled as well as expected, and the ad may be “canned” as a result. On the other end of the scale, a high DAR score may mean that the ad will get the green light for showing. As noted in the text, the DAR score is not always 100% accurate, Chapter 9 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 9-9

sometimes failing to identify successful ads. Likewise, achieving a high score does not always mean product success. DAR scores are often criticized as favouring non-emotional appeals. H.

Discuss the elements necessary to conduct good advertising testing research. Perhaps the best answer to this question is that the marketer practices a sound market research methodology. This would mean the employment of the proper sample, pretesting of questionnaires, adequate controls, and assessments of reliability and validity. More specifically, the PACT principles might also be used to insure that a proper research design is implemented. PACT principles state that the research must: (1) be relevant to the objectives of the advertising; (2) achieve agreement as to how the results will be used prior to testing; (3) provide multiple measures; (4) be based on a model of human response; (5) allow for multiple exposures; (6) recognize limitations associated with unfinished copy; (7) provide controls to avoid biases; (8) have a proper sample; and (9) demonstrate reliability and validity.

What is a Starch Test? What scores does this test provide? The Starch Readership Report is designed to determine recognition of print advertisements as well as a comparison to other ads of the same variety or in the same magazine. The report provides the following scores:

•

Noted Score—the percentage of readers who remember seeing the ad

•

Seen-Associated Score—the percentage of readers who recall seeing or reading any part of the ad identifying the product or brand.

•

Read-Most Score—the percentage of readers who reported reading at least one half of the copy portion of the ad.

Major changes have taken place in the way that theatre tests are conducted. Describe some of these changes and the changes in measures that have also occurred in this testing method. Theatre tests have been used for quite some time. In the past, participants would be invited to a theatre-type setting, asked to watch commercials and programming, and give their opinions. A number of measures were taken, including recall, reaction, pre and post brand preferences, buying intentions and even physiological measures. While useful due to the controlled environment and the norms these tests provided, many researchers criticized the methodology due to its artificial environment as well as on the validity of the measures taken. In an attempt to improve on this methodology, a number of research companies started to take the theatre test methodology into the receiver’s home. Videotapes would be developed that included program content and test commercials. The respondent would be asked to view the videotape (which would then self destruct), and answer questions. Recall tests could also be taken the next day. The argument for in-home tests was that they could improve on the validity of the theatre testing methodology and get as many, if not more measures. As the tapes self destructed, concerns with security were resolved. While some theatre testing methodologies still exist and are still employed, the in-home version of the theatre test has now become the more popular alternative.

Discuss some of the aspects of the communication program that advertisers may wish to test. Provide some examples. Chapter 9 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 9-10

Advertisers may wish to test all creative strategy decisions. Once a particular advertising theme has been exposed for a period of time, advertisers would want to know whether it positions the brand successfully. Alternatively, they may desire to test multiple advertising themes to determine which is most appropriate. Related to the creative theme is the message appeal and advertisers would be concerned as to whether the particular appeal is effective at persuading. Advertisers would like to know whether the source being used is effective and how the target audience will respond to it. A product spokesperson may be an excellent source initially but for a variety of reasons may lose impact over time. Changes in the source’s attractiveness or likeability or other external factors may also lead to changes in source effectiveness. Creative tactics decisions are also critical aspects of measurement. The executional style can be assessed to determine its effectiveness. Message structure issues can be looked at to determine if they are persuading appropriately. Design factors that have an impact on its effectiveness include headlines, text, layout, and illustrations. Advertisers can produce many different options prior to launching a campaign to asses which might be more liked. Astute students will recognize that the chapter mostly addresses advertising message effectiveness, and that aspects of media effectiveness are relevant. Research pertaining to media is presented in the media chapters and instructors can make reference to it at this stage and use the material in this chapter as a foundation to explore the issues in more detail. Some topics that can be highlighted now include the following. The location within a particular medium and size or length also merits examination. For example, research shows that readers pay more attention to larger ads. Another factor is the vehicle option source effect, i.e., 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. The final factor in media decisions involves scheduling. The evaluation of flighting versus pulsing or continuous schedules is important. There is evidence to support the fact that continuity may lead to a more effective media schedule than does flighting. L.

Describe some of the effectiveness measures that might be used to get at non-quantifiable aspects of advertising and promotions. Chapter 9 discusses a number of quantitative methods for determining the effectiveness of advertising and other IMC elements. The chapter also mentions the fact that sometimes the effects of these programs are not easily quantifiable. Sometimes to get a true feeling for the effectiveness, other, non-quantifiable measures must be taken. These may include observation— watching how people react to an ad, observing the crowds at PR events, etc. Interviews and discussions can also be used to assess reactions. Other unobtrusive methods can also be employed, such as listening to word-of-mouth conversations, seeing how many people pick up brochures and flyers, etc. For an excellent resource on other ways to measure non-quantifiable variables see Unobtrusive Measures, Eugene Webb (1966)

What is the difference between a lab and a field test? When should each be employed? Lab tests are those that take place in a controlled environment. The major advantage of these tests is the control that they offer. The major disadvantage is the lack of reality and the potential for testing effects. Lab tests are appropriate when the research needs to isolate particular aspects of the advertisement. For example, is one source more effective than another? Is the message being comprehended as intended? Lab tests are more commonly employed as pretests. By isolating specific aspects of the ad, changes can be made to improve the effectiveness of the communication before fielding. Field tests are those that occur under natural viewing situations. The advantage is the reality that would be likely under such viewing situations, the disadvantage would be the lack of control. Chapter 9 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 9-11

Thus with a field test, it is difficult—if not impossible—to isolate specific aspects of the communication. The measures taken are typically more comprehensive in nature, and look for the overall impact of the communication, or the impact of media. Field tests are more frequently used to posttest ads.

IMC Exercise Assign students the responsibility of interviewing at least one business or non-profit organization’s person responsible for the marketing /promotional program. Have them ask whether effectiveness measures are taken. Have them report to the class what measures these are. If none are taken, have them suggest which might be used.

IMC Comprehensive Project In your plan you identified a variety of messages that might be employed. Explain which measures of effectiveness would be employed. Report whether they would be used at the pre-test or post-test phase, and whether they would employ lab or field methodologies.

CHAPTER 10 MEDIA PLANNING AND BUDGETING FOR IMC Chapter Overview This chapter introduces the concepts involved in media planning. The chapter begins with an overview of media planning by introducing the content of the plan and media planning challenges. The chapter then focuses on media strategy decisions and media tactics decisions. The chapter concludes with a description budgeting process, theories underlying budgeting decisions, and the managerial approaches to budgeting.

Learning Objectives 1. Illustrate how a media plan is developed. 2. Explain the process and identify the decisions for implementing media strategies. 3. Explain the process and identify the decisions for implementing media tactics. 4. Distinguish among the theoretical and managerial approaches for media budget setting. 5. Apply the methods for allocating the media budget to relevant IMC tools and market situations.

Chapter and Lecture Outline I.

MEDIA PLANNING

This first section 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 marketing strategy, and the product being advertised. A.

Overview—a media plan defines a combination of media that will enable the marketer to communicate the message effectively and efficiently. The activities involved in this plan are detailed in Figure 10-2. A media plan is the actual document detailing these decisions.

Media Plan—media planning involves the series of decisions in delivering the message to the target audience. •

media objectives—the objectives sought by the media plan

•

media strategy—action designed to attain the media objectives. It includes the medium, the general category of media channels like broadcast, print, or out-of-home, the media type, the specific media category like television or radio for broadcast, and finally the media class such like specialty TV channels for that context. Decisions include: •

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

media tactics—the more specific media decisions involving media vehicle (e.g., type of television show to advertise on), fine-tuning the budget and timing of all media purchases.

Media Planning Challenges—a number of problems are identified, each of which directly impacts the planning process such as: insufficient information, inconsistent terminology, need for flexibility, role of media planners and problems in measuring effectiveness of a media plan. An understanding of these problems is critical to the proper design of the media plan.

II.

MEDIA STRATEGY DECISIONS

Media Mix—many media strategies require a combination of media to be used. The media mix determines the various channels used. The objectives of the plan, the budget, and other factors, will directly impact this decision. Figure 10-4 summarizes the strengths and limitations of the key media characteristics. An attempt to include the same sixteen criteria for all six traditional media makes comparison more systematic. Descriptive words to indicate the relative intensity of the strength or limitation have be omitted as this is more of a judgment and is heavily dependent upon other media decisions and creative decisions. Items for each media are investigated more fully in each chapter.

Target Audience Coverage—Figure 10-5 provides a graphic illustration of marketing 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 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. A number of critical terms are introduced including: the Brand Development Index, and the Category Development Index. The calculation of both BDI and CDI is provided, based on actual examples. Figure 10-8 is a very useful way of presenting strategies evolving around BDI and CDI.

Scheduling—marketers will typically employ one of three scheduling alternatives since it may not be feasible (or necessary) to maintain a constant advertising schedule. 1. Continuity refers to a continuous pattern of advertising—that is every day, week, or month depending on the planner’s time horizon for planning (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 (automobiles).

Reach and 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 Chapter 10 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 10-2

often. In making this decision, the media planner must take into consideration a number of factors including: 1. How much reach is necessary? 2. What frequency level is needed? 3. Determining effective reach and frequency. 4. Using gross ratings points (GRP's) These four sections have been substantially re-written for clarity in the 5th edition. III.

MEDIA TACTICS DECISIONS

Media Vehicle—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. Likewise, 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 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.

Relative Cost Estimates—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. A comparison of media vehicles is usually necessary, using criteria such as cost per thousand (CPM), and cost per ratings point (CPRP)

Blocking Chart—the blocking chart summarizes many of the media strategy and media tactics decisions made thus far, and includes extensive implementation details that guide the media buyers as they attempt to achieve the media objectives.

BUDGET SETTING

Theoretical approaches 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 these. 1. Marginal analysis—Figure 10-21 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 Chapter 10 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 10-3

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. 2. 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 10-22, 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 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. Figure 10-23 can be used to demonstrate this point quite effectively. B.

Managerial Approaches in Budget Setting—the more traditional methods of setting budgets and the relative advantages and disadvantages of each are summarized. Both top-down and bottom up approaches are summarized. Top down approaches occur when the budget is established at the “top” by management and is passed down to the managers (e.g., affordable, arbitrary, percentage, competitive, ROI). Bottom-up approaches focus on establishing specific objectives and determining the budget based on the costs required to attain these goals (e.g., objective and task, payout). 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 on the number of units sold (see Figure 10-26). 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. Chapter 10 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 10-4

Many firms employ both methods, with a projection used for planning, and the final budget adjusted according to actual sales. d. competitive parity—in this method, budgets are set by matching the percentage advertising/sales ratios of competitors. e. return on Investment (ROI)—while good in theory, the ROI method is rarely used. 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. f.

objective and task method—Figure 10-29 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.

g. 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 10-31. V.

IMC PLANNING: BUDGET ALLOCATION

Budget allocation is determined by a number of factors. A.

IMC Tools—direct marketing, the Internet and other promotional tools are also receiving increased allocation and requiring additional budget for marketing communications. Figure 10-31 summarizes a couple of examples. At this planning stage, managers are concerned with determining the relative emphasis across various media and IMC tools to maximize media and communication objectives and to the need to stay within the budget.

Market share goals—increasing or maintaining market share will impact the allocation decision. Markets have varying sizes and potential and managers adjust their market share goals accordingly. 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. James Schroer’s approach (Figure 10-34) illustrates managerial options given a competitive and company situational analysis. 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.

Organizational Factors After reviewing the literature, Low and Mohr conclude that a number of organizational factors influence the budget allocation decision. These factors include: (1) the organization’s structure, (2) power and politics in the organizational hierarchy, (3) the use of expert opinions, (4) characteristics of the decision maker, (5) approval and negotiation channels, and (5) pressure on senior managers to arrive at an optimal budget.

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 issues of budgeting.

Vignette 1. Do you agree with the placing of the three winners? This is an opinion question to get a discussion going to essentially assess in what way the media selections are innovative. A key point to raise is the interplay between creativity and media, and the fact that creativity can exist within the selection of the media chosen. 2. How do these examples influence our thoughts about IMC? Each of the winners demonstrates unique innovation in media such that one may wonder why or how they are in the media chapter. This is precisely the point of the question where design, technology and the ability to connect all facets of communication is opening the door for alternative views of what constitutes the delivery of a marketing communication message. In fact the alternate view of media raises the issue of whether the marketing communication message is in fact the same type of message historically viewed. In either respect, the examples are interesting and presumably interesting topcis for students to discuss.

IMC Perspective 10-1 1. How could Nissan have leveraged the experiential component of the plan beyond obtaining press coverage? This question invites students to consider other IMC tools that can work with an original idea once it is fully established. Often in an IMC program a key lead tool or media, along with the creative element, is fully established and then related messages and exposures can take hold. Students might suggest placing the video imagery recorded of the car in public places with the screening on the walls of buildings. This would produce a similar feeling to having seen it live and certainly surprise people. Promotional activities might be possible in terms of product placement or promotional products for continued exposure.

IMC Perspective 10-2 1. Which of these media executions appears to be the most innovative? The awards winners manage to find a good fit with their message, creativity and media selected. Media decisions in isolation cannot be considered effective as it is predicated on the target and what Chapter 10 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 10-6

the brand is attempting to say to the target audience. Combined, the overall effect appears quite innovative in an area where it is difficult to innovate.

Answers to Review Questions 1. Media planning involves a tradeoff between reach and frequency. Explain what this means and give examples of when reach should be emphasized over frequency and vice versa. 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 audience may allow for an emphasis on frequency, and the minimization of waste coverage, thus placing less emphasis on reach. 2. Describe what is meant by waste coverage. The decision must often be made between waste coverage and under-coverage. Give examples of when the marketer might have to choose between the two, and when it may be acceptable to live with waste coverage. Of course, the optimal situation would be one in which there is a perfect match between the target audience sought and the media coverage, with everyone getting potential exposure to the message, and those not in the market not being exposed. In reality, this is not going to happen, so the marketer must choose between the options of under-exposure or paying for coverage for recipients not in the target audience. In some instances, the budget may not allow for full market coverage under any situation. In other situations, the communications objectives, the cost of the media buy and other factors must be taken into consideration. Most marketers would likely argue that they would rather live with waste coverage, insuring that most if not all in their audience were exposed, rather than under-coverage, as those not exposed are much less likely to purchase the product or service. A recent trend in business to business advertising is to buy time and/or space in consumer oriented media rather than the more targeted trade publications. While perhaps only a small percent of the audience or readers is in the target audience, media buyers have found that it is still more cost efficient to purchase the less-targeted medium than it would be to buy trade magazines, etc., even though there is a high degree of waste coverage. A final consideration is the potential to convert nonprospects into buyers. While the market may be defined as a specific group (let’s say 18-24), those on the fringe (17, 25) may end up seeing the ad and ultimately purchasing—even though not in the primary target audience. In such cases, what was thought to be waste coverage really was not.

3. What is meant by readers per copy? How is this different from CPM? Explain the advantages and disadvantages associated with the use of both. Many magazine advertisers argue that the circulation figure is an underestimate of media reach. They contend that because many magazines may be read by more than one person, that the CPM is an underestimate of cost efficiency. They believe a more accurate figure is readers per copy. Readers per copy is determined by including a pass-along rate—a figure that includes readers who may not subscribe or have paid for the copy. An advantage of using this number is that it may more accurately reflect potential exposures to the medium. For example, it is well accepted that there is not always a one to one circulation to readership ratio. Smart buyers may be able to actually be able to gain more exposure to their ads than they are paying for if they can find a medium with high pass along readership. Consider a magazine like Time or Sports Illustrated. More than one person may read each issue, whether the readership is taking place in the household, fraternity, etc. In this case, the media buy based on circulation underestimates the reach, and the buy becomes more efficient. The disadvantage associated with using readers per copy is that pass-along rate is very difficult—if not impossible—to determine. While one may easily estimate the number of persons exposed to Time magazine in a household, for example, the ability to estimate the number of persons exposed to Business Week in a doctor's office, or fraternity house is much more complicated and lacks validity. In many cases, the actual number of readers per copy is little more than a guess. More and more media are presenting relative cost comparisons in terms of CPM rather than CPP (cost per point). Part of the reason for doing so is the fact that it is often difficult to make cross media comparisons using various cost figures. By providing the media buyer with a “standard” figure, it makes the media buying process much simpler. A disadvantage of this consistent use of CPM’s is also evident, however. A message appearing in print is not the same as a message appearing on broadcast. One appearing in a magazine will not have the same impact as one in newspaper. By providing a standard number the media buyer may be somewhat mislead in terms of the impression that the ad carries. (Some have suggested using a comparison called cost per minimum impression unit, but no one seems to know what that means.) So long as the media buyer remembers that CPM refers to the cost to potentially expose one’s message to a thousand people, there should be no problems associated with this common term. At the same time, as the text warns, media buying is both an art and a science, and other factors must be taken into consideration 4. Identify the information resources required to calculate the budget using the objective and task method. A number of information requirements are needed to perform the objective and task method; the size and location of the target audience, precise definition of the communication tasks required, cost information for all media considered, reach and possible frequency estimates for each media vehicle. This extensive lists illustrates why this method is not commonly done as the work involved is quite extensive. 5. .What factors influence the budget allocation to different media or different IMC tools?

The marketing objective in terms of sales or share is a major factor as these contribute to the target audience selection and the subsequent behavioural and communication objectives. Beyond this, planners would need to consider how media and IMC tools will contribute to these objectives and fit with the decision-making process of the target audience. Internal organizational factors and relationship with the different marketing communication agencies can also influence the decision since these participants will put forth their own suggestions and recommendations.

Answers to Applied Questions 1. One long-time advertising agency executive noted that buying media is both an art and a science, with a leaning toward art. Explain what this means and provide examples. There is a wealth of secondary information available to advertisers and media planners. As noted throughout this chapter, audience profiles, media usage, media costs, and competitive information is readily available. However, even given these large volumes of data, media buying may be less scientific a process than one might think. A number of reasons can be offered for this position. First, the validity of the data is often questioned due to methodological difficulties. Secondly, there are factors that just don’t show up in the numbers. The content of the material, the audience’s impression of or attitude toward a specific DJ, or newscaster, etc. may not be reflected in the numbers, and must be evaluated more qualitatively. Monthlies may offer greater potential for frequency of exposure than weeklies, etc. Even when the numbers are valid, one must look purely beyond just the data per se. For example, local news ratings for CBC stations may often be highest on a certain night because of the network’s prime time programming. While the numbers may be there, this doesn’t indicate the fact that the stations are more popular, only that people haven’t switched away from the station they were on. While one might say, “so what, the numbers are there”, the quality of the viewer may not be the same as on other nights when they specifically tuned into the news broadcast. The discussion on CPM’s vs. Readers per Copy is another example when the media must be looked at and evaluated on criteria other than just the numbers. Most good media buyers know that numbers are important. Most also know, however, that they must look beyond just the numbers in making their decisions. Qualitative aspect or the “art” of media buying may be as important at the hard data. 2. Visit the website for a two magazines of the same genre and locate their media kit that tries to attract advertisers to their particular media vehicle. Investigate how each magazine tries to persuade advertisers and decide which magazine would be most suitable to advertise. This should prove to be an illuminating activity so that students can appreciate the wealth of data available for each media vehicle and to see the extensive promotion of media vehicles to entice advertisers. For example, the media kit for Canadian Living 2014 is a pdf comprised of 22 pages with colourful imagery, multiple tables showing the audience profile, the placement costs, production requirements and schedule in addition to a few other items. In contrast, Chatelaine shows a few tabs of the basic information and nothing more. Student could certainly compare others, but these are the foremost magazines with a female readership skew and offer a good example if students do not come to class with a good example. 3. Calculate the CPM for five or six different media vehicles that are interesting or topical. Chapter 10 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 10-9

This exercise can be done in conjunction with question 2 since students will be looking at the media kits. Alternatively, students can try to locate multiple print vehicles in CARD and calculate the CPMs. Whatever the selection, the students should be questioned on explaining why the numbers differ. For example, a vehicle could have a very selective audience with a low readership, thus driving up the CPM. Guidelines on comparing similar media vehicles could be offered as an extension to the question. 4. Assume that a new entry level car brand wants to achieve thirty percent awareness among graduated students aged 21 to 24; calculate how much would have to be spent in the budget to achieve this objective. This is a very challenging question for students as it is an application of the objective and task method of budget setting. They have to estimate the number of students first from a secondary data source. From this, reach and frequency decisions need to be made taking into account any geographical skews in the data in order to show how the 30% awareness could be achieved. Media selection is next which would likely require multiple avenues. This part would open up debate on whether TV would still provide sufficient coverage. Alternatively, consideration of Internet ads for young people watching a “TV” show online would likely be evaluated by most students. Once the media selections have be done, the costs for each need to be worked into the calculations along with the earlier estimates for reach and frequency. In the end, an estimated budget based on the task of awareness should arise. An extension question could investigate how the budget would need adjusting to achieve other objectives. 5. For an up-and-coming brand of fashionable jeans, a re-branded local night club for dancing, and an established energy drink, identify the most appropriate media budget allocation (in percentages) to create awareness. Do the same for all three brands with respect to IMC tools. Instructors could tabulate many alternatives in a class discussion and get students to express the reason for their decisions. Each of the product selected fit within the life of a young student and all three are at different stages of the PLC, new product, rebranded, and mature which should prove to be a challenge to wrestle with and offer divergent opinions across the three options. The first question looks to see how the students will allocate the budget across different media in a pure advertising recommendation, while the second looks at the budget for multiple IMC tools. Of course there will be some overlap where an IMC tool might require advertising. For example, if a brand is sponsoring an event, it might advertise the sponsoring in media, so from a budget and communication effects standpoint, it is both advertising and both an IMC tool. So in the end, this exercise draws upon the key part of IMC planning which is the link between the IMC tools to achieve objectives.

Additional discussion questions (not in the text) A.

Using the BDI and CDI indices, explain the least desirable market situation for marketers. Provide an example. Then do the same for the most desirable situation. BDI compares the percentage of the brand's total Canadian 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. Figure 10-8 provides an excellent summary of how BDI and CDI can be used to develop marketing strategies. The use of these indices provides marketers with insights into the market Chapter 10 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 10-10

potential for the product or brand. This, in turn, provides information regarding the amount of media emphasis, weighting, etc. to be allocated. The least desirable situation is one in which the BDI and the CDI are both low. In this situation, there appears to be little potential for either the category or the brand. For example, consider typewriters. If they are still marketed at all, the category is in the decline stage, and any brands would be as well. No amount of advertising is likely to bring back the category or the brand. The most desirable situation is one in which BDI and CDI are both high. In this case, the category is growing, and the potential for the brand to grow is high as well. An example might be PC’s. The use of computers is growing, and new brands may have the potential to grow as well. The advertiser would be more likely to be successful by investing in this situation. B.

Discuss some of the factors that are important in determining frequency levels. Give examples of each factor. Figure 10-14 identifies factors important in determining frequency levels. The three factors and specific examples of each are:

Marketing factors—these include factors such as brand history, brand share, degree of brand loyalty, purchase and usage cycles, competitive share of voice, and target markets.

Message factors—complexity and uniqueness of the message, length of time the campaign has run, image versus product sell, message variation, wearout and advertising units.

Media factors—clutter, editorial environment, attentiveness, scheduling number of media used, and repeat exposures.

Discuss how you would explain to a small business owner why he or she needs to budget a larger amount to advertising and promotion. Base your argument of the S-shaped response function. As noted in the previous question, the S-shaped response function argues that advertising will have little or not effect until a certain level of expenditures is reached. The small business owner would, therefore, have little success if the budget was not adequate enough to reach this point. For example, one might ask how much sales might be generated in an area with an ad budget of a few hundred dollars? This amount would small that only a few people would be reached, and no noticeable impact on sales would be achieved. Only when this budget is increased to the point where enough people could be exposed to the message would any impact be felt. High tech companies illustrate this point quite well since they typically spend s much on research and development, not enough money is left over to make an impact on the marketplace. (They also often tend to be very product oriented, placing all of their faith in the fact that the product will sell itself.) The small amount that is typically spent might just as well as been saved.

Some advertisers believe that economies of scale are accrued in the advertising process. Discuss their reasons for taking this position. Does research evidence support it? The argument of economies of scale is that companies with a large share of the market have an advantage over smaller companies, and thus can spend less money on advertising and realize a better return. Factors such as better ad rates, declining costs of production, and more favorable time and space locations are cited to support this position. Chapter 10 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 10-11

A variety of studies cited in the text suggest that there are no true economies of scale to e accrued—at least in respect to advertising cost per dollar of sales. These studies note that the evidence just does not support this contention. Jones’ article concludes otherwise, however. According to Jones, when “share of voice” is considered there is clearly an economy of scale that is accrued, as the advertising dollar works harder for leading brands. As can be seen, studies regarding the economies of scale in advertising often provide mixed evidence. The studies seem to conclude that when share of voice is the dependent variable, this relationship may hold true. When ad/sales effects are the dependent variable, no economies of scale seem to be present. E.

Describe the three methods of promotional scheduling. Give examples of products and/or services that might employ each method. The text discusses the three 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 year round, 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.

What level of frequency is necessary to achieve an impact on the receiver? While most advertisers agree that one exposure to an ad may not be enough to have an impact, there is less agreement as to what number of exposures is necessary. A number of researchers have joined the debate over the number of exposures required. While three exposures has been accepted as the optimal frequency level for years (Figure 10-12), a number of researchers have challenged this number. Abbott Wool, for example, contends that one exposure may be enough if the exposure takes place very close to the actual purchase. Jack Myers, on the other hand argues that Krugman's work may have been valid twenty years ago when consumers were exposed to only 1,000 ads per day. Now that we are exposed to 3,0005,000 per day, and throw in the fact that changes in media have taken place, Myers estimates that Chapter 10 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 10-12

a minimum of 12 exposures may be required. He suggests that as media continue to fragment and advertising continue to proliferate; this number may continue to increase. What is the right number? No one really knows! G.

Figure 10-27 shows that advertising spending and effects may differ in different competitive environments. Explain each of the four scenarios presented and give examples of brands in each of these cells. 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. 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.

The text states that flexibility is required in a media plan due to changes that may take place in the marketing environment. Describe some of these changes and how they might affect the media plan. A number of environmental factors may lead require flexibility in the media plan. These include: •

market opportunities—an event that takes place that provides an unforeseen opportunity. For example, a winter snowstorm may provide the opportunity to announce a sale on shovels.

•

market threats—internal or external factors that may lead to problems resulting in sales losses, etc. For example, a direct competitor increases its advertising budget, and the company is required to respond. Chapter 10 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 10-13

•

availability of media-a medium sought may not be available. For example, all media space may be sold out.

•

changes in media or media vehicles—for example, the recent changes in television (500 channels) or the fact that the Internet has now become available to commercial advertisers.

A much broader list can be developed. This question makes for good class discussion as students can be encouraged to generate their own lists. I.

Critics of the percentage of sales method of budget setting contend that this method “reverses the advertising and sales relationship” and that it “treats advertising as an expense rather than an investment” Explain what these arguments mean, and discuss their merits. The percentage of sales method, while a commonly employed method of budget setting, has its disadvantages. Perhaps the major disadvantage is the fact that the advertising budget is based on the amount of sales generated, not as a basis for achieving sales; and thus reverses the advertising and sales relationship. By establishing the advertising budget based on the level of sales, sales is dictating what the ad budget will be. Advertising is not considered a tool for generating sales, but is considered more of a cost of doing business. If sales fall, the ad budget is cut. So what happens is that in periods of declining sales, rather than considering advertising as a tool for reversing the trend, it is seen as a way to cut costs to improve profits. In periods of increasing sales, the advertising budget may be raised accordingly (remember it’s a % of sales), in many cases not because it has been shown to have an effect so much as just a rule of thumb. The argument that % of sales reverses the advertising→ sales relationship is a valid one. If one treats advertising as an investment, then the ad budget should actually increase during down turns in the market, in an attempt to turn around the declining sales. By slashing the ad budget based on a % of sales, management is saying that they do not believe that investing in advertising is a viable strategy for improving sales. J. Discuss the two sales response models described in the text. Explain the differences between the two models. Provide examples of type of products that might follow each of these response curves. 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 be felt almost immediately then 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 Chapter 10 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 10-14

cumulative effect would adhere to this model. 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 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 mind set 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 S-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.

IMC Comprehensive Project At this stage, present the specific media objectives. Without specifically naming media (this will be done in following chapters) develop a broad media schedule. Also explain what creative aspects and mood must be taken into consideration. In addition, determination and allocation of the budget is now required.

CHAPTER 11 BROADCAST MEDIA Chapter Overview The purpose of this chapter is to examine the broadcast media of television and radio. We examine the general characteristics of television and radio as well as their strengths 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.

Learning Objectives 1. Describe the different types of television advertising, specialty television advertising, alternate time periods, program format, and measurement of television audiences. 2. Summarize the strengths and limitations of television TV as an advertising medium. 3. Describe different types of radio advertising, specialty television advertising, alternate time periods, program format, and measurement of radio audiences. 4. Summarize the strengths and limitations of radio as an advertising medium. 5. Apply the media knowledge of TV and radio for strategic IMC decisions.

Chapter and Lecture Outline I.

TELEVISION

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.

Types of Television Advertising—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—advertisers disseminate their messages by the purchase of airtime from a television network which assembles a series of affiliated stations or affiliates to which its supplies programming. Network advertising 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. 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. Sponsorship—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.

Specialty Television Advertising 1. Cable and Satellite—Cable or CATV (community antenna television) is probably the most significant development in the broadcast media. Today cable penetration is about 66% of Chapter 11 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 11-1

Canadian households. Programming reaches Canadian homes digitally through alternative direct broadcast satellite (DBS), and now digital cable. 2. Specialty Networks—have approximately 28% of the Canadian viewing audience. Specialty networks offer a lower cost, more flexible alternative to regular network and spot advertising and this makes them particularly attractive to smaller advertisers. C.

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 11-5. Dayparts are important to advertisers because they attract different demographic groups.

Measuring the TV Audience An important considerations in using television advertising concerns the size and composition of the TV viewing audience. Audience measurement is critical to advertisers, networks and stations 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 on the basis of audience size. Audience Measurement—the source of network TV and local audience information is the Bureau of Broadcast Measurement of Canada (BBM Canada). BBM Canada uses a diary research method for gathering audience information using standard marketing research practices to ensure valid and reliable information. BBM Canada has begun implementing people meters to measure national local audiences in major cities. This improved technology over the original people meter offers individual level data and Audience Measures 1. Program rating—the percentage of TV households in an area that are tuned to a specific program during a specific time period. A ratings point is a figure that represents 1 percent of the TV households in a particular market tuned to a specific program. 2. Share of audience—the percentage of households watching TV in a specified time period that is tuned to a specific program. Share figure are important because they reveal how well as program does with the available viewing audience. Total audience is the total number of homes viewing any five-minute part of a program. Audience Measurement Reporting BBM’s subsidiary offers numerous software applications for analyzing the data collected to understand audience composition for TV shows. The breakouts of the data include a wide variety of segmentation variables identified in Chapter 3.

II.

EVALUATON OF TELEVISION

Television has virtually saturated households throughout the Canada 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 make 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 strengths, it also has limitations as an advertising medium. A.

1. Creativity for cognitive and emotional responses—the interaction of sight and sound offers tremendous creative flexibility and makes possible dramatic, lifelike representations of products and services. 2. Target audience coverage—marketers selling products and services that appeal to broad target audiences find that TV lets them reach mass markets. 3. Cost efficiency—extensive coverage across markets permits markets to reach many thousands of millions of consumers with very little cost per person or cost per thousand. 4. 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, many viewers are likely to pay some attention to commercials. 5. Scheduling 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 as a result of scheduling flexibility through different programs and broadcast times. 6. Geographic coverage—scheduling flexibility gives rise for advertiser to cover more desirable geographic markets or more strongly emphasize some regions over others. 7. Reach—with nearly 100% penetration of televisions and virtually all Canadian reporting television consumption, advertisers have the opportunity to reach virtually everyone. 8. Frequency—advertisers can control the number of times consumers receive the message through proper scheduling and can optimize their frequency based on their market needs. 9. Media Image—advertising on television places a certain degree of legitimacy upon an advertiser due to the extensive absolute costs involved. B.

Limitations of Television 1. Absolute cost—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 more than $300,000 and can be much higher for more elaborate spots. 2. Target audience selectivity—advertisers who are seeking a very specific, often small, target audience find the coverage of TV extends beyond their market, reducing its cost efficiency particularly within a local market area. 3. Amount of processing time—most TV commercials are only 15 or 30 second spots and leave nothing tangible for the viewer to examine or consider. 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. Viewer attention—the increased penetration of VCRs 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. 6. Involvement—the overall effect of the many characteristics of television implies that low involvement persuasion despite its significant invasiveness. Chapter 11 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 11-3

III.

Media image—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.

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.

Types of Radio Advertising—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—a new option for Canadian advertisers who can now purchase advertising time on the CHUM and The Team radio networks. 2. Spot radio—national and local advertisers can use spot radio to purchase airtime on individual stations in various markets.

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 11-14.

Measuring the Radio Audience—BBM Canada provides information on radio listenership and this includes person estimates, rating and share including average quarter hour (AQH) figures and cumulative audience data (Cume).

IV.

EVALUATON OF RADIO

Strengths of Radio 1. Cost efficiency and absolute cost—radio commercials are inexpensive to produce and the absolute and relative costs for radio advertising time is generally lower than for television. 2. Reach and frequency—cost implications suggest tremendous opportunity to build strong reach through placement across various radio formats and enhanced frequency. 3. Target audience selectivity—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. Geographic coverage—advertisers often use radio stations and personalities to enhance their involvement with a local market and to gain influence with local retailers. Radio provides marketers with a variety of integrated marketing opportunities such as event marketing and point-of purchase promotions. 5. Scheduling 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. 6. Creativity for cognitive responses—verbal characteristics permit extensive rational messages or ads designed to communicate more factual information about a product. Chapter 11 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 11-4

7. Media image—consumers rely on radio for basis day-to-day media and good impressions about it are generally reported by market research. B.

Limitations of Radio 1. Creativity for emotional responses—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. However, there is potential for mental imagery. Creative radio ads encourage listeners to use their imagination when processing a commercial message. It can also reinforce TV messages through a process called image transfer where the visual elements of TV commercials are implanted in a radio spot. 2. Amount of processing time—similar to television, radio features very short messages. 3. Target audience coverage.—the percentage of the market tuned to any particular station is usually very small. 4. 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 cellular telephones. Commuters who own a cell phone are talking on the phone more and listening to less radio. 5. Selective exposure—pre-programmed radios provide instant availability of other stations during ad breaks. Consumers have significant control to avoid ads. 6. 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. A new technology called Cash is making it possible for radio broadcasters to reduce the pauses between words of radio announcers and add more time for commercials. 7. Low involvement—like television, radio is often construed as a low involvement media.

IMC PLANNING: STRATEGIC USE OF BROADCAST MEDIA

Television—The points raised build on Figure 5-5 where each media plays a role in the consumer decision-making process and has particular communication objectives. While TV has specific strengths and limitations, how a promotional planner constructs the message in the media can help achieve varying degrees of the communication objectives options described in Chapter 5.

Radio—The same argument if put forth for radio as seen above for TV. The key strengths of radio allow many different advertisers take advantage of this media for consumers at the purchase stage of their decision-making.

Teaching Suggestions This chapter is designed to provide the student with a general understanding of the broadcast media of television and radio. Radio and television are probably the most pervasive media in the lives of most Canadian 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 limitations, 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. 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 Chapter 11 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 11-5

attract. An interesting and informative website that you may want to visit is the Television Advertising Bureau which can be found at www.tvb.ca. The nature of television as an advertising medium has changed dramatically in recent years and will continue to do so with the evolution of the Internet. The trend toward shorter commercials and the resulting clutter problem, the growth of cable and concomitant decrease in network viewing audiences, and the increasing technological sophistication of video equipment, such as personal or digital video recorders 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. 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 Marketing Bureau has a very informative web site (www.rmb.ca ) 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 should 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.

Vignette 1. Is Sportsnet more attractive for advertisers with its changes? Many of the steps taken would be welcomed by advertisers especially the broadened media vehicle selection so that advertisers can increase their exposure levels with one supplier. Advertisers look for efficiency across its media partners and this should now be an opportunity with Sportsnet. Furthermore, with stronger buys, an advertiser might have greater say in its placement rotation. The branding aspect would help to attract stronger audience numbers so that the advertiser would get great efficiency in that regard as well. A stronger number two player in the sports domain might lower overall costs as TSN would move away further from its monopoly position.

IMC Perspective 11-1 1. Explain why the selection of shows is so important to networks? Quality programming turns into stronger audience numbers so networks and all types of stations look to figure out which show coming out will resonate with audiences. Naturally, larger audiences translate into higher levels of advertising revenue since advertisers will want to spend to reach the bigger audiences. This idea is central for most advertising no matter what the media. In this respect, all media vehicles are distributors or sort or who take a margin and look for volume to achieve higher levels of overall profit. Instructors can use this example and contrast this with digital media to show that many established methods in existing media for the past 100 years are not being duplicated online.

IMC Perspective 11-2 1. How is viewing a TV show on TV the same as or different from viewing it online at the broadcaster’s website? The actual selection of the show is somewhat different (adjusting the remote vs. finding the show on a website), however the viewing occurs similarly in the sense that marketing communication messages occur during the streaming. Of course we are talking about legal access to TV show content online Chapter 11 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 11-6

that is on the broadcaster’s website (e.g., CTV, CBC). Another aspect is the control online, pausing and delaying the playing for a moment, however this is now possible with “live” TV with the latest technology. We are concerned with the actual viewing with this question, so issues of scheduling are not material, and the article shows that many viewers are watching approximately when the show originates on TV. Of interest would be whether consumers notice more or fewer ads with online TV and whether the placement timing during the show is a relevant factor. Additionally, it is very easy for viewers to look at another window, or tab, while watching a show online, but then on TV, we can easily change channels and have picture in picture to know when the show is back on. All in all, many of the experiences are quite consistent.

Answers to Review Questions 1. 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? For many years television was essentially a mass medium. 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 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 MuchMusic and MusiquePlus, as well as to business and financial news (Report on Business Television). 2. Discuss the strengths of television as an advertising medium and the importance of these factors to major national advertisers and to smaller local companies. 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 so many minutes per hour of commercials. The Chapter 11 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 11-7

increase in the number of homes with digital video recorders is not yet a major problem but is likely to be so in the near future. 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. Discuss the methods used to radio audiences. Do you think that the measurement methods being used for each are producing reliable and valid estimates of the viewing audiences? National network viewing audiences are measured by BBM Canada. BBM uses a diary method that requires respondents to record their viewing at 15 minute intervals. Demographic information is collected for each respondent so that viewership by age, income, occupation, education and geographic location can be estimated. While BBM receives back 40% of completed diaries, some are not filled out correctly and this may affect reliability. BBM is implementing a people meter program to overcome some of the measurement deficiencies associated with diaries. There is, of course, a considerable amount of debate over the reliability of audience measures. The measurement of television viewing audiences is very difficult and some variability must be accepted. However, since these measures are used to determine advertising rates, marketers want them to be as accurate as possible. The use of the diary method is likely to provide less accurate measures since there are problems with diary households not filling them out regularly and/or accurately. There also are problems stemming from the fact that many consumers are zapping commercials and then coming back to the program after the commercial break. This means that the actual viewing audience for the commercial is not as large as that for the program. One way of improving measurement of local viewing audiences is greater use of the portable people meters rather than relying on the diary system. Another way is by increasing the sample size. Larger sample sizes will decrease sampling error and also provide better representation of specific demographic segments. 4. What are the strengths and limitations of advertising on radio? What types of advertisers are most likely to use 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. Chapter 11 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 11-8

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. 5. How can TV best be used to work with social media? TV ads can direct viewers to the social media vehicle naturally with their brand at the conclusion of the ad for an extended message. Any other IMC tool that may be advertised on TV can be featured (e.g., contest, cause-related activity) and the viewer directed to the social media vehicle for the execution of the sales promotion or request for involvement with the cause. An interactive scenario could be possible where one TV ad invites Twitter comments, and then a subsequent TV ad 30 minutes later could be incorporated with the Twitter messages. Of course, any content seen from any social media vehicle can be the essence of a TV message. Students should be encouraged to think creatively, brainstorming for new ideas or recalling examples they have experienced.

Answers to Review Questions 1. Watch a show on TV and make notes on what ads are shown. Find the equivalent show on the network’s website and makes notes on what ads are shown. What similarities and differences do you notice? This should be a very interesting short assignment that can be the basis for some interesting class discussion. Students should pick TV shows during non-prime time day-parts (e.g., early morning, afternoon, late fringe) and list the products and services advertised, and analyze the type of consumers these advertisers are targeting. Similar time periods and questions can be done for online shows and ads to see if there is any difference. 2. Watch TV or listen to the radio and make note on whether the ad directs the receiver to any aspect of digital media (e.g., social network). This task represents another perspective of question 5 from both sections of questions. The contribution of each media assisting one another for overall communication effects is one of the most exciting aspects of new media. Students should try to classify whether the usage is straight advertising messages of the brand or whether the media is used in the execution of other IMC tools. 3. Listen to the radio and make notes on what ads are shown. What similarities and differences do you notice in comparison to TV advertising? This is another comparison task to allow students to observe that many ads on the radio will be for products that do not require a visual as much to achieve communication effects. Alternatively, the ads will support the visual media of the brand in order to gain additional frequency at a lower cost and to encourage purchase intention with reminder messages. Another feature is to encourage students to experience radio messages as many are gravitating away from such media. 4. Listen to a radio station and pay attention to the ads to assess whether any use the idea of image transfer? 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. Coordination of radio and television commercials is often done by national advertisers in particular. Students should be encouraged to find and evaluate current examples of campaigns using image transfer techniques. 5. How can radio best be used to work with social media?

Similar ideas found in question 5 of the other set of questions are quite logical here. Again, students should be encouraged to think of new ideas. Instructors could augment the question to focus on a specific brand if they like to make the exercise more applicable to an identifiable context.

Additional Discussion Questions (not in text) A. Discuss the strengths and limitations of advertising on specialty channels. Discuss how both large national advertisers and small local companies might use this TV option effectively. There are several advantages including the opportunity for advertising to very specialized markets that tune to a particular channel, its lower costs, and the greater flexibility in the type of commercials that can be used. In that regard, a big advantage is the ability to use longer commercials that can communicate more detailed and complex messages. Limitations include that it is still overshadowed by the major networks as most households still watch considerably more network programming.. A final problem is its lack of penetration in many markets. Cable penetration is currently at about 73% of Canadian households, which means nearly a quarter of the market cannot be reached on cable. While the growth in the number of specialty channels has resulted in much greater audience fragmentation, it has also provided advertisers with much greater selectivity. Specialty channels make it possible for advertisers to reach very specialized market segments since they carry a specific type of programming that appeal to certain audiences. A number of developments are likely to affect the advertising industry. The number of channels available will continue to increase which will result in more audience fragmentation but allow for even greater selectivity. It will also continue to be a popular source of sports programming, particularly at a local and regional level. Television service providers are promoting the high-speed access to the Internet that is available through cable modems and digital cable boxes. Another important impact of cable will be at the local level as advertisers such as more retailers and service companies are advertising on their local cable systems. B. Analyze reasons for the boom in televised sports programming. How can marketers capitalize on the growth of sports programming in developing IMC programs? The growth in sports programming is due to a number of factors. People have a tremendous interest in sports and are watching sporting events, sports news shows and various other types of sports-related programming more than ever. The major broadcast and cable networks have also increased their sports programming because televised sporting events attract free-spending young men, who constitute an important market segment for many advertisers. Media companies are improving the quality of sports programming which is helping attract more viewers. Marketers are capitalizing on the growth in sports programming primarily by building integrated marketing communication programs that center around event sponsorships. Nearly two-thirds of the monies spent on event sponsorship go to sporting events. Sports such as auto racing, golf, tennis, skiing, beach volleyball and others are attracting corporate sponsorships. Marketers are recognizing they can build integrated marketing programs around sporting events that include television advertising, sales promotion, publicity/ public relations and even interactive media. C.

Discuss the methods used to measure network television viewing audiences and local audiences. Do you think that the measurement methods being used for each are producing reliable and valid estimates of the viewing audiences? How might they be improved? National network viewing audiences are measured by BBM Canada with the portable people meter that receives a signal from media once the wearer is in proximity. BBM uses a diary method that requires respondents to record their viewing at 15 minute intervals in smaller markets. Demographic information is collected for each respondent so that viewership by age, income, occupation, education and geographic location can be estimated. While BBM receives back 40% of completed diaries, some Chapter 11 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 11-10

are not filled out correctly and this may affect reliability. BBM is implementing a people meter program to overcome some of the measurement deficiencies associated with diaries. There is, of course, a considerable amount of debate over the reliability of audience measures. The measurement of television viewing audiences is very difficult and some variability must be accepted. However, since these measures are used to determine advertising rates, marketers want them to be as accurate as possible. The use of the diary method is likely to provide less accurate measures since there are problems with diary households not filling them out regularly and/or accurately. There also are problems stemming from the fact that many consumers are zapping commercials and then coming back to the program after the commercial break. This means that the actual viewing audience for the commercial is not as large as that for the program. One way of improving measurement of local viewing audiences is greater use of the portable people meters rather than relying on the diary system. Another way is by increasing the sample size. Larger sample sizes will decrease sampling error and also provide better representation of specific demographic segments. D. Discuss the factors that media buyers should take into consideration when buying advertising time on radio. 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 or spot buy. National advertisers such as automobile companies or major business-to-business marketers are likely to purchase time on one of the radio networks since they are generally trying to reach a national audience. However, because of the limited geographic coverage of Canadian radio networks and their relatively low ratings, they do not generate very high reach. Companies who are interested in buying time in certain geographic markets and 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. 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. E. Explain what is meant by zipping and zapping and how they affect television viewing behaviour. Discuss some of the ways advertisers can deal with the zapping problem. Zipping refers to the practice of fast forwarding through commercials during the playback of a program recorded on a PVR. Zapping refers to the use of a remote control to change channels and switch away from commercials during a break. The networks use a variety of tactics to hold viewers’ attention during commercial breaks such as showing previews of upcoming programs or short closing scenes at the end of a program. The ultimate answer to zap-proofing commercials, however, is to produce creative and meaningful spots that will attract and hold the attention of TV viewers. Techniques might help do this include the use of celebrities, humorous appeals or unique executions. Students should be asked to take note of any commercials that catch their attention and that they like and discuss why they might watch the ad rather than switching channels. F. Discuss how personal video recorders will influence consumers’ television viewing and how advertisers will likely respond to the changes. Chapter 11 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 11-11

To some degree, a PVR will merely replace a VCR and the consumer will not change their viewing habits substantially as there is a choice to record a program and watch it whenever. Alternatively, a PVR offers a consumer greater convenience with many hours saved on a hard-drive vs. dozens of tapes. Furthermore, some of the technical advantages of a PVR allow enhanced viewing. In some respects, the advertiser is faced with the same problem, although the technological features may make the problem of zipping even more pronounced. The standard response to this problem is that commercials must be more creative, making them a compelling visual to experience. Associated public relations to enhance publicity of campaigns might also be necessary so that consumers are primed when deciding upon their selective exposure. Greater product placement may emerge although its growth may have reached its peak over the past decade. With such consumer power of recording, and then potential digital distribution of media conveniently on the Internet, advertisers might actually want to be more consistent in their advertising over time to avoid many different types of brand messages publicly available. Certainly other scenarios are plausible.

IMC Exercise There are many advantages to advertising on cable TV including the opportunity for narrowcasting or reaching a very specialized market and greater flexibility in the type of commercials that can be used. Select a popular cable network. Analyze several of the different programs on this network and the types of companies who advertise on these shows. Discuss the types of commercials used by the advertisers on these programs with respect to factors such as creative style, objectives, length and format. Do the commercials appear to differ from those found on the major networks?

IMC Comprehensive Project Students should analyze how the broadcast media of television and radio might be used as part of the media plan for their project. The specific assignment is as follows: IMC Project Assignment for Chapter 11 Analyze the role of television and radio in the media plan for your product or service. Your analysis should focus on how TV and/or radio can be used to reach the target audience and help achieve your media objectives. What are the advantages of using TV and/or radio? What percentage of your media budget will be devoted to broadcast media? Do you plan on using both network and cable programs as part of your TV media schedule? What specific network and cable programs will be use in your media schedule and why? Discuss how radio might be used as part of your media plan.

CHAPTER 12 PRINT MEDIA Chapter Overview This chapter continues the analysis of the major mediums for advertising by examining the two primary types of print—magazines and newspapers. Magazines and newspapers are high-involvement media which allow the presentation of detailed information that can be processed at the reader’s own pace. The characteristics of each media are examined including the different types of magazines and newspapers and their strengths 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 media concludes with an application of magazines and newspapers for strategic IMC decision. Magazines have become a highly specialized medium that reaches specific target audiences in both the consumer and business markets. Newspapers are particularly important to local advertisers and retailers to encourage shoppers to visit their store locations and still represent a large portion of the total Canadian advertising expenditures. Advertising revenue is extremely important to magazines and newspapers as few could survive without it, however newspapers face a difficult situation of having lost significant classified advertising revenue to digital alternatives.

Learning Objectives 1. Identify the different types of magazines available for advertising, how circulation and readership levels are determined, how audience size and its characteristics are measured, and the factors that influence advertising rates. 2. Evaluate the strengths and limitations of magazines as an advertising medium. 3. To identify the types of newspapers offered for advertising, how circulation and readership levels are determined, how audience size and its characteristics are measured, and how advertising rates are determined. 4. Evaluate the strengths and limitation of newspapers as an advertising medium. 5. Apply the media knowledge of magazines and newspapers for strategic IMC decisions.

Chapter and Lecture Outline I.

MAGAZINES

Magazines serve the educational, informational, and entertainment needs and interests of a wide range of readers in both the consumer and business markets. While some magazines are general mass-appeal publications, most are targeted to very specific types of audiences in for many different markets. A.

Classifications of Magazines—a useful way of classifying magazines is provided by Canadian Advertising Rates and Data (CARD) which divides the publications into three broad categories based on the audience to which they are directed. 1. Consumer magazines—those that are bought by the general public for information and/or entertainment. CARD divides domestic consumer magazines into numerous classifications, among them general interest, sports, travel, and women’s. Consumer magazines represent the major portion of the magazine industry in terms of advertising revenue. 2. Ethnic Publications—growth of languages spoken in Canada has spurred many publications in a variety of dialects. Some of these publications are large and earn reasonable advertising Chapter 12 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 12-1

revenue; however, many are early in their development and offer limited options to communicate with less overall quality. 3

Farm publications—the second major CARD category consists of magazines direct to farmers. There are approximately 80 publications targeted to nearly every possible type of farming or agricultural interest.

4. Business publications—these are magazines or trade journals that are published for specific businesses, industries, or occupations. CARD’s 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. 5. Foreign publications—magazines from other countries, notably the USA, provide competition for domestic publications but allow advertisers an alternative vehicle to reach Canadians through specialized editions. Moreover, brands with North American mandates reach Canadians through the same ads in the original publication. B.

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 receive a publication, either through subscription, store purchase or controlled circulation. 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. Circulation verification services are provided by several companies to ensure circulation figures for magazines are accurate. Most major publications are audited by the Alliance for Audited Media (AAM). 2. Readership—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 pass-along 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.

Magazine Audience Measurement-PMB—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 Canadian source of information concerning magazine audiences is the Print Measurement Bureau (PMB). It measures readership, consumption of other media, shopping behaviour and product usage.

Magazine Advertising Rates—while magazine rates are primarily a function of the circulation of the publication, rates will vary in response to a number of other variables including size of the ad, position, number of colours, particular editions chosen (geographic, demographic), any special mechanical or production requirements, the number and frequency of insertions and whether the circulation is controlled (free) or paid. Advertising space is generally sold on the basis of space units such as full page, half page and quarter page. Ads can be produced in black and white, black and white plus one colour or four colours.

II.

EVALUATION OF MAGAZINES

1. Target audience selectivity—magazines are the most selective of all media except direct mail. Most magazines are published for special interest groups, activities, or obvious segments that marketers use such as demographics. 2. Geographic coverage—national, regional and city coverage is possible with appropriate use of some magazine titles. 3. Creativity for emotional and cognitive responses—magazines are generally printed on highquality paper stock and use printing processes that provide excellent reproduction in black and white or colour. These production qualities offer tremendous opportunity for advertisers to effectively portray their product. 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. 4. Reader involvement and amount of processing time—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 thereby increasing the amount of processing time compared to broadcast media. 5. Media image—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. Selective exposure and attention—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. B.

Limitations of Magazines 1. Absolute cost and cost efficiency—the absolute cost of advertising in large mass-circulation magazines like MacLean's can be very expensive, particularly for popular positions such as back covers. 2. 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. Scheduling Flexibility—most major publications have a 30- to a 90-day lead time, which means space must be purchased and the ad must be prepared well in advance of the actual publication date. 4. Target audience coverage—magazines typically do not very high circulation rates so even the best of magazines can only reach a smaller portion of its target audience relative to other media, and especially the main other print media, newspaper. 5. Clutter—this is something of a paradox for magazines. The more successful a magazine becomes, the more advertising pages it attracts, which leads to greater clutter.

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. 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.

Types of Newspapers—the vast majority of newspapers are daily publications serving a local community. However, there are other types of newspapers that have 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. In 2000, there were 134 daily newspapers in Canada and these were read by approximately 50% of adults each weekday and 80% each week. 2. Community newspapers—most community newspapers originate in small towns or suburbs where the volume of news and advertising is not adequate to support a daily paper. They appeal primarily to local advertisers in the community because of their limited geographic focus. 3. National newspapers—national newspapers in Canada include The National Post and The Globe and Mail. They appeal primarily to national advertisers and to regional advertisers that use specific geographic editions of these papers. 4. Internet newspapers—many of the above newspapers offer on-line versions of their newspapers and are experimenting with varying advertising approaches. 5. Special-audience newspapers—there are a variety of papers that offer specialized editorial content and are published for specific groups. Marketing Magazine is an example of a special audience newspaper as are college newspapers. 6. Newspaper supplements—although not a category of newspapers per se, many papers include magazine type supplements. An example is The Globe and Mail’s Report on Business which is published monthly.

Types of Newspaper Advertising—advertising in newspapers has categories including: 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. Local advertising refers to ads placed by local advertisers targeted to the market area served by the newspaper. National or general advertising refers to newspaper display advertising done by marketers of branded products sold which are sold on a national or regional level. 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—special ads in newspapers include a variety of government 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. 4. Inserts

Newspaper Circulation and Readership—media planners must understand the size and characteristics of the audience reached by a newspaper 1. Circulation and Readership – the basic source of audience information comes from the circulation figures in CARD. The Alliance for Audited Media (AAM) verifies circulation Chapter 12 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 12-4

figures for newspapers as shown in the magazine section. The Canadian Community Newspapers Association (CCNA). 2. Readership –Data on newspaper audience size and readership characteristics is available from NADbank. D.

Daily Newspaper Audience Measurement—media planners must understand the size and characteristics of the audience reached by a newspaper 1. Newspaper Audience Measurement – NADbank specifically measures readership of local and national newspapers. Its measurements include time spent reading, frequency of reading, method of newspaper receipt as well as product usage and usage habits for other media. Their study indicates that adults spend an average of 48 minutes per weekday and over 90 minutes on the weekend reading newspapers. 2. Newspaper Audience Measurement – ComBase administers the audience measurement for CCNA. ComBase is also the name of the study. ComBase is an organization with a composition and mandate similar to that of NADbank. The independent board features newspapers, advertisers, and advertising agencies. Its mandate is to publish audience research information of the community newspapers throughout Canada to allow them to sell their advertising space more effectively.

Newspaper Advertising Rates—advertising space in newspapers is sold by the agate line and column width. Most newspapers offer volume discounts (e.g., open-rate structure). There are additional charges for the use of colour and for preferred page and section positions.

IV.

EVALUATION OF NEWSPAPERS

Strengths of Newspapers 1. Reach and frequency—in most areas, 60 percent or more of households read a daily newspaper, and the reach figure may exceed 70 percent among household with higher incomes and education levels. 2. Scheduling 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 coverage—advertisers can vary their coverage by choosing a paper or combination of papers 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 amount of processing time—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. Media Image—consumers rely on newspapers as a trusted source of information and therefore carry a significant source effect as a legitimate media. 6. Creativity for cognitive responses—extensive long-copy appeals are possible for make for more thoughtful and elaborate processing of informational messages. 7. Absolute cost and cost efficiency—newspapers allow large and small advertisers to find the most appropriate sized ad to fit their overall advertising budget. 8. Target audience coverage—the general nature of newspapers permits extensive coverage of its target audience, especially with such a high readership. The resulting weaker selectivity can be offset with placement in appropriate sections. Chapter 12 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 12-5

Limitations of Newspapers 1. Creativity for emotional responses—the course paper used for newspapers, the absence of extensive colour, and the lack of time papers have available to achieve high-quality reproduction limits the quality of most newspaper ads. 2. Selective exposure and attention—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. 2. Target audience selectivity—while newspapers can offer advertisers geographic selectivity, they are not a selective medium in terms of demographics or lifestyle characteristics. The only exception to this is the various sections that are available in most newspapers. 4. Clutter—because a high percentage of the average Canadian daily newspaper is devoted to advertising, the advertiser’s message must compete with numerous other ads for consumers’ attention and interest.

IMC PLANNING: STRATEGIC USE OF PRINT MEDIA

Magazines—The points raised build on Figure 5-5 where each media plays a role in the consumer decision-making process and has particular communication objectives. While magazines have specific strengths and limitations, how a promotional planner constructs the message in the media can help achieve varying degrees of the communication objectives options described in Chapter 5.

Newspaper—The same argument if put forth for newspaper as seen above for magazines. The key strengths of newspaper allow many different advertisers take advantage of this media for consumers at the purchase stage of their decision-making.

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 strengths 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. Students might also be asked to find and discuss examples of magazines that are using selective binding and inkjet imaging to target and personalize ads. A very interesting web site that you may want to visit for some interesting information on Canadian magazines is Magazines Canada at www.cmpa.ca. With regard to newspapers, it is important to stress their importance as an advertising medium for local advertisers and also to discuss how national advertisers might be encouraged to allocate more of their budgets to newspapers. 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, however people are gravitating to reading newspapers online and potentially young adults are doing adopting readership there. The implications of this for advertisers can be discussed.

Newspapers have been decimated with less ad revenue; collectively losing $600 million from classifieds, which is pretty much exactly the level of online classified advertising. Looking to other avenues, especially the distribution of the regular newspaper to online channels is a logical step for Torstar and is in a direction that may be profitable. Vice has always been an innovator and a leader in media right from its first magazine issue so its iconic leaders are expected to go in a direction that is new and potentially profitable. With a blurring of content and advertising, Vice’s direction is an interesting move for further discussion.

IMC Perspective 12-1 1. How is the experience of reading a print magazine similar or different from reading the same title online? This question continues a line of similar questions in other perspectives to generate discussion about how the processing and communication effects may be similar or dis-similar with new media. It also raises the idea of whether an online version of a magazine is really a magazine. In fact, it is a website with a magazine brand name! The interaction is much different even though the content maybe identical. Moreover, the placement and type of ads are somewhat the same, but considerably different as well. All of this suggests that the discussion of media experience is one that students should be exposed towards.

IMC Perspective 12-2 1. Why are newspapers a stronger or weaker alternative as an advertising medium compared to online blogs? The perspective outlines the key advantage of newspapers over blogs in that there is reliable and credible authenticity of the information content due to the existence of its history of journalism and of an editorial board that questions and reviews the journalists work. In fact, the article highlights the importance of newspapers as a resource for bloggers. While there are no doubt some credible bloggers, the view that all bloggers are superior or overtaking newspapers is not a view shared by all. In essence, this perspectives calls into question the editorial content in which an advertiser would want to be associated with and suggests that newspapers retain their credibility still.

Answers to Review Questions 1. Discuss how circulation figures are used in evaluating magazines as part of a media plan and setting advertising rates. Circulation figures represent the number of individuals that receive a publication, either through 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 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. 2. Discuss the strengths and limitations of magazines as an advertising medium. How do magazines differ from television and radio as advertising media? Chapter 12 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 12-7

There are numerous advantages of magazines as an advertising medium. 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. Disadvantages or limitations of magazine advertising include the high absolute costs of advertising in many publications, the limited reach and frequency (particularly for individual publications) the long lead time often required for placing an ad, and the problem of advertising clutter and competition among the numerous ads for the readers’ attention. Magazines and newspapers 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 reaching mass audiences and they offer advertisers the same creative options that are available through TV commercials. 3. Discuss how circulation figures are used in evaluating newspapers as part of a media plan and setting advertising rates. Circulation figures represent the number of individuals that receive a publication, either through 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. 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. 4. Discuss the strengths and limitations of newspapers as an advertising medium. How might the decision to use newspapers in a media plan differ for national versus local advertisers? Newspapers have a number 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. Limitations of newspapers include their poor reproduction quality, the short life span of daily papers, their lack of selectivity with respect to demographics and lifestyle and the clutter problem that results from the vast number of ads in most papers. The decision to use newspapers in a media plan may differ for national versus local advertisers because of the rate differential that papers charge the two types of advertisers. The rates paid by national advertisers are considerably higher than those paid by local advertisers. Thus national advertisers may be less willing to use newspaper advertising or may try to avoid the higher rates by channeling their newspaper ads through special category plans, cooperative advertising deals with retailers, and local dealers and distributors that pay the lower local rates. 5. How do magazines and newspapers help achieve brand behavioural and communication effects? Chapter 12 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 12-8

Both media are high-involvement which contribute substantially to category need, brand attitude and brand purchase intention objectives. Consumers are in a reading situation, and when attended to, the message can be especially convincing with rational arguments augmented with appropriate emotional message content. The desire of readers to experience a magazine on multiple occasions increases frequency potential which can contribute to awareness. The message content can also designed maximize brand exposure assisting in brand awareness as well. In short, all communication objectives can be obtained with magazines; however, the coverage is not excellent with many magazines having very low readership levels. Newspapers suffer on this latter point as they are discarded on a daily basis; however frequency can be built in with additional exposures during daily placements. Of course the drawback of this is the additional cost versus magazines.

Answers to Applied Questions 1. Explain why advertisers of products such as cosmetics or women’s clothing would choose to advertise in a publication such as Flare, Elle Canada or Chatelaine. 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 Flare, Elle Canada or Chatelaine is to see the ads. For example, clothing ads 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 favourable environment that includes high quality photography and artwork as well as articles that are of interest to women. 2. Select an enjoyable print ad from a magazine and apply the earlier text material. Identify the target audience, behavioural objectives, communication objectives, brand positioning strategy and the creative strategy and tactics decisions; and associate these points with the key strengths of magazines as an advertising media. This represents an assignment that the Canadian author uses. It is a good application of the material and requires the student to make a decision on a number of points where there is likely some debate or interpretation as to what is really going on. Of course, the brand could have had an entirely different idea on the direction and purpose of the ad, however this exercise gives the student a good opportunity to develop confidence making a decision on the key concepts of this and other chapters. 3. Explain why advertisers of products such as smartphones or men’s clothing would choose to advertise in newspapers such as The Globe and Mail, Vancouver Sun, or Metro. Each of these three media vehicles offer the breadth of selection for newspaper advertising; national newspaper and city newspaper that require payment, and a city newspaper that is free. To some degree Metro is not a city newspaper since much content is not local and fits with all of the cities in which it has distribution, so it may be seen as a mid-point between the other two. Each would suit men’s clothing, but likely different brands and different retailers that have corresponding fit between the readership and the target audience. Alternatively, the wide spread usage of smartphones, we could expect to see all major brands advertising in all three publications. In this case though, brands might adjust the message and image to be more fitting of the readership of each newspaper. Of course brands in each product category may make other adjustments if there is a stronger concentration of its customers with a particular publication. 4. What differences might one conclude between national newspapers and community newspapers regarding the strengths and limitations of newspapers? Community newspapers provide excellent target audience coverage for the local market at a reasonable relative and absolute cost while national newspapers are wasted coverage for local advertisers even with regional editions that they offer. National newspapers offer stronger reproduction quality with their superior printing technology and offer a better emotional experience to Chapter 12 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 12-9

influence attitudinally. Much of the other evaluation criteria are quite similar. One might suggest that the media image is substantially different with neither the winner as they each serve a readership niche. This might imply an advantage for certain types of advertisers however. Students are encouraged to consider one or two other significant differences. 5. Identify how newspapers and magazines can be used for each stage of the decision-making process for automobile purchases. Ads in both media can highlight need recognition very easily with an appropriate headline to attract attention with relevant copy in the message. Newspapers might be more useful for information search and evaluation of alternatives, although one could not claim that magazines are weak in this regard since the format offers good opportunity to do comparative ads. From a purchase decision standpoint, neither might be considerably strong, but the frequency potential with repetitive viewings in a magazine might sway this one. Post-purchase evaluations may be more influential with magazines due to the ability to capture emotionally with better visuals and stronger reproduction.

Additional Discussion Question (Not In Text) A. Describe what is meant by selectivity with regard to the purchase of advertising media and discuss some of the ways magazines provide selectivity to advertisers. Selectivity refers to the ability of an advertising media vehicle to reach a specific target audience. Magazines provide selectivity to advertisers in a number of ways. Most magazines are published for readers with specific interests and lifestyles or who are involved with or work in a specific profession, business or area. Magazines also offer demographic and geographic selectivity. The editorial content of various magazines generally appeals to specific demographic groups based on factors such as gender, income, occupation, and education. Magazines also offer demographic selectivity through special editions that are targeted at different demographic segments. Geographic selectivity is possible as magazines can make it possible for advertisers to focus on certain cities or regions. This can be done by advertising in a magazine that is targeted to a particular geographical area such as a regional or city magazine. Geographic selectivity is can also be achieved in magazines by purchasing ad space in specific geographic editions of national or regional magazines. B. Choose a specific target audience that an advertiser might want to reach. Discuss how magazines and/or newspapers could be used to reach this particular market in a cost effective manner. First of all it should be noted that selectivity is an inherent advantage of advertising in many magazines. Most magazines are published for 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 can be 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 postal 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 even contact a magazine and ask for a media kit which usually provides very detailed information on how the magazine can reach specific target audiences and users of various products and services. Newspapers have 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 Chapter 12 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 12-10

a local newspaper (even the college paper) and request a media kit or information on advertising rates. C. If you were purchasing magazine advertising space for a manufacturer of snowboarding equipment, what factors would you consider? Would your selection of magazines be limited to snowboarding publications? Why or why not? In purchasing magazine space to advertise snowboarding equipment the media planner would obviously want to know what publications are best suited for reaching snowboarders and their advertising space rates. Consideration should also be given to the amount of advertising for snowboarding equipment that appears in these publications and the problem of getting the company’s ad noticed among all the competing ads. North American marketers of snowboarding equipment limit their advertising to publications that focus specifically on this market such as Snowboard since virtually all of the readers of these publications are snowboarders and there would be very little, if any, wasted circulation. Companies might also consider running ads in skiing magazines such as Ski, Skiing or Powder as readers of these publications may also be snowboarders. However, one problem of advertising in snowboarding or skiing publications is the high amount of competition from ads for other companies’ equipment which may make it difficult for the company’s ad to get noticed. Consideration also has to be given to the number of snowboarders who may be viable prospects for the equipment but do not read any of the snowboarding skiing publications. To broaden its reach, the company might want to look at other magazines that reach snowboarders such as general sports publications (e.g., Sports Illustrated), outdoor magazines, or other publications that reach this age and lifestyle group. A problem the company faces in advertising in these general publications is that of wasted circulation as many of the readers may not be snowboarders. Thus, advertising in general sports or outdoor magazines may not be as cost-effective as the more narrowly targeted snowboarding or skiing publications. D. Discuss why companies brands choose to publish their own magazines. Do you agree or disagree with critics who call some of these custom magazines “phony publishing”? Some companies publish their own magazines because they are a very good way to provide detailed information to their customers. The company controls all of the editorial content in a custom magazine and thus can provide readers with what ever type of information they feel is appropriate and, of course, is beneficial to the company. Custom magazines are valuable to a company such as Sony since it carries so such as wide variety of electronic products ranging from televisions and video equipment to stereos and digital cassette players. Custom magazines allow these companies such as Sony to provide readers with advertising as well as other forms of information in a manner that is more cost effective than media advertising. Some people in the publishing industry are very critical of custom magazines and refer to them as phony publishing because they are controlled entirely by the advertiser and sometimes represent themselves as independent publications. The basis of the criticism stems from the fact that the companies who publish the magazines also control the editorial content and thus can write articles that are biased in favour of the company and its products or services. If consumers are not aware of the fact that the company publishes the custom magazine, they may interpret this favourable information as coming from a neutral, objective source and thus attribute more credibility to the stories. On the other hand, if the companies make it clear to consumers that they are publishing the custom magazines and they still choose to read them, then it is difficult to criticize them. E.

The number of magazines has increased substantially in the past five years. What could have caused this recent trend? As Figure 12-8 shows, Canadian magazines experienced tremendous growth in comparison to the USA, and the trend is fairly strong and consistent from about the time the Internet grew. As Chapter 12 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 12-11

advertising revenues statistics indicate, it appears that newspaper revenue is being lost to Internet revenue. Consequently, personal reading of print publications might be substituted from newspaper to magazines, as consumers receive more of their news information from the Internet. With greater use of media with less selectivity, it appears advertisers are looking for some avenues for some selectivity in their plans, a key strength of magazines. Thus, publishers noting their customers’ preferences respond to the new found demand with some creative supply options. Finally, as a couple of examples suggest, building on Canada’s growth in the global cultural market, Canadian publishers are expanding internationally. F.

What factors could explain the lower readership of newspapers compared to a few years ago? The growth of the Internet represents both a challenge and opportunity for newspapers. Newspapers are a source of information but also a form of entertainment. With the growth of the Internet and online services, more consumers will be spending time “surfing the net” which means they may be spending less time reading 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 newspaper. Newspapers are responding to this challenge by making their publications available online. Some studies have shown consumers are comfortable with the idea of reading newspapers over the Internet. This means that it will be very important for publishers to make their newspapers available online. However, there are still many problems associated with issues such as audience measurement and the ways to sell advertising on these electronic versions of the publications.

IMC Exercise Choose a specific consumer or business magazine and analyze it from an advertising perspective. If time permits you might write or call the publication to request a media kit from the publisher. Your report should include an analysis of the following: •

The target audience for the magazine in terms of both demographics and life style of its readers.

•

The percentage of the magazine’s pages devoted to advertising versus editorial content. Is there a clutter problem in the magazine?

•

A breakdown of the types of products and services advertised in the magazine. Why do you think these advertisers are attracted to this particular publication?

•

An analysis of the editorial climate and mood created by the publication and how it affects who chooses to advertise in it. How might the editorial climate of the magazine affect readers processing of the advertisements?

IMC Comprehensive Project Students should analyze how magazines and newspapers might be used as part of the media plan for their project. The specific assignment is as follows: IMC Project Assignment for Chapter 12 Analyze the role of magazines and newspapers in the media plan for your product or service. Your analysis should focus on how magazines and newspapers can be used to reach the target audience and help achieve your media objectives. What percentage of your media budget will be devoted to magazines and newspapers? What class of magazines and specific publications do you plan to use and why? If you plan to use newspaper advertising what are some of the factors you need to consider in making effective use of this medium? You should consult a source such as Canadian Advertising Rates and Data to get rate information on the magazines or newspaper you plan to use. You might also consider contacting some of the publishers to request media kits on their magazines. Chapter 12 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 12-12

CHAPTER 13 OUT-OF-HOME AND SUPPORT MEDIA Chapter Overview In addition to the broadcast and print mediums discussed in the two previous chapters, marketers have a variety of alternatives from which to choose. In addition to the familiar outdoor ads and transit ads, a number of new out-of-home media appear in a many places and point-of-purchase locations. Out-of-home media are assuming an increasing role in the media mix as a primary media and as a support media. Moreover, other forms of support media are gaining prominence. The purpose of this chapter is to explore out-of-home and support media, and to discuss their strengths and limitations.

Learning Objectives 1. Identify the options within out-of-home for developing an IMC program and for audience measurement, and their strengths and limitations. 2. Apply the concepts of out-of-home media to promotional products and product placement to construct support programs within an IMC plan. 3. Show how out-of-home media and support media are important elements of IMC planning.

Chapter and Lecture Outline I

OUTDOOR MEDIA

Outdoor Media Options—outdoor media are available in a wide variety of formats including posters, backlit posters, bulletins, superboards, spectaculars, street-level posters and transit shelter posters, mobile signage. All of these options feature creative opportunities as advertisers look to make a unique public impression to large audience passing by these media on a regular basis. Most options are sold by a few media companies as there is concentration in this industry much like others.

Audience Measurement for Outdoor Media—Reach and frequency are measured by the Canadian Outdoor Measurement Bureau (COMB). Their methodology involves using traffic circulation data from municipalities and analyzing this data with respect to the average number of people in the vehicle and the origin of the vehicle within the CMA. COMB measurement results can be used to estimate reach and frequency levels for individual outdoor advertising campaigns. The Outdoor Marketing Association of Canada (OMAC) is an industry group designed to foster the growth of outdoor media. To facilitate this, they commission research, Day in the Life, that demonstrates the effectiveness of outdoor media by understanding their consumption habits. Instructors should provide commentary on the sophistication of the research methodology for both organizations and indicate the strength of the reliability and validity of the audience data. It is easy to be skeptical regarding the quality of this data, but these organizations represent worldclass standing on the confidence advertisers can have when purchasing media from these sources.

Strengths of outdoor media •

reach

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frequency

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geographic coverage

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creativity for emotional responses

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scheduling flexibility

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selective exposure

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attention

Limitations of outdoor media •

target audience coverage

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amount of processing time

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creativity for cognitive responses

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absolute cost

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media image

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target audience selectivity

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clutter

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low involvement

II.

TRANSIT ADVERTISING

Transit Media Options—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 differs in that these ads are oriented around transportation. Buses, taxis, commuter trains, airplanes, and subways are some of the transit forms employed. Four types of transit advertising are most commonly employed: •

interior transit cards are placed in backlit units above the seating area in buses, streetcars and subway cars.

•

interior door cards are placed on both sides of the doors of subway and commuter train cars.

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exterior posters are placed on the on the sides and backs of buses.

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station posters are found in places where people wait for public transportation and include bus shelters.

Travel between cities offers additional exposure avenues for advertising messages. Video and audio ads can be placed in airplanes along with additional collateral material. B.

Strengths of transit media •

amount of processing time

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reach

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frequency

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geographic coverage

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absolute cost and cost efficiency

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selective exposure

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scheduling flexibility

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media image

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target audience selectivity

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target audience coverage

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creativity for emotional and cognitive responses

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clutter

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attention

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involvement

III.

PLACE-BASED MEDIA

Place-Based Media Options—place-based media bring the message to the audience. They include mall posters and advertising placements in convention centres, movie theatres, hotels, sports venues and school campuses.

Strengths of Place-Based Media

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target audience selectivity

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absolute cost and cost efficiency

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creativity for processing responses

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control for selective exposure

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attention and involvement

Limitations of Place-Based Media •

media image

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clutter

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reach and frequency

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target audience and geographic coverage

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amount of processing time

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scheduling flexibility

PROMOTIONAL PRODUCTS

The Promotional Products Association International (PPAI) 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”. A.

Strengths of promotional products •

target audience selectivity and coverage

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creativity for cognitive responses

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frequency

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absolute cost and cost efficiency

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creativity for emotional responses

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Limitations of promotional products •

media image

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clutter

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scheduling flexibility

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reach

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geographic coverage

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selective exposure

Promotional Products Research Because of the unique nature of the ‘medium’, there is no established audience measurement system for it. Various studies have shown that the use of advertising specialties can dramatically improve brand recall and response to direct mail offers.

PRODUCT PLACEMENT

In increasing numbers, marketers are paying to have their products used in movies, television shows and music videos. In many instances such product placements have resulted in significant sales increases. A.

Product Placement Decisions—the source in which the product is place is critical since the plot, actors or other characteristics of the entertainment vehicle can be associated effectively with the brand. Issues of the amount of time and the number of different vehicles are also highlighted as important.

Strengths of Product Placement

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reach

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frequency

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creativity for emotional responses

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cost efficiency

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geographic coverage

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selective exposure

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clutter

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involvement

Limitations of Product Placement •

absolute cost

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amount of processing time and attention

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creativity for cognitive responses

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scheduling flexibility

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media image

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target audience selectivity

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target audience coverage

While no formal audience measurement organizations exist, some studies have shown that product placement generates relatively high recall and that it can add an aura of glamour to products associated with celebrities. VI.

IMC PLANNING: STRATEGIC USE OF OUT_OF_HOME & SUPPORT MEDIA

Out-of-Home—The points raised build on Figure 5-5 where each media plays a role in the consumer decision-making process and has particular communication objectives. Out-of-home’s strengths suggest its ability for enhance awareness. Place-based media is often used for purchase intention objectives due to the time and location characteristics.

Support—The points raised build on Figure 5-5 where each media plays a role in the consumer decision-making process and has particular communication objectives. Promotional products and product placement offer good awareness and brand-building characteristics due their disperse and narrow availability and their ability to fit into the message context successfully.

Teaching Suggestions Coverage of the characteristics of the media presented in this chapter can lead to interesting exchanges. As indicated, discussions of product placements, advertising in the movies, 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 strengths and limitations, 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.

Vignette 1. Why are advertisers turning to experiential messages? Advertisers always look for new avenues to deliver their messages and gravitate to popular changes that competitors may be using. Another reason is that the experiential component often offers an opportunity for personal selling to occur as staff is usually at the location. Many of these experiential messages are designed for consumers further along in their decision-making so that seeing, using, and communicating about the brand becomes paramount.

IMC Technology Perspective 13-1 1. Which of these ideas appears to be the most creative use of new technology? These out-of-home technological messages offer ideas for students so that they can always be thinking creatively no matter what the brand or product is. Furthermore, it is possible to do successful marketing communication without spending considerable amounts in regular media as these exmaples suggest. Of course, in a couple of the instances other advertising existed, so these examples also review the point of outdoor advertising being appropriate as a support media. As for the most creative, the question invites a friendly debate that allows instructors to encourage students to put forth their idea. Instructors can use the material to show the link between creative strategy and tactics decisions and the media implementation.

IMC Perspective 13-2 1. In what way do you think product placement is effective? Clearly product placement delivers on exposure as the brand is presented visually or verbally, and presumably given the non-commercial exposure, the processing of the brand occurs with a strong probability beginning with attention. Whether extensive cognitive or emotional responses occur Chapter 13 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 13-5

depends on the amount of exposure time and the content of the brand presentation. This is one variable that decision makers certainly try to influence with the producers and directors of the show/movie. This exposure and processing presumably leads some enhanced awareness with additional frequency and the context could help build stronger retention. A strong brand effect in terms of attitude is expected from the presentation context. Certainly some brands experience publicity with news reporting on the usage of such devices in the shows and word of mouth can be enhanced as w well. As this suggests, the communication of a brand through placement is quite positive if the audience does not perceive it as an intrusion or too gratuitous.

Answers to Review Questions 1. Explain how outdoor ads can be creative and foster emotional responses. Why would brands use outdoor ads for this purpose? Outdoor ads use humour with clever phrases in a message that is primarily text based. In this case, the humour of the ad is consistent with the brand and reinforces the attitude of the target audience. It would be very difficult to expect short text messages to have a central route to persuasion and actively contribute to significant attitude change. Alternatively, pictures with limited copy can provide reminders of consumption experiences, or reminders of television commercials. In this case, the transformational experience of television commercials is played once again the target audience’s mind allowing the processing of a television commercial when it is in fact not occurring. For an advertiser to deliver a similar kind of message experience at a lower costs, allows potentially greater ad frequency in the overall media plan. 2. What are promotional products? List some of the advantages and disadvantages of this medium. Provide examples of where this medium would be appropriate. Promotional products and advertising specialties consist of products and gifts that are given to clients and/or prospective customers for a variety of reasons. These products may range from something as simple and inexpensive as matchbooks or ballpoint pens to much more expensive items such as leather cases, plaques, etc. Promotional products are used to accomplish a variety of objectives, including creating awareness, building relationships, and increasing the likelihood of retention. The products offer a number of advantages including the ability to be creative, thus increasing awareness and attention to the message, attractive, leading to retention and goodwill and inexpensive. Due to these reasons, many employ this advertising medium to achieve reach and to remind customers of their offerings. Potential disadvantages of promotional products include the potential for waste (the items are lost or thrown away), potentially harmful effects to the company’s image (cheap products) and they can be expensive. Some companies will not permit their employees to accept promotional products that exceed a certain cost, expressing concerns that the employee may favour the giver in future deals, to the detriment of those not providing specialties. Promotional products are appropriate in a number of situations. For a company making a sales presentation and attempting to be creative and/or break through the clutter the medium holds strong potential. In addition, when awareness and or retention are the objectives, specialties serve as an inexpensive means of achieving reach and reminders respectively. (Every time you use your pen, it may remind you of the provider.) Other specialties—for example, desktop items or calendars—serve as an easy way to keep one’s name and phone number in front of the potential customer. It is a lot easier to glance across one’s desk than it is to look up the number in the phone directory. 3. How do out-of-home and support media help achieve awareness objectives? Out-of-home and support media can be used to achieve a number of communications objectives. Creating awareness is foremost among these objectives since the message is not processed for very Chapter 13 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 13-6

long but may be seen very often. In this sense, out-of-home and support media offer a tremendous amount of frequency so that brand name and key images may be recalled or recognized. The volume of auto and pedestrian traffic helps with reach again improving awareness levels. In short, the awareness objective is foremost for these media as they act as a constant reminder.

Answers to Applied Questions 1. While traveling throughout the town or city, look for the most unusual place-based ad and decide if this was effective advertising. Hopefully students appreciate an adventure to look for unusual ads in all sorts of places. Instructors might like to explore whether students have seen ads in unique places when they might have visited other cities for enjoyment or on exchange programs for their studies. The text and Figure 13-1 can give a list for handy reference to prompt recall of different examples. If none emerge in a discussion, instructors might look to the new Budweiser Red Light that is visiting cities in 2014. This is an especially good example since it acts as a very good support media for the whole campaign that was prominently featured in TV ads. Other examples are easily found with a careful search and other labels for this kind of advertising might occur such as ambient or guerilla. 2. The James Bond movie Skyfall had many product placement deals. Watch the movie and figure out which brands used this strategy; then do an Internet search to find the real answer. Heineken paid $45 million to be Bond’s beer of choice, and many other brands are featured in the movies. A simple search shows multiple news articles that include many brands. One critic claims that the placements were neither blatant nor excessive, despite numerous writers with this contention. Historically, Bond films often featured extensive product placement and given the persona of the Bond character, it is expected that we see high-end brands displayed in the movie. 3. Explain how out-of-home and support media might be used as part of an IMC program. Take any of the media discussed in the chapter and explain how they might be used in an IMC program for automobiles, cellular phones and Internet services. Out-of-home and support media can be used to achieve a number of communications objectives, awareness, attitude, purchase intention/shopping. Consider the following examples: Automobiles-product placements are often effectively done in movies for image purposes. Outdoor billboards have been used by all major brands for awareness. Promotional products are another hallmark of auto advertiser for reminder and image reasons. When in the market for a new car, auto brands often place themselves in key places for demonstrations (e.g., malls). In short, auto brands typically us all forms of out-of-home and support media. Cellular telephones- Promotional products have been used by a number of cell phone companies. Key chains shaped like cell phones have been used to create awareness and retention. Note pads for desktops have also been commonly employed. Outdoor is a favorite of many cell phone companies, primarily to create awareness. Cell phone ads have also appeared on transit ads and bus shelters. Internet services-These companies are also frequent users of outdoor and transit advertising for all communication purposes. Most of these messages focused on creating awareness of the service As you can see in each of these examples, support media can be used by a variety of companies to achieve a number of communications goals. Due to their flexibility these media can be creatively used to effectively promote companies and their service offerings.

Additional Discussion Questions (Not in Text) A.

Discuss some of the reasons why in-flight advertising is an attractive medium for advertisers. In-flight advertising is attractive for a number of reasons: Chapter 13 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 13-7

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the audience is desirable. The average traveler is upscale, and professional. They are often involved in the purchase decision for a variety of products.

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the audience is captive. The programming and ads are relatively free from distraction and quite often there is little more to do than watch the ads—particularly on long flights.

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relative cost. The cost of advertising in-flight is low on a relative basis than many other media reaching this target audience.

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target marketing. In-flight allows the advertiser to segment and to target specific demographic groups.

Expensive products including perfumes, liquors, jewellery, etc. are products with a strong potential market in in-flight. In addition, products targeted to travelers (both business and pleasure), products with international appeal, and hotels, restaurants, and auto rentals can all reach their target markets with this medium. Generally, all products targeted to an up-scale market may have potential. Business products—for example, luggage, computers, etc.—may also be marketed effectively on in-flight television. The percentage of travelers that are on business trips accounts for a substantial target market. The reason for these products having the best potential is the demographics of the airline passenger. Given an older average age with a higher household income, the traveler has money to spend, and can afford more luxurious items. Given the high percentage of business travelers, the market for business products and services may also be attractive. B. What are some of the reasons in-store media may be effective in increasing sales? Many marketers believe that the majority of purchase decisions are made when the consumer is in the store. For that reason, they believe that by being “where the action is” they will be able to more directly influence the consumer’s decision. The cite a number of reasons why they feel that they will be more effective advertising in-store: •

they can influence the consumer at the precise time the decision is being made.

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the consumer has no time to forget the brand name

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coupons can be used as an extra incentive to purchase

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in-store displays can catch the consumer’s eye and stimulate trial

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product information can be conveyed at the exact time the consumer needs it

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the consumer has less time to experience dissonance and change his/her mind

C. Discuss advantages and disadvantages associated with advertising in movie theatres. For what types of products and/or services might these media be most effective? •

There are a number of advantages associated with these forms of advertising. First, there is the potential for a high number of exposures and for high frequency. The cost in local theatres can be relatively low, though this is typically accompanied by a lack of creative potential. There is little or no clutter, and the audience is more likely to be attentive (essentially a captured audience). Recall of movie ads can be quite high (though not necessarily positive) and if the experience is an enjoyable one, positive effects of mood are experienced

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One of the primary disadvantages is that such ads may lead to dissatisfaction among consumers in that they feel the ads are intrusive. Unlike television, radio and other media, the consumer often feels that they have paid a significant price to enjoy their movies and are not happy when they must watch an advertisement. As a result they tend to react negatively when the ads appear. Chapter 13 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 13-8

Studies have shown that ads in movie theaters are rated as intrusive, irritable and less well liked. Consumers often express the idea that they are paying to watch a movie, and if they wanted to watch television with all of the commercials, they could have done so for free at home.

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A second disadvantage is that of cost—particularly with movie ads. Both absolute and relative costs are high, with the CPM’s for movie advertising particularly high relative to other media.

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Perhaps the most viable product or service to advertise in these media are entertainment related products and/or services. Movies are advertised in the format of previews, and some companies have been successful in promoting travel and related services.

Discuss some of the advantages and disadvantages of outdoor advertising. Outdoor ads are creative, more attractive, more attention getting, and in general more appealing to both advertisers and viewers. More specifically, outdoor advertising has the following advantages: •

wide coverage of local markets—if the budget allows, outdoor advertising can be used to cover a very broad local customer base. Ads can be placed in strategic locations such as freeways, bus terminals, city streets and buildings, etc., allowing for the potential of a large number of exposures.

•

high levels of frequency—because purchase cycles are usually for a minimum of one month, passers-by will have the opportunity to be exposed to the message a number of times.

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geographic flexibility—as noted, outdoor ads can be placed in a variety of locations, potentially reaching drivers, walkers, mass transit users, etc., throughout a number of geographic locations.

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creativity—due to recent technological advances, outdoor has now become a very creative medium. Boards are no longer unidimensional and boring. (Note some of the examples provided in the text.)

Outdoor also has its disadvantages:

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target audience selectivity—outdoor is not a very effective medium for targeting specific markets. Given that locations are chosen on the basis of the number of potential exposures, the medium is most effective when a mass market is sought.

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limited message capabilities—in many cases—particularly for billboards—exposure times to the ad are very short. As a result the message must be simple and limited. (Of course this is less true for terminal ads or transit ads on the inside of commuter vehicles. It is also possible to increase message comprehension with well-thought-out illustrations or pictures.)

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media image—one of the advantages of outdoor (high frequency) may also result in a disadvantage—wear out. If the viewer sees the ad repeatedly for a lengthy period of time, the likelihood increases.

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Absolute cost—outdoor is expensive in both an absolute and relative sense.

One of the disadvantages associated with transit advertising involves image. Discuss why this might be a problem and why advertisers might stay away from this medium as a result. Ads that appear on buses, subway cars, benches, etc. may suffer from image problems. A variety of reasons may contribute to this:

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the image of transit itself—many people feel they would never ride a bus, are afraid of the subway and/or have a negative image of taxi drivers—this image may carry over to the advertisers themselves.

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advertisers—while ads on buses, taxi’s, etc. may involve a number of companies with well known names and reputations, ads on benches (for example) may be sponsored by less well known companies. The receiver may impute a lack of credibility or form a negative impression as a result (Would you use a lawyer whose ad you saw on a bus bench?)

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The low cost of the ads can also attract advertisers who could not afford to advertise elsewhere.

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appearance—weather conditions can contribute to the negative image. For example, slush and dirt on motor vehicles, dirt and fading on benches, graffiti on posters, etc.

Problems:

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If the ad does not create a favourable impression this may carry over to the image of the product/service.

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Attributions may be made to the advertiser—as noted above “would you eat in a restaurant you saw on a subway ad?” Many people wouldn’t.

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The ad could be defaced beyond recognition.

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Ads on transit vehicles may go to places outside the targeted area. For example, a restaurant ad targeting urban dwellers may reach those on a cab or bus that are not likely to go into the city to eat.

A prevalent strategy among advertisers is to get themselves into television shows and movies. Discuss the possible advantages and disadvantages that might result form such exposures. The advantages of this form of promotion include excellent exposure, the potential for high levels of frequency, relatively low cost per thousand, and recall. One of the major advantages, is however, source association and image creating abilities. At the same time, all product placements are not successful. Due to a variety of reasons, the product may fail to be seen or heard. When it is seen or heard, the time of exposure may be minimal—it costs more to have a long exposure. The advertiser also does not have total control over the placement. For example, if a scene is cut, the product placement may be cut as well. If the script calls for a change, the product placement may suffer in the process. Product placements are not inexpensive in an absolute cost sense. As noted in the text, as more and more advertisers employ this form, the law of supply and demand will dictate cost increases. Finally, two factors may even lead to negative consequences of product placements. One is the negative placement described in the book. The mood created by the movie or television show may negatively impact the impression of the product, and/or the product may be depicted in a less than positive fashion (see Pepsi/Coke example in text.) Secondly, as the number of product placements continues to increase, the inclusion of these placements will leave the domain of a natural setting and become intrusive. As more and more placements become blatantly placements, the viewer will become more irritated and the effectiveness of this strategy will decline.

IMC Exercise Stage a contest in which students bring their best example of a support ad to class (or a description of the same). The contest should be judged on the novelty as well as the potential effectiveness (as explained by the student) of the ad. Chapter 13 - Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 13-10

IMC Comprehensive Project Include a variety of support media in your media plan. The absolute and relative costs of these should be shown and a rationale for their inclusion should be provided.

CHAPTER 14 SALES PROMOTION Chapter Overview Sales promotion and its role in a firm’s integrated marketing communications program is the focus of this chapter. We examine how marketers use both consumer and trade promotions to influence the purchase behaviour of consumers as well as wholesalers and retailers. The chapter discusses the scope of sales promotion and the reasons for its increasing importance. The content of a promotion plan is reviewed such as specific promotion objectives, strategic use of promotion regarding consumer franchise-building versus non-franchise-building promotions and key promotion tactics. The chapter thoroughly examines consumer and trade sales promotion techniques used by marketers. The chapter concludes with a discussion IMC issues as they relate to sales promotion.

Learning Objectives 1. Explain the role of sales promotion in a company’s integrated marketing communications program and to examine why it is increasingly important. 2. Identify the objectives, strategy, and tactical components of a sales promotion plan. 3. To examine the consumer promotion strategy options and evaluate the factors to consider in using them. 4. Describe trade sales promotion strategy options and evaluate the factors to consider in using them. 5. Apply key IMC issues related to sales promotion decisions.

Chapter and Lecture Outline I. SALES PROMOTION PLANNING Fully integrated marketing programs include consumer and trade promotions that are coordinated with advertising, public relations, and Internet marketing programs as well as sales force efforts. A.

Characteristics—sales promotion has been 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 two important aspects to sales promotion that should be noted: •

sales promotion involves an inducement that provides an extra incentive (e.g., financial, emotionally based, value oriented, or experiential)to purchase a product

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sales promotion is essentially an acceleration tool that is designed to speed up the selling process and maximize sales volume

Types of Sales Promotion—sales promotion can be broken down into two major categories: •

Consumer sales promotion which are promotions directed at the consumers who are final purchasers of goods and services Chapter 14 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 14-1

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

The activities included under each sales promotional category are shown in Figure 14-1. 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. A company’s sales representatives can offer resellers special programs such as promotional allowances and cooperative advertising. Trade advertising in publications that serve the industry 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 that 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. C.

The Growth of Sales Promotion The role and importance of sales promotion in companies’ integrated marketing communications programs have increased dramatically due to a number of factors such as: 1. Strategic Importance—sales promotion experts or agencies are part of the brand building team at the start of the planning process as all promotional professionals realize the dual importance of the communication and behavioural effects of sales promotion. 2. Reaching a Specific Target Audience—sales promotion tools are effective in reaching specific geographic, demographic, psychographic and ethnic markets. 3. Promotional sensitivity—the percentage of purchases made in conjunction with a promotional offer has increased. 4. Declining brand loyalty—consumers have become less brand loyal, are purchasing more on the basis of price, value, and convenience, and are looking for more deals and will buy whatever brand is on sale. 5. Brand proliferation—consumer product companies are launching more new products each year. Sales promotion tools such as samples and coupons are often used as part of the process that leads consumers from trial to repeat purchase at full price. Promotions play an important role in securing and maintaining shelf spaces for new and existing products. 6. 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. 7. Accountability—many companies are demanding to know what they are getting for their promotional expenditures. They feel that sales promotion programs are more economically accountable than advertising since they often generate a quick and easily measured jump in sales. 8. Power of retailers—recent 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 Chapter 14 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 14-2

use this information to analyze sales of manufacturers’ products and then demand discounts and other promotional support from manufacturers of lagging brands. 9. Competition—many companies 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 co-marketing) whereby a marketer collaborates with customizes promotions for individual retailers. II.

SALES PROMOTION PLAN

Objectives for consumer sales promotion—companies must give consideration to 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 different objectives the marketer might have for both new and established brands. These include; obtaining trial purchase, obtaining repeat purchase, increasing consumption, building brand equity.

Consumer Sales Promotion Strategy Decisions 1. Sales Promotion Strategy Options—the options identified in Figure 14-1 are important strategic choices. In making these choices it is important to make the distinction between consumer-franchise building sales promotions and non-franchise building efforts. Consumerfranchise-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. An additional decision criterion relates to the incentive characteristic. As illustrated in Figure 14-2, the choice is based on the target audience and the intended behavioural response. Operant conditioning, a form of behavioural learning this approach, can help explain the different types of behavioural responses. 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 behaviour and is an important element of instrumental conditioning. Sales promotion rewards a consumer through the incentive. Operant conditioning concepts that are particularly relevant to sales promotion are schedules of reinforcement and shaping as shown in Figure 14-3. 2. Application across Product Lines—another strategic decision is the degree to which each sales promotion tool is applied to the range of sizes, varieties, models, or products. 3. Application across Geographic Markets—sales promotions can be run nationally, regionally or in select markets.

Consumer Sales Promotion Tactics Decisions—the value, timing and distribution of the sales promotion offer are key tactical decisions. 1. Value of Incentive—the marketer must decide on the value of the promotion in terms of any discounts offered, the value of premium offers and whether non-economic incentives will be used.

2. Timing—the marketer must decide during which months, weeks, days and/or seasons the promotion will be run. 3. Distribution—the marketer must establish the logistics with respect to how the promotion will get to the consumer and how the consumer will get to the promotion. III. CONSUMER SALES PROMOTION STRATEGY OPTIONS The various consumer sales promotion techniques used by marketers should be discussed along with their strengths 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. 1. Strengths of sampling •

Samples are an excellent way of inducing trial

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Sampling allows consumers to experience a product directly and gain an appreciation for its benefits and characteristics

2. Limitations of sampling •

Costs of sampling programs can be very high

•

The benefits of a brand may be difficult to gauge from a sample

3. 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

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Sampling through the media

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Sampling through the mail

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In-store sampling

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On-package sampling

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Event sampling

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Location sampling

Coupons—are the oldest, yet most widely used and effective sales promotions tool. The number of coupons distributed to consumers has increased dramatically over the past decade. 1. Strengths of coupons Chapter 14 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 14-4

•

Coupons make it possible to offer a price reduction to those consumers who are price sensitive without having to reduce the price for everyone.

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Coupons allow the offering of a price reduction without having to rely on retailers.

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Couponing can be an effective promotional device for generating trial of a new brand.

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Coupons can be used to encourage trial and increase consumption of established brands.

2. Limitations of coupons •

It can be difficult to estimate how many consumers will redeem a coupon and when they will do so.

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Previous loyal users often redeem coupons targeted to attract new users of established brands.

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Couponing programs can be expensive.

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Problems of coupon misredemption and fraud exist.

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

•

media delivery in newspapers and magazines and as free-standing inserts (FSIs)

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through direct mail

•

in or on packages

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in stores and at points-of-purchase

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over the Internet through online promotion sites

Premiums—a premium is an offer of an extra item of merchandise or service either free or at a low price that is used as an incentive for purchase. 1. Strength of 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. A key feature is that the gift is viewed as a valuable incentive. Secondly, reinforce the brand image and work with co-branding. Third, premiums can encourage an impulse purchase to do the nature of the first two points. Fourth, premiums work with other IMC tools very well as there is a story or meaning to associate with. Finally, premiums generally obtain trades support as a push since they can see the pull efforts. 2. Limitations of premiums—while the gifts are inexpensive, they are costly on a per unit basis versus other forms of exposure. One solution is to use self-liquidating premiums that require the consumer to pay some or all of the cost of the premium plus handling and mailing costs. Premiums require a degree of effort in some cases where they need to send away for it. Finally, there is a risk of poor acceptance and being stuck with a worthless inventory.

Contests and Sweepstakes—a contest is a promotion whereby consumers compete for prizes or money on the basis of 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. Strengths of contests and sweepstakes •

Contests and sweepstakes can be an effective way of getting the consumer to become involved with the brand by making the promotion product relevant.

•

Contest and sweepstakes can be executed to build brand equity through the consumer franchising building characteristic.

2. Limitations of contests and sweepstakes

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A contest or sweepstakes promotion may overwhelm the ad or brand and may do little to contribute to the brand franchise or image.

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There are numerous legal problems and considerations that impact the design and administration of contests and sweepstakes.

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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.

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. 1. Strengths of Refunds and Rebates •

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 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.

•

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

2. Limitations of Refunds and Rebates •

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

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The terms of some rebate offers are inconvenient or even unrealistic.

•

• F.

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 strengths and limitations of bonus packs: 1. Strengths of Bonus Packs •

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.

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Bonus packs often receive favourable response from retailers.

2. Limitations of Bonus Packs

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They may require additional shelf space and do not provide extra profit margins to the retailer.

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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. 1. Strengths of Price-off Deals •

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.

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Price-offs can provide a strong influence when point-of-purchase comparisons are made.

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They can encourage consumers to buy larger sizes.

2. Limitations of Price-off Deals

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They can create pricing and inventory problems for consumers

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They may appeal primarily to regular users rather than attracting nonusers

Event Marketing—Event marketing is a form of promotion where a company or brand is linked to a specific event or a themed activity. It usually is 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 Chapter 14 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 14-7

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 has become very popular in recent years for at least two 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 actually let consumers experience the product

III.

TRADE SALES PROMOTION

Objectives of Trade Sales Promotion—sale 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 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

Trade Sales Promotion Strategy Options—there are a variety of trade promotion tools that manufacturers can use as inducements for wholesalers and retailers. These include: 1. 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

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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.

There are several problems with trade allowances. Many companies are concerned over the abuse of trade allowances by wholesalers, retailers and distributors. Marketers give retailers trade allowances with the expectation that the savings will be passed on to the consumer in the form of lower prices. However, the trade members often pocket these discounts. Two practices that are particularly bothersome are forward buying and diverting.

2. Point-of-Purchase Displays —marketers use a variety of point-of-purchase materials including end-of-aisle displays, posters, banners, shelf cards, motion pieces, stand-up 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. 3

Cooperative advertising—cooperative advertising, whereby more than one party shares the cost of advertising, is another important form of trade promotion. Actually there are three types of cooperative advertising including: •

Vertical cooperative advertising—Vertical cooperative advertising is the most common type of co-op ad program used as part of a trade promotional program. Under a vertical coop 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. This percentage is usually around 3 to 5 percent.

•

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.

•

Ingredient sponsored cooperative advertising – refer to advertising supported by a raw materials or component manufacturer to help establish end products using the company’s materials or ingredients.

4. 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. 5. Sales training programs—another form of manufactured sponsored promotional assistance is sales training programs for reseller sales personnel. Manufacturers provide sales training assistance to retail salespeople by having formal classes, having their sale reps work with resellers and providing sales manuals, brochures, videos and other selling aids. 6. 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. IV.

IMC PLANNING: STRATEGIC USE OF SALES PROMOTION

Sales promotion techniques usually work best when used 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: Chapter 14 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 14-9

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

Creative 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 WD-40 ad shown in Exhibit 13-3 provides a good example of how a sweepstakes theme is coordinated with the positioning used for the brand.

Media Support—using a promotion without prior or concurrent advertising can limit its effectiveness and risk damaging the brand’s image. Conversely, a coupon, a premium offer, or an opportunity to enter a sweepstakes or contest can enhance the effectiveness of an ad.

Brand Equity—The increasing use of sales promotion in the marketing program represents a fundamental change in strategic decisions regarding how companies market their products and services. However, the value of this increased emphasis on sales promotion has been questioned by many experts. 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.

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 1, brand equity refers to a type of intangible asset of added value or “goodwill” resulting from the favourable image or differentiation that a brand has achieved. There are many examples of situations where a company’s have hurt the brand equity of their products by placing more emphasis on consumer and trade promotions than advertising. 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 14-10 shows this dilemma which is analogous to the “prisoner’s game” as the only way out of it is for both parties to cooperate by cutting back on promotions. E.

Measuring Sales Promotion Effectiveness—one framework that can be used here is based on four communications goals: attention, comprehension, persuasion and purchase. Behavioural measures include brand switching and loyalty, number of inquiries, coupon redemption and contest entries. A number of organizations measure sales promotions. MarketSource provides marketers with a basis for measuring the effectiveness of their sampling program.

Teaching Suggestions In this chapter we examine sales promotion including the promotional activities directed at consumers as well as the trade. This is a very long chapter as its covers both consumer and trade sales promotion very Chapter 14 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 14-10

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, reasons for the shift in marketing dollars to sales promotion and consumer 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. In covering sales promotion you may want to refer students to the discussion of behavioural learning theory that describes shaping procedures. It is very important to point out to the students the increasing emphasis many companies are placing on sales promotions targeted to both consumers and the trade. It is 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 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 14-10 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. To keep abreast of development in the sales promotion area and to find some very interesting articles on, and examples of, successful promotions, the instructor can refer to sources such as Promo magazine. This magazine offers complimentary subscriptions to professors and is also available online at www.promomagazine.com. Another organization that has a lot of valuable information on sales promotion is the Promotional Marketing Association, Inc. Their website can be found at www.pmalink.org.

Vignette 1. Why are consumers motivated to participate in contests like these? Two contests involve user generated content to participate. The resulting artistic work represents many interpretations of the brand from creator’s perspective. Thus, the subsequent exposure of the material provides fresh and new interpretations of the brand experience for the viewers. Presumably the many viewers would be loyal consumers so that the communication effect would be strong from an attitudinal point of view; however, new users could be equally inspired for a trial purchase with a fresh consumer view of the brand. The other contest required a visit to the pop-up store, so in all three cases, consumers put forth a degree of effort to participate suggesting strong attitudinal commitment to brand or at least strong curiosity about the brand as part of their shopping. Ultimately, the motivation is very transformational and one may suggest along the likes of intellectual stimulation or in the case of Nivea, sensory gratification or social approval via the improvement in skin.

IMC Perspective 14-1 1. What is the appeal for consumers to receive discounts like this versus finding a coupon or receiving the discount in-store while shopping. One main advantage would be to reach consumers who would not normally seek coupons or other deal in established distribution channels (e.g., free standing insert). Consumers, especially younger ones, who are more technologically inclined or who have adapted many habits etc to their handheld device would likely be within this group. Heavy coupon users or very price-sensitive shoppers may also gravitate to the online versions as they are deal prone consumers that seek out discounts through multiple means. Directory type websites will likely to continue to develop (e.g., yellowpages) so that coupons and other marketing communication activities will continue to grow. Chapter 14 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 14-11

IMC Perspective 14-2 1. How does Red Bull Crashed Ice help build the brand? Red Bull Crashed Ice represents event marketing much like its development of other extreme sports competitions supported by the popular energy drink that can be seen on the Red Bull website. The event attracts significant spectators and is covered on TV, so clearly there is a strong awareness effect. The excitement of the event and it notoriety produce fantastic attitudinal effect, and people drink Red Bull at the event representing both trial and repeat purchases. Interestingly, the branding does not use the imagery and slogan of the TV ads for the product calling into question the prescription of IMC experts who suggest all tools should have the same look and feel. More recent broadcasts have referred to the even as the World Ice Cross Championship, without referencing Red Bull. The Quebec 2014 event actually removed the Red Bull start imagery and only had the Championship imagery. In short RBCI is in transition for the brand, moving from event marketing to event sponsorship as the sport becomes legitimized. As an aside, the Olympics evaluated the event in Moscow for 2014 with consideration for the 2022 games.

Answers to Review Questions 1. What are the differences between consumer and trade sales promotions? Discuss the role of each firm’s IMC program. Consumer sale promotions are directed at the consumers who purchase various goods and services and are designed to provide them with an extra incentive or inducement to buy the marketer’s brand. They are part of a promotional “pull strategy” and designed to help create demand for a brand at the end-consumer level. Trade promotions are targeted to the wholesalers, distributors and retailers in the channel of distribution and are designed to encourage channel members to stock and promote the marketer’s products. Trade promotions are part of a promotional “push” strategy. Both consumer and trade promotions are a key part of a firm’s integrated marketing communications 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 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 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. Trade promotions are an important part of this strategy. 2. Discuss how sales promotion can be used as an acceleration tool to speed up the sales process and maximize sales volume. 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 Chapter 14 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 14-12

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. 3. Post-secondary educational institutions do not usually use sales promotions. Consider which ones could be use and identify the target audience in which they could be effectives. The Canadian author offers a bonus pack to students during night classes, students can receive a free hour of education after the 7:00 to 10:00 class. Surprisingly, no student, including very loyal ones, has accepted this promotional offer despite economic theory saying more is better! Another sales promotion could be discounts on tuition for low enrollment courses or for summer courses when there is less demand which would even out demand over the twelve month period. Of course the implementation of discounts could be quite problematic for universities to justify, but an interesting consideration nonetheless for price sensitive students. Universities could offer more promotional products perhaps to reinforce the brand image, why not give every student a binder and pen with the university logo upon graduation to remind them to donate Instructors could have some fun with this exercise brainstorming what the effects would be how promotional incentives could work. 4. Explain how trade promotions are similar and dissimilar to consumer promotions (note typo in book). Trade promotions are very similar in that they attempt to influence behaviour (trial, repeat buying, or action) via an incentive. The incentives are very similar with an emphasis on financials, assistance or experiences. Since in both cases the audience makes a final decision by evaluating the pros and cons of the offer, it is not too surprising to see that there is a strong degree of similarity. The communication effect from the presentation are also relevant in terms of awareness and attitude, so all in all the over strategy and tactics of the decisions have more in common that something dissimilar. 5. Explain why it is important for sales promotion to contribute to brand equity. In what circumstances will brand equity enhancement not be a priority? Brand awareness and brand attitude play a key role in brand equity, and the opportunity for communication beyond the promotion offer is recent trend in the development and implementation of sales promotions. For example, the Bring Home the Cup promotion is enhanced with extensive television commercials contributing to the equity of for Pepsi, Lays’s and Gatorade. Many coupons offers include a regular print ad. In fact, so many promotional offers are combined with advertising or some other IMC tool, it is difficult to find a promotional offer that does not provide enhanced communication that builds brand equity. In another direction, as the Bring Home the Cup promotion illustrates, the activity or type of behaviour associated with the promotion is often now designed to contribute to the brand experience. Given these points, it is hard to imagine very many circumstances where brand equity enhancement would not be a priority, especially given the importance of word-ofmouth communication. So even transactional situations where there is little expectation of a continued relationship with the brand and the customer, promotional offers should still attempt to build brand equity

Answers to Appied Questions 1. Explain how the consumer sales promotions identified in Figure 14-1 can be executed with Internet media. Chapter 14 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 14-13

Electronic samples and premiums can easily and obviously delivered; and physical samples and premiums can be ordered on company websites or social media locations. Coupons can be virtually disseminated essentially anywhere on the internet for printing at home. It seems like almost all contests/sweepstakes entry occur online these days as entry software is commonplace. Submitting rebate information can be possible as consumers can enter the data and email physical evidence of proof of purchase, however companies may have concerns of fraudulent claims in this regard and continue to expect mailed in evidence. Bonus packs seem to be an unlikely avenue for Internet delivery unless of course the product is actually order online and delivered via mail or courier. Priceoffs are the simplest to administer online since it is information based in fact occurs with dynamic pricing systems as people search for hotels, flights etc. Event marketing is a curiosity as to whether that could be executed online, but entertainment activities that are streamed appear as a possibility. Students would likely add to this list based on their consumption experiences, especially with this final one. 2. What are the differences between consumer-franchise-building and non-franchise-building promotions? Find an example of a promotional offer you believe contributes to the equity of a brand and explain why. 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 are designed to help build long-term brand loyalty or preference and help the marketer achieve the ultimate goal of full-price purchase. Non-franchise-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. Students should find promotional offers that they feel are examples of each type and explain why. Examples of non-franchise 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. 3. Phone service providers do not offer premiums all that often. Identify good ones for different brands. Bell could likely send out…. Bells! – a good symbol that has been a logo for decades previously. This could manifest in an number ways and be a fitting imagery if the brand decided to go this route. Fido could obviously send out different dogs and be a whole set of valuable collectibles. Koodo of course could send out miniature El Tubadors and Telus has in fact handed out beany baby like plush items of the famous animals. Of course all of these premiums are the imagery of the brand in the ads and would reinforce the characters shown. 4. Consider all the trade sales promotions that a major brand like Tassimo would use and explain how they would be effective or ineffective for increasing sales of the machine and the coffee discs. All three types of trade allowances would be very useful; off-invoice allowances to ensure extra inventory during key selling times, promotional allowances for display information which would critical for consumers to understand the new technology, and perhaps slotting allowances to ensure product acceptance in the stores since Kraft did not normally sell in household good locations. Additional dollars for point-of-sales displays would be useful for enhanced consumer communication in-store, especially during Christmas sales or other times. Cooperative advertising might be used with Chapter 14 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 14-14

stores that have good flyers like Hudson’s Bay. Certainly sales training would useful during launch so that floor staff understood how the product worked and could offer in-store assistance to consumers. 5. Why does the Red Bull Crashed Crashed Ice event not use imagery from the advertising with the slogan “Red Bull Gives You Wings”? The RBCI event is a good example where the same look and feel is not used across all IMC tools since there is likely a much different target audience for the event versus the general advertising. The Same imagery is useful when a brand is directing it messages to a common target audience. However, the lifestyle, or perhaps a different segmentation variable, may be much more relevant for RBCI compared to the general advertising. In this case the use of the drink is more for social drinking at the event in comparison to the advertising to highlight the stimulating effects of the energy drink. This suggests a different brand positioning strategy for an alternate target audience, a key concept of the planning model of the text.

Additional Discussion Questions (not discussed in text) A. Discuss the factors that have led companies shifting more of their marketing budgets to sales promotion from media advertising. Discuss the pros and cons of this reallocation of marketers advertising and promotion budgets. 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; 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. 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. However, critics argue that this reallocation often comes at the expense of brand equity. They note that many types of sales promotion do not contribute to the building of brand identify or image. 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. Marketers are also concerned that the large sums of money they are spending on trade promotions are not being passed through to consumers and thus they are attempting to cut back in this area. 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 too 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. B. Discuss how advertising and sales promotion can have a synergistic effect and what is required to create this effect. Advertising and sales promotion can have a synergistic effect whereby the impact of the combination of the two promotional tools is greater than the response that would be generated if they were used Chapter 14 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 14-15

independently. Proper coordination of advertising and sales promotion requires coordinating decisions regarding the allocation of the budget to each area as well as advertising and sales promotion themes, the target audience reached and the timing of various sales promotion activities. For example, by using advertising in conjunction with sales promotion for a new product, marketers can make consumers aware of the brand and its benefits and increase their responsiveness to the promotional offer. Consumers are more likely to redeem a coupon or respond to a price-off deal for a brand they are familiar with or have favorable feelings toward versus a brand they know little about. Moreover, product trial created through the use of sale promotion techniques such as sampling or coupons is more likely to result in long-term usage of the brand when accompanied by advertising. C. What is a slotting allowance? Do you think retailers are justified in charging manufacturers slotting fees? Why or why not? 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. They 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. An excellent discussion on the debate over slotting allowances can be found in a recent article by Paul N. Bloom, Gregory T. Gundlach and Joseph P. Cannon in the Journal of Marketing, Vol. 64 (April 2000) pp. 92-108. D. Discuss the advantages of cooperative advertising from the perspective of the manufacturer and the retailer. 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 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. E. Discuss how sales promotion program can be integrated with a company’s online strategy and how the Internet can be used as part of a company’s sales promotion efforts. Many companies are integrating their sales promotion efforts with their online marketing efforts and using the Internet to make various promotional offers available to consumers. Marketers promote contests and sweepstakes on their web sites and consumers can enter them online. These companies Chapter 14 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 14-16

promote their contests and sweepstakes in their media advertising and encourage consumers to visit their web sites to learn more about these promotions and to enter. Many companies also include premium offers on their web sites 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. F.

Explain the process of shaping. Give an example of a marketing communications strategy that employs this technique. Shaping involves the reinforcement of successive acts that lead to a desired behaviour pattern or response. Marketers often use shaping procedures in the introduction of a new product. Using a new cookie product as an example, a company might employ shaping procedures through the following process. First, free samples of the product would be distributed. This might take place through the mail, door to door, or by sampling in grocery stores. Coupons might be given out with the samples to provide an incentive for the customer to make the initial purchase. Next, an additional coupon might be placed on or in the cookie package, encouraging the consumer to rebuy. Follow up coupon distribution through newspaper inserts, direct mailings, and/or magazines might follow—with the coupon amount being reduced. By this time, assuming the product is of good quality and is liked, the coupons might be eliminated. Occasional coupons in the future might be used to maintain loyalty.

Find an example of an industry where brands are competing on promotional offers. What are the options for a marketer involved in such a situation? When firms are competing on a sales promotions, 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. For example, grocery store chains often run promotional specials to attract shoppers. The fast food industry is another example of a market where promotional battles occur as chains such as McDonald’s offer special promotions such as 59-cent hamburgers or cheeseburgers on certain days of the week. Other fast food chains in some markets match these special promotions so McDonald’s does not gain a competitive advantage. 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 have two basic options—cut back on promotions or maintain them. As shown in the matrix in table 14-11, 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.

H. Discuss the differences between a promotional push and a promotional pull strategy. What factors influence a firm’s decision to use either a push or a pull strategy? A promotional push strategy is one whereby a company has a program to encourage channel members to stock and promote its products. The goal of this strategy is to push the product through the channels of distribution by aggressively selling and promoting to resellers. Chapter 14 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 14-17

A promotional pull strategy creates demand on the consumer end by spending monies on advertising and promotion directed at the ultimate consumer. The goal of this strategy is to pull the product through the channels as favorable demand from consumers will motivate the trade to stock and promote it. 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.

IMC Exercise The chapter discusses how sales promotion can be used to contribute to the development or maintenance of brand equity by developing a promotional offer that is consistent with the image or positioning of a product or service. Find an example of a contest, sweepstakes or premium offer that a marketer is currently running and analyze the promotion with respect to how it contributes to brand equity. You can find examples of contests, sweepstakes or premium offers in magazine ads, freestanding inserts (FSIs) in the newspaper, or on the Internet. Your analysis should include a discussion of the image or positioning the marketer is using for the brand and how the promotional offer supports the advertising campaign being used for the brand.

IMC Comprehensive Project After reading and discussing this chapter, students should be prepared to develop the sales promotion portion of their IMC project. The specific assignment is as follows: IMC Project Assignment for Chapter 14 Discuss how you will use sales promotion as part of the integrated marketing communications plan for your product or service. You should specify the consumer and trade sales promotion objectives for your product or service and discuss how specific sales promotion tools discussed in the chapter may be used as part of your integrated marketing communications program. You should also discuss how you will coordinate sales promotion with your advertising campaign giving attention to areas such budgeting, ad and promotional theme coordination, and media support and timing.

CHAPTER 15 PUBLIC RELATIONS Chapter Overview Public relations (PR) are how information about the organization and its products may be communicated. Like the program elements discussed thus far, marketers attempt to use this tool to benefit the firm and its offerings. At the same time, this promotional mix element is generally used in a different way that is not always designed to promote a specific product. Rather, it 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, it is not always within the control of the marketer. Thus, while it may be possible to affect public relations in some situations, in many others the marketer may have to assume a reactive posture. This chapter discusses and expands on the changing role of public relations and summarizes the content of a public relations plan that is consistent with other IMC tools.

Learning Objectives 1. Recognize the role of public relations in the promotional mix. 2. Explain how to compile a public relations plan. 3. Examine how public relations is generated through media publicity, and argue the strengths and limitations of media publicity. 4. Illustrate how public relations is managed through corporate advertising. 5. Apply the ideas of public relations within the development of an IMC plan.

Chapter and Lecture Outline I.

PUBLIC RELATIONS

Traditional View 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.

New Role of PR—the new role assumes a much broader, and more marketing-oriented, perspective. In the new orientation, the public relations function operates in close communication with the marketing department (rather than as separate entities) to develop programs and policies.

Publicity—publicity refers to the generation of news about a person, product or organization that appears in the media. It often is the result of a public relations effort. It typically lasts for a short period of time, and it is not always positive and under the control of the marketer. Some powerful incidents of publicity are unplanned by the marketer.

II.

PUBLIC RELATIONS PLAN

A structured public relations plan can help ensure that PR is an ongoing process as opposed to series of disconnected one-time events. As well, a plan will facilitate the integration of PR with other IMC tools. The key elements of a PR plan are similar to other IMC tools. A.

Situation Analysis—in addition to a review of the situation analysis elements from the marketing or IMC plan, people’s attitudes towards the firm, its products and/or specific issues should be assessed. Conducting attitude research has a few key benefits; provides input into the planning process, serves as an early warning system, secures support internally, increases the effectiveness of the communication. Chapter 15 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 15-1

Determine Relevant Target Audiences—target audiences can be internal or external. Internal audiences include: employees, stockholders and investors, community members, suppliers and customers. External audiences may include: media, educators, civic and business organizations, governments, financial groups.

Behavioural Objectives—the framework for these as discussed in Chapter 5 is readily applicable for PR. Organizations would want to consider whether the consumer interaction following the communication would be “trial” or “repeat” oriented.

Communication Objectives—The communication objectives set out in Chapter 5 also apply to PR. Firms certainly have awareness objectives and the above point concerning attitude research indicates that communication objectives in this direction are imperative.

Strategy—there are three elements for the PR strategy: message content, message creativity and message delivery. As in the case of regular advertising, the public relations communications have similar basic decisions. The focus of the message can have a marketing level orientation or a corporate level orientation. Public relations activities designed to support marketing are referred to as marketing public relations (MPR). Used in conjunction with other traditional marketing practices as well as IMC elements, MPR can be used in the following ways: •

building marketplace excitement before media advertising breaks

•

creating advertising news where there is no product news

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introducing a product with little or no advertising

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providing information to opinion leaders

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defending products at risk with a message or reassurance

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constructively promoting a product

Message creativity and message delivery of the PR are key variables as the purpose of the communication is similar to advertising which is to ultimately influence a target audience. F.

Tactics—depend on the type of dissemination tool used including the media, direct marketing, press conferences, seminars, events and personal letters.

Measuring Public Relations Effectiveness—the evaluation of PR can tell management how to assess what has been achieved by PR, how to measure PR achievements quantitatively and how to judge the quality of PR achievements and activities. Typical measurement tools for corporate advertising are focus groups and attitude surveys. The effects of sponsorship programs can be measured through exposure and tracking methods.

III.

MEDIA PUBLICITY

Media Options—choices for communicating with various target audiences include: •

press releases

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press conferences

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exclusives

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interviews

•

IV.

Strengths of Media Publicity •

credibility

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endorsement

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cost

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avoidance of clutter

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reach specific audiences

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image building

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frequency potential

Limitations of Media Publicity •

weaker brand or corporate identification effect

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inconsistent message

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timing

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accuracy

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—by enhancing its image, assuming a position on a social issue or cause, or seeking direct involvement from the market. This form of advertising is often considered controversial and/or of dubious benefit to the firm. A.

Corporate Reputation—we highlight the decision-making process (similar to advertising) and the importance of understanding the attitudinal implications through the concept of corporate reputation.

Image advertising—advertising designed to promote the organization’s overall image may include positioning, television sponsorship, recruitment, financial support, and advocacy.

Cause-related advertising—a company links with a charity or non-profit organization as a contributing sponsor. Recent findings are summarized for discussion.

Sponsorships—the marketer ties-in with a cause and/or event. Sports and entertainment events are among the most frequently used. Extensive planning issue associated with sports is presented.

IMC PLANNING: STRATEGIC USE OF PR

The concluding section suggests some interpretation on the use of PR with other IMC tools. For many organizations and brands, PR plays a critical support role or leading role depending upon the circumstances of the decision. The key point is that target audience and objectives of the role of PR needs to be clearly established for its most advantageous use.

Teaching Suggestions 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 topic, 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 PR 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. Chapter 15 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 15-3

Vignette 1. What is the redeeming characteristic of each of these award winners? Bells’s initiative featured participation from the general public. Many marketing communication activities include action so that the receiver is more involved and thus allowing stronger processing of the message. While the action is somewhat brief and transient, it is stronger than passively watching a TV ad. Campbell’s idea struck a chord with its humane treatment. All aspects of this activity appear positive which would be well received by all members of society. The other ideas are well founded and although the connection of chocolate and bicycles for Cadbury is less so. One might be concerned that Shoppers does not include everyone’s health, but since it sells many health products this domain is perfect.

IMC Perspective 15-1 1. What is your assessment on how each party handled the situation? The comments from the executive are quite expected given the circumstances. From a publicity perspective, interested parties will take a position or point-of-view in their own self-interest, a fundamental tenet of economic theory. Each of the public relations statements can be analyzed to estimate what the true meaning of the message really is. One interesting response to consider is the NHL’s since it indicates a position of strength where it signals that it could easily find a new sponsor if Air Canada decided to stop its contribution. Bell and Scotiabank’s moderate responses indicate a position of neutrality and suggest that they are taking the opportunity to move the public debate through the media in a new direction, of course in a direction that favours them. An key point to make is that even in PR, brands think very carefully about what the message content will be as it does with all other aspects of marketing communication.

IMC Perspective 15-2 1. Do each of these sponsorship strategies fit the brand? Most of these examples appear to be reasonable examples of sponsorship that would be consistent with the brand image that is intended to be portrayed. The first couple of examples show the difficulty with sponsorship as competitors will try to portray their marketing communication as a sponsorship when in fact it is not actually doing any sponsorship. Instructors can use this as an example to discuss ethical issues of marketing communication. While the competitive angle is often the first criticism, a more interesting one to consider is whether it is misleading consumers by giving them the impression of sponsorship. However, these marketers are clever and never directly claim, but let the message be associated enough so that low-involvement processing would result in consumer inferring incorrectly.

Answers to Review Questions 1. Identify the key differences between public relations and publicity. In what ways are the two interdependent? The distinction between public relations and publicity is often not clear to students. Much of this can be attributed to the fact that the public relations department typically handles problems and opportunities involving publicity. Thus the tools used in the creation of public relations programs are the same as those employed to generate or control publicity. The procedures used to measure the effectiveness of these programs are also similar. At the same time, there are distinct differences between public relations and publicity, with control being foremost. While public relations programs are designed and implemented by the organization, publicity may originate from within or outside of the organization. In the latter case, the information is not always favorable to the firm, and the scope of the actions designed to deal with these communications will differ significantly. Chapter 15 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 15-4

A second difference lies in the cost of public relations and publicity. While some textbooks argue that there is no cost involved in public relations, we take a different view. Public relations programs may be very costly in and of themselves, not to mention the cost of staff, materials, etc. Likewise, public relations agencies charge firms for their work. (If public relations are free, how did these large public relations firms get in business in the first place?) Publicity is expensive for the firm since writing and issuing press releases and managing “leaks,” obviously cost money. But these costs may be much less than those involved in large PR efforts, and—when released by other sources (for example, Consumer Reports)—may be free. Finally, both PR and publicity may too often be reactive rather than proactive in design. That is, they may be employed in response to an event or communication that poses a potential threat. Formalized programs designed to be proactive are now becoming more common, though more so in the public relations area than in publicity. 2. Describe the reasons why firms use public relations in an IMC program. Provide an example of an appropriate use of public relations in this mix. Advantages include: •

Credibility—due to its perceived news intent (versus selling), PR may have higher credibility than many marketing messages

•

Cost—PR costs less than marketing messages, due to the lack of media costs

•

Avoidance of clutter—longer articles, separation from ads and new content help avoid clutter

•

Ability to reach specific groups—through effective targeting, and due to its news value, PR messages may get through to groups advertising cannot

•

Image building—corporate advertising, cause and advocacy advertising, and PR activities in general may help establish a positive image in the mind of receivers

The major disadvantages of PR are the lack of control over the message and guarantee that it will appear in the media at all. Thus, the intended communication may never take place or an unintended message is delivered. Marketers can effectively employ PR activities and eliminate the disadvantages. Corporate, advocacy and cause advertising are paid for, and will get the message and media sought delivered. At the same time, they maintain many of the advantages, as there is no perceived intent to sell. Likewise, sponsorships can be effectively used to get the message delivered. Many companies now formally design-in PR programs as part of their IMC program to increase effectiveness. 3. Many companies are now trying to generate as much free publicity as they can. Cite examples, and discuss the advantages and disadvantages associated with this strategy. There is an old saying that “any publicity is better than none”. We are not sure that we subscribe to this expression. Many companies have a designed strategy to generate as much publicity as they can, assuming that most exposures are likely to help them. In many cases it does. Students should be encouraged to look for publicity in many domains beyond the entertainment industry. Instructors can certainly look at the digital manifestation of publicity and investigate whether social media exposure constitutes true publicity if the reach of the exposure is minimal. For example, a few hundred views of a YouTube video may be quite inconsequential versus newspaper headlines. Alternatively, the quick dissemination of a link to a video on YouTube can be quite damaging. 4. Companies are now taking the position that their charitable contributions should lead to something in return—for example, sales or increased visibility. Discuss the pros and cons of this position. Traditionally, public relations activities have been separate from the marketing department, primarily designed to create goodwill in the community, portraying the organization in a favorable light, etc. In Chapter 15 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 15-5

some cases, the organization would attempt to insure that no profit- motive aspects were realized, (from a sales standpoint) in fear that the goodwill would be negated. The more modern role basically takes the position that “if we are doing it, why not get credit for it”? In other words, these PR activities may not need to be designed to aid the marketing process, but if they do, what is the harm? Still another perspective is to use PR activities to directly aid the organization’s marketing efforts. From a marketing standpoint, one might take the position that if the PR activity is done in good taste, and it does benefit the recipient; why not get credit for it? There is no less value to the receiver, and so long as there is no exploitation involved, everyone benefits. One can take this position too far however, in that the receiver of the benefits now are selected based on potential benefits to the organization not on need. It is this last point that upsets the PR people—especially the traditionalists. They believe that PR was never designed to be a marketing activity and that it should remain independent. In addition to their altruistic convictions, they note the fact that the whole plan could backfire, causing the firm more problems than benefits. Many companies still engage in both forms of PR. Olympic sponsors are one example. Some do so quietly, with little or no recognition. Others essentially buy the sponsorship, using the same in their advertising and promotions to benefit their products or services. 5. Explain how public relations activities and media publicity can be executed with Internet media. Even though public relations practitioners have been some of the slower adopters of this innovation, the Internet offers this field a number of advantages. Traditional PR activities involve the dissemination of press releases, articles, etc. regarding the organization. The process of delivering these is cumbersome, and can mount up when paper and mailing costs are considered—particularly when the list of contacts is large. In addition, this distribution takes time. The Internet offers the advantage of speed. Articles and/or newsworthy events can be posted on the site almost immediately after they happen. There are no limits on length, which allows the organization to provide as much detail as they wish. News organizations or others wishing to use this information can access it as needed and remain up to the minute in terms of developments. Knowing that the organization has a website providing this information also allows the user to know where to go to access the same. Rather than having to wait for the pr news, the medium can access the site, and get it themselves. They can go back for updates, additional information, etc., which makes their job much easier, and increases the likelihood of the information getting published or on the broadcast medium. Finally, the cost savings are enormous. There are no paper and printing costs. There are no distribution costs other than putting it on the site, and of course there are no mail costs. And, in the process, many trees are saved.

Answers to Applied Questions 1. Some marketers and PR people believe that public relations should replace advertising as the primary means of introducing new products. Explain arguments in favor and opposed to the position. What do you conclude? Ries & Ries in their book The Fall of Advertising and the Rise of PR, contend that PR will replace advertising in terms of importance in the marketing communications mix. Advertising—they say— will be used primarily to support existing brands, with PR assuming the primary responsibility for introducing new products. While some support this argument, many others do not. Following are reasons both supporting and opposing this position: Chapter 15 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 15-6

•

Supporting--because of the declining effectiveness of advertising, it is no longer effective for introducing and building new brands. The reason for this is because consumers have changed in regard to how they learn about new brands, and the communications program must change as well. Consumers now learn about products and brands through means other than advertising. Further, they contend, advertising has lost credibility. Public relations and publicity are considered more objective information. Advertising’s role in the future will be primarily to maintain the brand image.

•

Opposed--Many advertisers feel that it is hard to control the message disseminated through PR channels. Often the complete message does not get told, the message may not appear at all, or may appear at the wrong time. Further, publicity can be a tool for mature brands beyond the introductory stage, and there is no reason to focus on this aspect only. Finally, more money is currently being spent on advertising as PR. It is highly unlikely that this will reverse, as PR— while important—is still perceived by many as support for advertising.

The most effective situation is when advertising and PR work together in an integrated program. To get the most from their individual contributions, they must work together to provide the consumer with a unified message. 2. Who are the target audiences for Bell’s work described in the opening vignette? To some degree CSR campaigns do not target anyone group in particular and one might presume that the effort is relevant for everyone in the general population. However, from a targeting standpoint, it is likely that there are certain segmentation variables that are more relevant to suggest a degree of targeting occurred. In this example, those who have seen the consequences of mental health issues are more likely to participate in the sending of messages. The 96 million messages sent during the 2013 initiative represent 3 per capita for the entire country. Since Bell has about one-third of the market, the messages represent 9 per capita, and rises to 10 or so if one eliminates youngsters in the calculation. Clearly there would be “heavy” users and “non” users, so it would be interesting to speculate on how many Canadians were very involved to fully consider the targeting. One might also speculate that those sending messages reflect a certain personality with a high need for social approval, “to be seen as doing good” versus doing something of value to the community for altruistic reasons. Instructors should use the key segmentation variables to break-down the anlaysis. 3. How do music artists take advantage of media publicity? Which strengths do they predominantly use? How do they minimize the limitation so of media publicity? This question hopefully resonates with students who are exposed via publicity regarding the artists they follow. It may also bridge the age gap of students and instructors who may not know what is going on with student consumption. A key aspect of the bridge is for the instructor to put structure around the student responses in a class discussion so that they can see the underlying principles. Students will likely focus on social media exposure of music artists (e.g., seeing video of the artist on YouTube, following artist’s Twitter feed). Instructors can also question the use of artists using other forms such as TV and radio and observe whether students are cognizant of publicity occurring in these media. Instructors can also delve into differences with “indie” artists versus mainstream artists. Logically artists are taking advantage of the lower cost, credibility of the source, and image building. The identification limitation is taken care of with the distinctiveness of the imagery artists typically portray that can be captured with the photos and video exposure. Timing is controlled with the performance schedule and the release of new material. 4. Identify sponsors of different concerts or entertainment activities you have attended and make a conclusion as to why this type of sponsorship may be successful? This is an experiential exercise that could prove interesting and distressing if there is poor recall, however an easy search can assist in this matter. The process of not recalling and then finding out Chapter 15 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 15-7

could prove quite illuminating and this addition to the assignment may be fruitful for instructors to consider. In most cities these days there are a series of music events (e.g., Rock, Blues, Jazz etc.) that the class could focus on. Of course other cultural activities might spur interesting debate. One useful part to consider is the degree of brand exposure that occurs for a sponsor. In some examples, there are dozens of sponsors and the logos are so small, the overall clutter of the exposure is so bad, one might wonder why the brand decided to participate. It is important to drive home the point of how the sponsorship contributed to the overall image and positioning of the brand when evaluating the examples. 5. Explain why a company like RBC would use the tools described in the chapter, including media publicity, corporate image advertising, cause-related advertising, and sponsorship. RBC is an example of a very large company that uses all aspects of public relations, and most instructors would likely conclude very effectively across it vast operations domestically and internationally. It published a social responsibility report documenting all of its accomplishments. Its most recent effort with respect to water is a very good example of cause-related advertising. This program is so comprehensive; the term advertising does not give it full justice, however, the average Canadian would only understand the program from the advertising of it, an important distinction to be made. RBC also has a number of other activities that it sponsors such as the Olympics. In fact the Blue Water effort is referred to as a sponsorship since it gives money to hundreds of groups who manage the waterways, which shows how the lines between these activities are blurred. However, RBC’s communication of its effort falls into the domain of cause-related advertising. No doubt these activities get covered by media which contributes to the positive media publicity RBC often receives.

Additional Discussion Questions (not in text) A. Discuss some of the advantages associated with the use of marketing public relations (MPR’s). What are some of the disadvantages? Advantages include: •

It is a cost effective way to reach the market—public relations activities are often less expensive than traditional marketing programs

•

It is highly targeted—MPR’s can be targeted to a specific audience, thus increasing the effectiveness of the program

•

Endorsements of third parties—MPR’s may be perceived as more credible because they receive endorsement of those who may not be connected directly with the organization. This perceived lack of a relationship is a benefit to the sponsoring organization.

•

Support of the IMC program—the MPR program lends support to the more profit-oriented IMC program strategies due to its credibility.

•

Breaking through the clutter—due to the length of the articles, and the separation from advertisements, MPR’s may break through the clutter of ads

•

Circumvents consumer resistance—consumers may be hesitant to respond to marketing efforts they know are designed to sell, MPR’s help circumvent this problem

Disadvantages include: •

Lack of control—as with other PR pieces, the marketer loses control over the material

•

Difficulty tying in marketing efforts—it is often difficult to get one’s logo, positioning statement, etc. tied into the message Chapter 15 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 15-8

•

Media time and space are not guaranteed—because there is no media being paid for, there is no guarantee that the media time or space will be granted

•

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.

B. Describe some of the criteria used by companies to measure effectiveness of the public relations program. The text discusses a number of criteria for measuring effectiveness that 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

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Percentage of negative articles over time

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Ratio of positive to negative articles

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Percentage of positive/negative articles by subject

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Percentage of positive/negative articles by publication or reporter

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Percentage of positive/negative articles by target audience

Also discussed are the means for accomplishing the evaluation process: •

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.

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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.

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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.

C. Explain what is meant by the term cause-related advertising and advocacy advertising. Cite examples of organizations that have used this strategy. Does it work? Cause-related advertising is the term used to describe the linking of companies with charities or nonprofit organizations as contributing sponsors. Cause related marketing is a “hot” trend in the business community. Companies like American Express, Visa, Johnson & Johnson and many others have participated in cause related marketing for a variety of reasons. First, the goodwill and positive publicity associated Chapter 15 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 15-9

with these activities are beneficial to the firm. Secondly, there is the feeling of doing something good for the community. Third, marketing activities such as coupon redemptions and sales have been shown to be positively affected. Participating in a cause-related relationship is not a guarantee of success, however. American express has suffered negative publicity, as have others when the public feels that all of the motives are not altruistic. In addition, some causes (such as AIDS) are considered by many to be too controversial to engage in, creating possible problems in the marketplace as well as within the organization. Advocacy advertising involves the propagating of ideas and elucidating controversial social issues of public importance in a manner that supports the interests of the sponsor. A quick perusal of any major daily newspaper will reveal that this form of advertising is on the increase. Such ads can also be found in magazines such as Time and Newsweek among others. The reasons for advocacy are many. One is to generate public support on an issue. Another is to elicit funds, while a third is to make people aware of an issue. Such ads may range from taking a safe stance (Mobil’s back the police campaign) to extreme depending on the goals of the sponsor. Effectiveness will also vary depending on the goals sought. D. Why is publicity so powerful? Give examples of how publicity has worked for and against companies. 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 positive news. As a result, more coverage is provided, more consumers are exposed, and the information seems to convey more “news value.” E. Some people believe firms should not adopt the new marketing oriented role for public relations. Argue for and against this position. Those who would argue against the new role of public relations base their arguments on the fact that public relations are not a marketing function. They argue that public relations are designed to create goodwill, promote relations in the community, etc. They believe that those trained in public relations take a different perspective and have different skills than those trained in marketing. Those educated in public relations programs—as opposed to business schools—have been taught PR from a very different perspective. To them, public relations are designed to create goodwill for the organization through traditional PR activities. Profit motives are, at best, optional benefits. Those who support the new role of public relations contend that since public relations efforts benefit the firm they offer a marketing advantage. Corporate image has been shown to be an important factor in consumers’ evaluations of products and services, and creating a good image through public relations activities helps the marketing cause. Secondly, they argue that organizations need all the help they can get in the marketing cause. By using public relations as a marketing effort, the organization is just receiving an additional benefit. MPR’s represent marketing activities. Public relations are considered a marketing tool, designed not only to create goodwill, but to potentially generate a profit as well. This is a very different perspective than traditional public relations objectives. The difference in perspectives leads many PR practitioners and marketer to a position of conflict. The PR people believe that marketers are overstepping their bounds, and are getting involved in an area in which they do not belong. They see for-profit efforts as eventually ruining the credibility of PR and Chapter 15 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 15-10

eventually destroying its effectiveness. Alternatively, marketers take the position that since it is being paid for, and it benefits the firm, PR should be used to better the interests of the organization, even if it means making a profit. In addition, they want to see coordination among all efforts to bring synergy to the communications. F. What are some of the reasons for conducting public relations research activities? As with any other part of the communications program, there are reasons for conducting public relations research activities. These include, but are not limited to the following: •

to determine target audiences—some members of society may provide more effective markets than will others.

•

to determine attitudes and perceptions—it is important to know the audiences perceptions of the organizations as well as the programs it may or may not implement

•

to “tune” the program—testing source, message, and media factors is important to insure the success of the pr program

•

to evaluate the effectiveness of the program—follow-up research designed to determine the effectiveness of the program is important.

Just as we would want to conduct research as input into the design of the program, we would also need to do the same to determine how the program worked once implemented. Research activities are required throughout the program G

What are the various forms that corporate advertising might assume? Give examples of each. Corporate advertising is generally classified as either image advertising or social, business and environmental issue advertising (advocacy). The former is designed to promote the general image of the firm, while the latter takes a position on a particular issue to enhance the image of the firm. Implementation of these forms of corporate advertising may be different. Image ads may be: •

General image or positioning ads. These ads are designed to create a specific image of the company in the minds of the public. Beatrice Foods has used this form of advertising to demonstrate the diversification of the company.

•

Sponsorships. By sponsoring special events, programs, or even television shows, companies hope to create an image of themselves. The Hallmark Hall of Fame movie specials, the sponsorship of educational television by Mobil and Gulf Oil companies are examples.

•

Recruiting. Companies create images through their recruiting ads. Arthur Young (an accounting firm) advertised for “free thinking” college graduates. Others have created an image of themselves as companies for those interested in “challenging careers.”

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Financial ads. Companies attempt to create images of themselves for potential investors. They may run ads showing their strong stock performance, sound investments, or the security of investing in them.

H. How can a manager manage publicity? What types of action can be taken in response to negative publicity? Managers have the ability to control some of the publicity that is presented. The issuing of press releases, the holding of press conferences, and “leaks” (the information somehow just seems to get out!) are ways of getting information to the media. When an organization wants to get positive information disseminated, these methods can be employed. Examples include the consumer products companies releasing of information about the signing of rock stars or movie stars to serve as product spokespersons. Chapter 15 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 15-11

Perhaps the most well cited example of dealing with negative publicity is the Tylenol case. Sound marketing research, a comprehensive advertising and public relations campaign and a strong brand image were all responsible for the success in dealing with negative publicity. Essentially, to deal with negative publicity, the company must have a crisis management program in place, and must use sound marketing practices to ward off the threat. Refusing to comment, attempting to discredit the source or other negative approaches are less likely to be successful. I.

A great deal of money is being spent on sponsorships. Discuss why organizations are increasing their expenditures in this area, and how they can measure the effectiveness of these investments. Sponsoring events has, in the past, been thought of as something an organization does because of the wishes or interests of the President or CEO. This is no longer the case. While some sponsorships may still take place for this reason (the CEO loves golf, for example), the vast majority have more strategic objectives in mind. Chapter 15 discusses some of these reasons, but one of the major ones is to keep the name of the company and/or brand in front of the target market. Air Canada and Bell have paid to have their names on NHL arenas to raise awareness of their brand names. A number of companies now offer methods for measuring the effectiveness of sponsorships. These companies use sales audits, exit interviews, and economic impact studies to measure impact. One company provides a measure of event sponsorships and their impact on sales. Still another clocks the amount of time a sponsors name is shown, and equates this to buying advertising space costs. While all of these measures would be useful to the sponsor, one must take a hard look at these methodologies before subscribing to them. In many cases, the measures are questionable (equating exposure to advertising), in others the impact may be overstated (economic impact). As noted in the text, a number of factors contribute to sales and/or other behaviours, and to attempt to isolate only the impact of sponsorships may not be as easy as suggested. Assuming the measures are valid, they could be used by a variety of companies. For example: •

golf equipment companies—measuring exposure to their name as a result of players wearing visors, using their balls, carrying their bags, etc.

•

event sponsors—companies who sponsor tennis events—is their name and association being noted?

•

underwriters—sponsors of events like concerts, plays, etc., who pay for the cost of the programs.

IMC Exercise Instruct students to gather information of various types of public relations activities engaged in by organizations. These include both traditional and nontraditional methods. Have them collect examples of sponsorships, and describe the target audiences sought, and the pros and cons of the sponsorship.

IMC Comprehensive Project Develop a public relations plan as part of the overall program. Describe what the objectives of this program are, how the program will be implemented and how it will be evaluated for effectiveness.

CHAPTER 16 DIRECT MARKETING Chapter Overview 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, the direct response media used to convey the communications message, and the evaluation of the direct marketing program. We also investigate loyalty programs that are typically executed via direct marketing. We conclude the direct marketing discussion with a discussion of its strengths and limitations.

Learning Objectives 1. Define direct marketing and summarize the importance of a database for making marketing communication decisions. 2. Express the decisions of a direct marketing plan. 3. Describe the content of a loyalty program. 4. Evaluate the strengths and limitations of direct marketing. 5. Apply the ideas of direct marketing within the development of an IMC plan.

Chapter and Lecture Outline I.

DIRECT MARKETING

Defining Direct Marketing—direct marketing is the interactive use of advertising media to stimulate an immediate behavior modification in such a way that this behavior can be tracked, recorded, analyzed and stored on a database for future retrieval and use. The execution of direct marketing uses one or more direct-response media (direct mail, telephone, interactive TV, print, Internet, mobile devices, etc.) to solicit a response from a prospect or customer. The use of direct media differs on whether the receiver’s identity is known or unknown.

Developing a Database—an important part of the direct marketing program is the development of a database. The database is the foundation from which direct marketing decisions evolve. Figure 16-1 shows how database marketing works and 16-2 demonstrates typical database content. Key points on where to obtain a database and the need to update the files are highlighted. 1. Using databases information—databases include much information allowing marketers to send messages to those with no past purchase history and those with past purchase history. This allows marketers to; Improve the selection of market segments, stimulate repeat purchases, cross-sell, and foster customer relationship management. 2. Sources databases information—databases are compiled from company records and from various public and private sources. Some will be rich with past purchase history along with extensive profile variables. Others will be less comprehensive with basic demographic and contact information to send marketing communication. 3. Determining the effectiveness of the database—databases containing customer information need updating and monitoring to assess the success in terms of frequency and amount of purchasing.

II.

DIRECT MARKETING PROGRAM PLAN

Target Audiences for Direct-Marketing—the content of the database permits direct communication to those who are both known and unknown so that messages can be customized and or personalized.

Direct-Marketing Objectives—direct marketers seek a direct response, in terms of trial or repeat purchases. This response need not necessarily be a behavioural 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 Response 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: a. Direct mail—direct mail is used extensively for communicating with current customers for up-selling. Keys to the success of direct mail are the mailing list and the ability to segment markets. Purchased mailing lists allow advertisers to reach non-customers according to predefined criteria found in the database. b. Catalogues—Examples of successful catalogue retailers are described. c. E-mail—Electronic distribution of direct mail is E-mail where consumers agree to receive messages from a brand. Sign-up occurs via online or store based transactions or through visits to home pages or social media vehicles. Legitimate communication via e-mail is distinguished from unwanted “SPAM” from ruthless illegitimate “marketers”. d. Broadcast media—The majority of direct marketing broadcast advertising now occurs on TV through the use of TV Spots, Infomercials, and Teleshopping. e. Telemarketing—consumer and business-to-business telemarketing facilitates personal communication in the selling process.

Direct Marketing Effectiveness—the typical measure is cost per order.

II.

LOYALTY PROGRAMS Frequency programs—Frequency programs (also referred to as continuity or loyalty programs) are promotional programs that reward customers for continuing to purchase the same brand of a product or service over time. Frequency 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 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 frequency 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

III.

Strengths of Direct Marketing •

Target audience selectivity

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Target audience coverage

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frequency

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scheduling flexibility

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personalization

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costs

Limitations of Direct Marketing •

media image

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target audience coverage

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control for selective exposure

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reach

IV.

IMC PLANNING: STRATEGIC USE OF DIRECT MARKETING

Decision-Making Process Direct marketing influences trial and repeat purchase primarily at the purchase decision stage. It can also contribute to purchase-related action at any stage such as the information search stage.

Direct Marketing and IMC Tools Direct marketing is in itself a form of advertising. Whether through mail, print, or TV, the directresponse offer is an ad. Sometimes the ad supports the direct selling effort as a brand might run image ads to support its store and catalog sales. Direct marketing media are also employed to support all facets of the IMC program including PR, sale promotion.

Teaching Suggestions As noted, direct marketing is a rapidly growing field. 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, reputable firms are engaging in this form of marketing. It is also useful to spend some time discussing the increased use of databases. Seemingly every organization either now has, or is in the process of establishing a database from which to market. Students will probably be able to identify which databases their names might appear on by the fact that the lists are often sold. It is easy to track who is buying lists from each other, as noted in the text.

Vignette 1. Why are loyalty programs different across different product categories? Brands customize their marketing mix for their target market based on the nature of their product, competition and market factors. Essentially, a firm’s situation analysis will dictate its marketing mix and so logically, a loyalty program will be customized for a brand since it is within the scope of the brand’s marketing mix. Within a product category we may see less differentiation since brands within a competitive space often go head-to-head on a number of characteristics, so it would be expected to see similar systems for the point collection and use of the points. Interestingly, recent competition has focused not so much on the systems but the service logistics of claiming the prize. An interesting exercise related to this would be an evaluation comparing loyalty programs. Chapter 16 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 16-3

IMC Perspective 16-1 1. What are the similarities and differences among these loyalty programs? Similarities: each knows the identity of the consumer, each bases its reward on the amount or level of purchase, each offers a reasonably valuable reward, each offers a rewards consistent with what is sold, each are moving towards mobile apps. Differences: each is customized to the shopping experience of it customer, levels are seen in some but not others, branding and messaging is unique for each, the redemption rates are likely much different given the frequency of purchase. 2. Could any of them be adapted given what occurs with the others? Scene could consider levels, as heavy users of movies might enjoy alternate or more valuable rewards. The remaining three could follow the lead of Aeroplan with a higher profile communication. Other ideas from students are welcomed.

Answers to Review Questions 1. Explain how companies use database marketing. Name some of the companies that may have your information in their database. Explain how this information is used to reach you. An important factor in the success of direct marketing is that of developing and maintaining a database. Sources for names to include in a database come from a variety of sources, including customers themselves. When you fill out a warranty card, provide information to receive promotions, or even provide information at the cash register, there is a good chance your name will be entered into a database. Once in the database, companies will use your name for a variety of marketing purposes. Sending out notices of sales, phoning members of the database, and sharing your name with other companies or organizations are just some of the activities for which the names will be used. In addition, sophisticated companies spend much time and effort in analyzing their databases. Through their databases they can track sales, determine the impact of sales and promotions, and profile their customers. By selling the names to others, another revenue stream is developed for the company. 2. What is the difference between the one and two-step approaches to direct marketing? Give examples of companies that pursue both methods. In the one-step approach, the direct marketer is trying to get a sale immediately upon exposure to the direct communication. For example, the commercials that ask you to call an 800 number “right now” and place an order would be an example of the one-step approach. Companies selling magazines, gimmicky items, psychic networks, etc. typically use this method. In the two-step approach, two communications are used. Sometimes, as in the case of magazine subscription sales, companies like Publishers Clearing House and others will send a notice of an upcoming sweepstakes, telling the receiver to watch the mailbox to enter, and then send the second piece. Others may use a TV commercial to have the viewer call in for further information, a brochure, etc. then follow-up with another communication to attempt to make the sale. It is interesting to note that some companies that originally used the one-step approach—for example, Publishers Clearing House and Bowflex, now employ the two step model. Bowflex—an extremely successful direct marketer employs a variety of media including TV, coupon inserts in the mail, and the Internet in their direct marketing efforts. 3. Why are loyalty programs considered to be a direct-marketing program rather than a sales promotion?

Loyalty programs are established activities within an organization that facilitate the ongoing relationship with its customers. Sales promotions are short-term events that are started and stopped with a prescribed time period. This distinction is a primary characteristic that is very important to point out. As part of this, it should be noted that a simple card keeping track of purchase like coffee where a consumer would get free one after buying ten is not a loyalty program since it does not fulfill the characteristics outlined in the chapter. In all likelihood, this kind of card is akin to a sales promotion since it can be discontinued so very simply by no longer distributing them. A loyalty program operates with customer registration and executes communication and loyalty transactions via the use of a data base. This is substantially more involved and institutionalized compared to a coupon event or running a price discount for a few weeks. 4. One of the disadvantages associated with direct marketing media is the high cost per exposure. Some marketers feel that this cost is not really as much as a disadvantage as is claimed. Argue for or against this position. While the higher cost per exposure is often considered a disadvantage associated with direct marketing media, in many cases this cost may be warranted. While most other media have lower costs, their value lies primarily in creating exposure, interest and/or providing information. Direct marketing media actually seek a response. Thus, the higher cost is warranted if there is a higher, more direct behaviour associated with the communication. The ability to target market, and eliminate waste coverage is another factor in support of the higher cost of direct marketing media. When one factors in the minimal waste coverage, the cost per exposure may be more in line with competitive media. Finally, the ability to tailor the message may result in a more effective message. If this is true, and it improves the likelihood of a behaviour, again the higher cost is warranted. 5. How does direct marketing influence each stage of the consumer decision-making process as it works with other IMC tools? Direct marketing messages and media can influence every stage of the decision-making stage. No doubt some attempts work at the need recognition stage. For example, direct mailings to households for household services encourage consumers to use a service rather than doing it oneself (e.g., snow removal, lawn maintenance). Consumers may be on an email list for a retailer and receive notification of a sales event or new merchandise and begin the process of information search by visiting the store. A follow-up phone call from a car dealership, along with brochures sent or picked up, assist consumers in the alternative evaluation stage. Essentially, virtually any direct response media could be used as each of the stages assuming the right message is associated with the deliever and there are no logistical difficulties to turn off the consumer as they progress through the stages.

Answers to Applied Questions 1. Construct a list of variables that a fashion brand might desire in its database to mark to students in college or university. The starting point for this question would be Figure 16-2. Students would add or delete from the list of variables. Given it is a fashion product, the database might be include lifestyle variables that would be related to design etc. If possible the database would include the styles liked or other preferences that its clientele might desire. 2. Collect any direct mail delivered to your household and evaluate whether it is effective. This is another experiential exercise designed so that students can understand the marketing stimuli they encounter on a regular basis. Students can examine the material and assess the degree to which there may be category need, awareness, attitude, and purchase intention effects. As part of this Chapter 16 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 16-5

evaluation instructors can link the creative decisions covered earlier to illustrate that they are operational in this media much like other print, TV, and online messaging. 3. Read up online about an interesting loyalty program and apply Figure 16-4 to identify the characteristics and give an assessment of the program’s value. Students may investigate one of the loyalty programs featured in the chapter, so instructors might want to put constraints on the question. For example, Air Miles is referenced quite a bit so perhaps this one might be skipped. Alternatively, Air Miles could be used as a basis, an in class summary first, and then each student could compare another one to Air Miles. Figure 16-4 represents new material in evaluating loyalty programs as the topic has grown with the maturity of the programs the past couple of decades. Instructors may want to refer to the article as it in very comprehensive shedding new light on a topic that is much more complex than one might expect. In the end, an overall assessment on whether the program fosters loyalty or merely sets up switching cost should be considered and investigated with respect to consumer behavior theory. 4. How might a smartphone service improve its marketing communication with the use of direct marketing? Customers of smartphone service providers can receive regular information flow from email. Conversations via chat can occur when the customer has some kind of difficulty, perhaps simple instructions from a service attendant could alleviate extensive dissatisfaction. Alerts can be given when new product and services are available with both of these options. Glossy communication via a magazine could work as well since the mailing address is in the data base. Also, the personal touch might be helpful with phone calls periodically to answer and questions or concerns. 5. Provide examples for both consumer goods and services of how companies might use direct marketing as part of an IMC program. This is an open question for students to present their findings. They should be encouraged to look for examples that would interest themselves and their fellow students in order to understand how direct marketing works. Instructors need to be prepared to react to the material presented and offer structure on the type of objectives, strategy and tactic that are used, and to draw connections on how the direct marketing effort may be connected to other IMC tools. This assignment could prove to be very interesting to students if the right examples are sought and investigated accordingly.

Additional Discussion Questions (not in text) A. Explain how a consumer goods company might employ database marketing. A business-to-business company? A service company? All industries can use of database marketing in a variety of ways. Following are a few examples: •

Consumer goods companies—consider the example of bicycle helmet companies. A helmet is purchased, and the warranty card is filled out. The information is entered into a database. The database can then be used to cross sell the customer on additional bike products, offer an insurance policy in case of helmet failure, and sending a thank you for the purchase. Bike helmets are replaced, on the average every three years. Around this time, the database identifies potential new buyers, and direct mail pieces, coupons, reminders, etc. are sent to the prospective buyers.

•

Business to business companies—the possibilities for relationship building are enormous. Automatic filling and shipping of orders, cross selling and other database tools can be applied. In addition, announcements of new products, sales and/or promotions can be sent from the database. In respect to customer service, the information contained in the database may speed up the entire problem solving process. Chapter 16 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 16-6

•

Service companies—banks are extensive users of database marketing tools. New banking services designed to specific demographic and/or socioeconomic groups rely on databases to increase the ability to specifically target these groups with new program offerings, important changes, news, events, etc.

B. Many marketers felt that the Internet would hurt the direct mail catalog industry. In fact, this has not been the case. Explain some of the similar characteristics of catalog shopping and shopping on the Internet. Then explain why you feel the mail catalog business has not been hurt. When direct marketing began to grow in popularity, some people felt that it would be the end of the retail shopping business. Obviously, this was not the case. Likewise, when the Internet started to take off, some believed that this new medium would be the death of catalogs. Again, not true. The direct marketing people have always felt the Internet would be a boon to the industry—not a threat. The Internet and the catalog are both direct response media. In fact, some websites are online catalogs, seeking orders just as mail catalogs do. Both media satisfy the needs of the consumer, that is, the ability to order direct, save time, etc. In fact, the media complement each other in that shoppers now have two options for shopping and for ordering. Studies have shown that many shoppers will peruse the mail catalogs, finding what they want, and then order through the Internet. These shoppers find it easier to order through this method than via phone or completing the order form. Likewise, many shoppers are still more comfortable with the print medium for seeing and examining products. The fact that the Internet makes catalog shopping easier accounts for much of the fact that it has not hurt the catalog industry. Some companies have found that they have maintained their customers who were previously catalog shoppers, but who now order through the Web. C. Why have companies like Volvo, Cadillac, and General Motors increased their use of infomercials? Is this a wise strategy? The low cost associated with infomercials have attracted many “mainstream” companies to this medium. Compared to prime time television rates as well as other media, infomercials are a CPM bargain. For those in a buying mode, or considering the purchase of an auto, the infomercial can provide valuable information upon which to make a decision. While these persons may not yet be motivated to go to the auto showroom for information, they may be interested enough to watch the infomercial. Whether this is a viable strategy on the part of the auto companies remains to be seen. Some consumers are offended by infomercials while others just don’t like them. Even though the CPM is low, if many consumers are disinterested in this form of advertising/selling, cost efficiencies are lost. Add to this the potential negative impact on image, and one has to question this strategy. Infomercials continue to gain in popularity. Major corporations like GM, Volvo and many computer companies have now found this to be an effective means of communication, and—as noted in the text—a vast majority of television stations report having aired the 30 minute commercials. The infomercial has had an interesting evolutionary process. Originally the domain of smaller direct response companies, the infomercial was a thinly veiled 30-minute advertisement. Amazing Discoveries—a program that appeared as a representation of new inventions—and diet programs in which doctors hyped specific brands that were supposedly more effective in weight loss were the rule. These programs were very inexpensive to produce, and media time was bought at a very low rate. For all intents and purposes, the infomercial was nothing more than an advertisement deceptively presented as a television program. Because of their high level of success, infomercials attracted the eye of major corporations. The result was less deception, more information content and more legitimacy. At the same time, these Chapter 16 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 16-7

infomercials were much more sophisticated, with production costs soaring. Media time also increased along with the increase in demand. As discussed in the text, the original form of infomercials still are the most popular—i.e., psychic friends networks, amazing products, etc. However, there will continue to be an increase of major companies’ ads—due in large part to a potential crackdown for deception by the FTC. D. Explain why companies like KitchenAid, Soloflex, and others have been successful in adopting direct marketing techniques. Describe the conditions that contribute to the successful implementation of direct marketing programs. The effectiveness of direct marketing has been known for quite some time. Almost as soon as it started through TV, direct marketing has been proven to be a success for smaller companies, start-ups and what might be considered “out of the mainstream”—psychic networks, etc. Now, however, large corporations have found these techniques—particularly the infomercial—to their liking. A number of factors have led to success for these marketers. The low cost of the medium—that is, both production costs and media costs are low. Advertisers can produce an infomercial for a relatively low cost compared to commercials, and the media costs—because of the time periods purchased - are also inexpensive. Beyond the costs, infomercials and other direct marketing tools also offer attractive features. One is the ability to reach the desired target audience. As noted in the text, the infomercial buyer, as well as those who use catalogs and shop online, reflect a range of demographics. It is now possible to reach these potential buyers effectively through these media. Content of the direct response messages is also a positive attribute. For example, a one-hour infomercial can provide the potential car buyer with a lot of information, right in the comfort of their home, and with little effort. The same is true for other products, some of which the buyer may not be familiar with and may become interested once they have acquired more information. In the Monster and Whirlpool examples, the ability to bring in more information—employment quizzes, recipes, cooking tips, etc.—which are useful and interesting to the prospective buyer are also “value-added” components that will keep visitors coming back, and potentially purchasing. Overall, the infomercial, and direct marketing overall, has evolved from its original platform. Once strictly a sales tool, these media have discovered that they can offer the consumer much more, maintaining their interest and satisfaction, generating goodwill, etc., and still generate sales. To some of these companies, the primary goal is not to sell, but to support other marketing efforts. The fact that they lead to additional sales is “icing on the cake.” E. Describe what is meant by a database. What functions do databases perform? A database is a listing of customers and potential customers. These lists may be organized on a variety of factors, including demographic, geographic, and even psychographic. The database has become a powerful marketing tool. Marketers use databases to: •

Improve segmentation strategies—lists can demonstrate past purchasers, potential purchasers, and (as noted above) be segmented on a variety of criteria.

•

Stimulate repeat purchases—many companies arrange databases in a way that allows them to contact customers when a service is due. For example, car dealers letting customers know when their service is due; carpet cleaners notifying customers that it has been a year since their last cleaning etc.

•

Cross-selling—once a customer is included in the database as a result of a purchase, the opportunity exists for cross-selling. For example, camera companies may sell film or developing to recent camera purchasers; tape and disc companies can cross-sell videotapes, etc. Chapter 16 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 16-8

The opportunities for using databases seem endless. A good discussion can ensue on this topic. F.

Direct marketing has been beset by a number of problems that have tarnished its image. Discuss some of these and what might be done to improve direct marketing’s image. 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. Telemarketers continue to aggressively pursue new business. Infomercials, despite their advances in sophistication, can be perceived as being questionable if not deceptive. The Internet contains pornography 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. Direct marketers could establish guidelines for appropriate actions, and could work closely with academia and industry as well as the government to help eliminate many of the problems. As more and more large companies become involved, the costs of infomercials will be beyond the reach of many, 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

Why do you think home shopping channels have been so successful? What is the profile of the home shopping channel user? Home shopping—at first thought we picture the stay-at-home TV addict with little or nothing better to do than watch a home shopping channel. In reality this may not be true at all. The profile of the home shopping channel viewer—while watching TV slightly more—is very similar to purchasers of products through the store. Home shopping has increased for the same reasons that direct response purchases have increased in general. The biggest reason is that people don’t have time to shop. Another reason is that to many people shopping has become a hassle. Fight traffic, look for a place to park, fight the crowds—it just a lot easier to sit in your living room and buy. Finally, the offerings on home shopping have increased and improved. Celebrities sell everything from clothing to perfumes—some exclusively through home shopping channels. Turn on the TV; pick up the phone, have the packaged delivered—its simple in an increasingly complicated world.

IMC Exercise Catalogues have become an important direct marketing tool, and many catalog companies have opened retail stores. Have students provide examples of these occurrences, bring in example catalogues, and explain why this is occurring.

IMC Comprehensive Project Explain whether the product could be marketed through direct response media. If not explain why not. If so, include in the plan the direct media to be used, the cost, budget allocation for their inclusion should be provided.

CHAPTER 17 INTERNET MEDIA Chapter Overview Internet media has been hailed as major breakthrough for marketing communication and a threat to established media as a means of delivering messages. We have taken a much more conservative view. We see the Internet as an extremely valuable tool for marketers and an important part of the IMC program. In our opinion, there are advantages and disadvantages of Internet media just as there are for other media and the astute marketer will know how and when to employ this medium. The chapter starts off with an overview of Internet communication by looking at the users, web-site communication along with its objectives, and website strategy. Advertising via Internet media is examined next by covering the different advertising formats; display ads, paid search ads, classified and directory ads, video & audio ads, and mobile ads, which are related to the idea of Internet media vehicles. Subsequently, the next section investigates social media along the lines of social networking, content communities, blogs, and collaborative projects, which related to the notion of social media incentives. Methods of measuring effectiveness are then summarized and strengths and limitations of the Internet follow. We conclude with a brief summary of the strategic use of Internet media.

Learning Objectives 1. Describe the general characteristics of Internet users and explain website communication. 2. Identify the advertising formats of Internet media. 3. Illustrate how to use social media in an IMC plan. 4. Define measures of Internet effectiveness. 5. Evaluate the strengths and limitations of Internet media. 6. Apply the ideas of Internet media within the development of an IMC program.

Chapter and Lecture Outline I.

INTERNET COMMUNICATION

The initial section provides a general overview of Internet with respect to marketing communication. The Internet is both a communications and direct response medium. We make the point that we initially want to consider the communication role of the Internet as opposed to its selling role as this former perspective is in keeping with the scope of the book. A.

Internet Users—Current Canadian summary statistics in the first four figures are provided.

Website Communication—This preliminary section highlights the point that websites are a primary Internet tool that contributes to marketing communication objectives such as; develop awareness, disseminate information, build a brand image, and facilitate interaction.

Website Strategy—The Website is the home of the information the company provides via Internet media. It is also an experiential medium with much transformational properties as seen in TV advertising. Developing and maintaining a successful site is costly and time consuming. However, to attract new visitors and retain current visitors, it is essential that sites be continually updated. The development of interactivity and the idea of website advertising are emphasized. Research of attitude ad and attitude to brand is as applicable to attitude to website and attitude to brand. In this regard, all branded company websites can be viewed as one big ad, and that the content of these websites are constructed to carefully influence the audiences’ brand attitude. Chapter 17 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 17-1

II.

ADVERTISING Promotional planners use Internet media as an advertising tool in a variety ways in order to reach their audiences. In most cases, the delivery is similar to other media in terms of a print messages, video message or audio message. In some instances, each offers specific opportunities to reach an audience with particular characteristics and act as a media vehicle. There are a number of advertising formats that resemble other media as well.

Display Ads—banner ads are the most common form of advertising and moved to a new standard known as Universal Ad Package (CAUP in Canada). Rich media ads are growing with a new standard known as Rising Star Display Units. Research shows these are substantially more effective with their interactive capabilities. Other rich media ads are Pop-ups/Pop-unders which are small message boxes that appear on one’s screen. Interstitial ads appear while content is downloading. Similarly ads shown when a viewer arrives at a website are splash page ads.

Paid Search Ads—search engine prompts of key words provides links to related web-sites. These links are essentially an extremely primitive form of a display ad that encourages additional action of the user desiring to process the message further at website or any social media vehicle potentially.

Video and Audio Ads—streaming of video messages via internet media increased with broadband growth and penetration giving rise to greater advertising opportunities. Online Video Ads—television-like commercials are available for viewing in many locations such as webs-sites and web-portals. Video available for viewing can include television-like ads that users can view prior to receiving the content. These ads are seen without TV show like content. Digital Video Ads—commercials are placed within programming on major TV networks like CTV. In this respect, consumers view the ads as the “cost” of seeing content not paid for. Podcasting—audio communication is sponsored by advertisers with the effect simulating radio ad.

Mobile Ads—penetration level of smartphones provides a growth opportunity for advertisers for short message service (SMS), display, search, and apps. In many respects, each of these is the portable manifestation of what occurs in advertising when one accesses Internet media via a nonmobile device with the exception of apps perhaps.

Internet Media Vehicles—all aspects of Internet media are available for dissemination of a marketing message necessitating the need to consider how to organize the options. Figure 17-19 applies existing media terminology to illustrate how planner can evaluate different media vehicles for ad placement. A book by the Advertising Research Foundation suggests targeting by context behaviour, geography, and time of day are relevant approaches with Internet media.

III.

SOCIAL MEDIA

Social Media Classification—Social media is an Internet-based application that allows the creation and exchange of user-generated content resulting in six social media classes; collaborative projects (e.g., .wiki, social bookmarking), blogs, content communities (e.g., YouTube), social networking sites (e.g., Facebook), virtual game worlds, and virtual social worlds. This chapter summarizes the first four for advertising and marketing communication purposes. Chapter 17 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 17-2

Advertisers are interested in consumers’ online brand-related activities (COBRAs) along the lines of consuming, contributing and creating. With a vast array of possible activities, it is no surprise to see almost an infinite number of potential social media classes and social media vehicles as shown in Figure 17-22. While there is no doubt that certain social media vehicles dominate (also true with established media), these illustrations imply that much of social media is fragmented and that target audience coverage is minimal when placing ads, thus necessitating careful planning and application of existing media knowledge. The extensiveness of social media has heightened existing ideas of “owned” media, “paid” media, and “earned” media implying that clarity in what occurs in a “social media advertising campaign” is paramount. B.

Social Networking—two media vehicles are summarized, Facebook and Twitter, for availability of all three views of media (owned, paid, earned). Depending upon the objectives, a promotional planner can (i) own a brand page/account to deliver message, (ii) pay to have a message placed within the media, or (iii) foster digital word-of-mouth communication of the brand.

Content Communities—two types of media vehicles are summarized, video (i.e., YouTube) and photo (i.e., Flickr). As with the previous section, these media are reviewed for all three purposes for marketing communication of brands.

Blogs—are usually the personal writings of an individual, although company and brand versions exist and represent the “owned” media in this media class. Blogs often reflect the “earned” media of brands as individuals will post their experiences while using goods and services. Blogs are also an avenue for “paid” media as bloggers will accept ads to support their costs. Blogger owned by Google is one option for bloggers to accept ads and for brands to place ads.

Collaborative Projects—illustrates the ultimate in social media since consumers are contributing and perhaps to some degree creating as a COBRA. This characteristic makes the distinction (e.g., paid, earned, owned) murky as it is difficult to know who is posting what material, and whether they were paid or not. Moreover, the blurring of content and advertising is become enriched with the movement of content from one domain to another like Pinterest. Instructors can raise an interesting discussion on this point with material from Chapter 18 where ASC shows that the identity of an advertiser should be known.

Social Media Incentives—examples of social media are illustrated where the exchange is in reality a sales promotion and not an ad or content. Instructors can raise a discussion on the merits of this point to gage student reaction.

IV.

MEASURING INTERNET EFFECTIVENESS Most of this can be done electronically and specific measures include: 1. Audience Measure—determination of audience sizes remains challenging with a lack of consistent standards and established procedures. 2. Exposure and processing measures—hits, viewers, unique visitors, clicks, click-through rate and impression/page views 3. Communication effects measures —online measuring of recall and message retention; use of surveys and panels to assess attitudinal effects. 4. Measures of behaviour—repeat visitor percentage, frequency, recency.

EVALUATION OF INTERNET MARKETING

Strengths of the Internet as a media include: 1. Target audience selectivity 2. Involvement and processing time Chapter 17 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 17-3

3. Control for selective exposure 4. Creativity 5. Costs B.

Limitations of the Internet as a media include: 1. Target audience coverage 2. Clutter 3. Reach 4. Media Image

VI.

IMC PLANNING: STRATEGIC USE OF INTERNET MEDIA The section identifies the tremendous communication opportunity of Internet media on many fronts. It works with any of the other IMC tools and various manifestations of the Internet media act as if they are unique IMC tools within it. With its print, video, audio characteristics, Internet media can have virtually all sixteen media characteristics summarized in Chapter 10 as strengths with the right combination of applications. Its pervasiveness allows it to achieve any communication objective for any target audience at any point in the consumer decision-making process. Thus, when one decides to use the Internet, the manager needs to be very specific with respect to the strategic intent or else valuable resources can certainly be wasted.

Teaching Suggestions This chapter may be one of the most interesting chapters 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 media is changing so rapidly that by the time something is committed to print, it has changed. 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 communication objectives—is a good starting point. A review of all the advertising avenues is warranted to see the similarity and differences with advertising on TV or print mediums. It is also instructive to make a link to the media concepts from Chapter 10. For example, the idea of media class and media vehicles can be applied to internet media, as social media may be viewed as a media class and Facebook viewed as a particular vehicle.

Vignette 1. Do social networking sites work better for attracting new customers or communicating with current customers? Brands can likely use social networking sites both purposes and it will depend on the message and whether the media class is used as “owned” media, “paid” media or “earned” media. A strategy could be mapped out for all six combinations with accompanying media vehicles. This point illustrates the complexity of planning for digital advertising that may in fact be more challenging that advertising in established media.

IMC Technology Perspective 17-1 1. What are the essential differences between an ad display network and an exchange for buying and selling display ads? An ad display network operates more like established media buying and selling, the three steps described and the start correspond to what occurs with broadcast media (inventory, sell ad space, Chapter 17 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 17-4

deliver ad to publisher/broadcaster). Ad exchanges are a negotiating tool to ensure greater economies for the buyer and seller much like a stock exchange. In this case the buyers and sellers are interacting with one another but in the ad network, the mediator facilitates the transaction between advertiser and content publisher.

IMC Perspective 17-1 1. How are apps an effective method for marketing communication? This perspective highlights a positive and a negative story with respect to apps. A key distinguishing feature of the two is the situation and timing of the app use. In the Poynt example, people are using the app with a clear motivation directed from an underlying need to shop to fulfill a consumption need. This is marketing at its finest where there is communication willingly adopted based on need. In the Ford example, the ad is requesting participation for which there is no discernable motive for anyone on the audience. Marketers have to be careful about getting too excited about their brand since not all consumers want to participate in marketing gimmicks for no reason when relaxing or socializing with family and friends.

Answers to Review Questions 1. How has Internet media threatened other media? How has Internet media assisted other media? Many dire predictions of the demise of traditional media have not come true. In fact, just the opposite has come true. The Internet may be one of the best things to ever happen to traditional media. Internet marketers very quickly learned that they needed traditional media to promote their sites, and that promoting on the Internet alone would not be sufficient. The result is that traditional media have received the rewards of the Internet companies’ expenditures, and are bringing in revenues at a very high rate. Recent events have demonstrated that for Internet companies to survive, they will need to adopt more traditional marketing methods, and employ even more traditional media. Traditional media brands are finding ways to deliver content on the internet which has expanded their revenue base. In fact, news readership is stronger with two avenues for consumption. Its only serious decline is the loss of its lucrative classified to online versions. TV encourages interaction with its programming via social media and its revenue has steadily grown, as does radio to some degree. Outof-home has resurged with the GPS technology connecting to consumers’ smartphones. 2. Explain the different advertising formats that advertisers use with Internet media. Discuss the advantages and disadvantages associated with each. A variety of options are available to those who wish to advertise on the Internet. Display Ads—banner ads are the most common form of advertising and moved to a new standard known as Universal Ad Package (CAUP in Canada). Rich media ads are growing with a new standard known as Rising Star Display Units. Research shows these are substantially more effective with their interactive capabilities. Other rich media ads are Pop-ups/Pop-unders which are small message boxes that appear on one’s screen. Interstitial ads appear while content is downloading. Similarly ads shown when a viewer arrives at a website are splash page ads. Ads are good for awareness and the brand is read and presumably processed at a low level of involvement. An extremely small percent are clicked indicating a small portion desire further information at a website or social media vehicle. Paid Search Ads—search engine prompts of key words provides links to related web-sites. These links are essentially an extremely primitive form of a display ad that encourages additional action of the user desiring to process the message further at website or any social media vehicle potentially. These clearly assist in the shopping for consumers at the information search stage or alternative evaluation stage. Directing to the appropriate website can naturally contribute to brand awareness and brand attitude objectives. Chapter 17 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 17-5

Classified and Directory Ads—a substitution of ads from newspapers (e.g., classifieds) and directory books (e.g., Yellow Pages) occurred over the past decade. General (e.g., Kijiji) and specialty websites (e.g., Autotrader) offer advertisers similar targeting options like other media. Similar to search ads, these assist in the directing consumer while shopping. Video and Audio Ads—streaming of video messages via internet media increased with broadband growth and penetration giving rise to greater advertising opportunities. Online Video Ads—television-like commercials are available for viewing in many locations such as webs-sites and web-portals. Video available for viewing can include television-like ads that users can view prior to receiving the content. These ads are seen without TV show like content. Digital Video Ads—commercials are placed within programming on major TV networks like CTV. In this respect, consumers view the ads as the “cost” of seeing content not paid for. Podcasting—audio communication is sponsored by advertisers with the effect simulating radio ad. The growth of video message in many ways and in many social media vehicles allow for brand building such that sophisticated brand positioning strategy opportunities now exist for promotional planners. This explosion of video will certainly challenge TV in this regard, however targeting will continue to be a difficulty with Internet media. Mobile Ads—penetration level of smartphones provides a growth opportunity for advertisers for short message service (SMS), display, search, and apps. In many respects, each of these is the portable manifestation of what occurs in advertising when one accesses Internet media via a non-mobile device with the exception of apps perhaps. All communication effects can be achieved with substantial levels with mobile ads, however the brand image will be curtailed to a degree due to the smaller screens sizes. However, the on-demand nature of phones, combined with all the different advertising format described above at the touch of one’s fingers at any point in time, anywhere, opens the door for considerable brand communication. 3. Explain the three ways in which a promotional planner can achieve positive marketing communication effects in social media. Popular terminology is “owned” media, “paid” media, and “earned” media. All three of these existed historically, but like many things, their saliency heightens with a change in the environment. Owned media exists with a brand’s own Facebook page (or website from a non-social media view). Companies have always distributed its own media in different ways; notably collateral material like brochures which represented “owned” media. A brand can have its own presence in social media with its own Facebook page, Twitter feed, or YouTube channel. Presently, a reasonable use of these social media can avoid paying the “paid” media features. Of course, if a brand chose to do so, it could make it marketing communication message go through each of these social media vehicles and pay for the delivery of ads just like what is done broadcast and print. Finally, media publicity represented “earned” media originally, and now it is seen with social media activity like tweeting or retweeting, sending links of YouTube messages to others or communicating via many Facebook options. In essence we witness an electronic manifestation of word-of-mouth communication, a key feature of “earned” media for a century or more. 4. Describe the ways that marketers measure the effectiveness of their use of Internet media. How do these measures relate to more traditional measures? Internet marketers have a number of exposure measures that include: •

Page impression—number of users exposed to a webpage

•

Unique visitors—number of different visitors to a site in a specific time period

•

Ad Impressions—number users exposed to an ad

•

Clicks—number of users interactions with an ad

•

Click-through rate—percentage of ads exposed that users click

Internet marketers have a number of processing measures that include: •

Average time per visit—length of times spent on webpage (note error in text)

•

Average time per visitor— (note error in text)

Marketers also adapt other media measures for communication effects to assess awareness and attitudinal results. Behaviour is tracked with respect to repeat visits, frequency and recency. 5. Review the limitations of Internet media and assess whether these are as weak as the limitations of other media. Target audience coverage is problematic with Internet media. The placement of one ad on one vehicle is quite limited compared to what may occur with TV for example where a placement of an ad may reach 2% to 4% or upwards of 8% to 10%. A placement of a print ad may be exposed to a few hundred thousand in the case of Canadian Living, but only a few tens of thousands with an online banner ad. Carrying this line of reasoning beyond one placement, reach attained by using multiple vehicles is potentially very strong with TV and other media, but a banner ad with Internet media would require even more ad placements to achieve high levels of reach (e.g., 30% or 40%). Banner ads on many websites produce significant clutter with many of them competing for attention, and this may be similar to newspaper ads, however TV ad placements do not have any other ad playing at one time and many magazine ads are full page without any competing messages. Refer to Figure 11-24 to illustrate the level for receivers’ attention occurs with each media. Much data (e.g., Figure 12-11) shows that many consumers do not view Internet media ads favourably, so from a media image standpoint, ads in Internet media have a long way to go. All of this is quite curious with the growth of Facebook ads and the placement in other Internet media vehicles. 6. Discuss the advantages of Internet media. For which types of advertisers is Internet media best suited? Why? The Internet offers some distinct advantages to the marketer. These include: •

Target audience selectivity

•

Involvement and processing time

•

Control for selective exposure

•

Creativity

•

Costs

Most companies may be able to find a way to use the Internet to operate to their advantage. They just need to know how to define what the objectives they are seeking will be in determining its role.

Answers to Applied Questions 1. Select a favourite Internet site for a brand and investigate how it achieves the objectives outlined in this chapter. Chapter 17 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 17-7

Students should have an enjoyable time applying the objectives outlined in the first section to their website selection. Of course, they may be looking at sites that are directed for transactions versus communication; however, instructors could still quiz them on how the website communicates the brand as part of completing the transactions. Instructors should make note of how well the student draws on all the characteristics of the web design that are consistent with the design elements looked at in Chapter 8. It may be tempting to delve into the technological elements, but instructors should keep the discussion on point with respect to communication. 2. Visit a number of internet media vehicles and evaluate the effectiveness of the display ads in terms of the creativity, message, and ability to reach the intended target audience. Of course students already looked at many different sites in the past; however in all likelihood they have not critically evaluated the ads. This exercise will allow students to apply the creative decisions of Chapter 7 and 8, as well as the segmentation variables in Chapter 3. In order to fully address these points, relevant ideas from Chapter 4 and 5 will have to be applied as well. 3. Investigate the social media use, in as many vehicles as possible, of a favourite brand, and asses which social media appears most effective for that brand. Social media is so pervasive and varied, this exercise encourages student to look at all the major vehicles to see if the message and image portrayed is similar or different to make a conclusion regarding effectiveness. Brands selected could be quite varied and this question could make for a fun class as students went from location to location in their presentation pointing out the key elements. 4. What measures of marketing communication effectiveness are relevant for each of the four types of social media investigated in this chapter? Students should be able to show that all aspects of measurement are relevant. Brands would want to know the numbers participating with the social media, the exposure and processing levels, and also try to figure out if there is any attitudinal influence. Behaviour could be especially interesting to talk about what to measure with so many different activities that are possible with each of the different social media. 5. Given the strengths and limitations of Internet media, how would a promotional planner use all the Internet media options to optimize a digital media plan? As with other media, promotional planners should make sure that they use enough Internet media to influence consumers at every stage of their decision-making process. And if brands consider marketing to customers and non-customers, then they need to consider all the stages for both types of customers. Additionally, brands should ensure that the all communication and behavioural effects are attained with multiple media. 6. Select a product of interest and explain how each of the four types of social media described in this chapter can be integrated effectively with broadcast, print and out-of-home media. TV and radio ads clearly suggest receivers to visit their Facebook page for varying reasons (e.g., information, promotion) and to find the brand’s YouTube channel for example. This covers off two of the four social media classes. It is unclear whether brands direct receivers to the other two, but the option certainly exists if there is a compelling communication objective. Print media commonly show the social media icons and given the reading format of this media, it may be more likely that brands could direct its target audience to a blog or a cause that is using a wiki for example for increased brand communication. Directing receivers to social media from out-of-home media does not appear as likely, perhaps due to its transient nature. However, this appears to be moving in the right direction with the use of mobile technology (e.g., QR codes) and we can expect more signage to be directing receivers to appropriate social media vehicles while consumers are in the process of shopping. Chapter 17 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 17-8

Additional Discussion Question (Not In Text) A. One of the most difficult objectives to achieve on the Internet is creating a strong brand image. Discuss the factors that make brand building both difficult and possible. A strong brand image goes beyond just creating awareness. Strong brands convey a very distinct impression of the brand; when their names are mentioned, something immediately comes to mind. Development of a strong brand requires that one have well developed, sustaining and differentiating attributes that distinguishes it from competitors. Brand image does not take place over night, and can change over time. Brand images can also be enduring which require appropriate messaging. The marketer must be committed to the brand, always being consistent in all marketing efforts on its behalf. Traditional media like TV and magazines are currently more effective than the Internet media for purposes of creating brand image. However, Internet media is becoming more like TV and it brand building capabilities will emerge significantly. B. Discuss the objectives marketers may be seeking in their use of the Internet. Which is the Internet best suited for? There may be a number of objectives for employing the use of the Internet. These include communications objectives as well as e-commerce. Communications objectives include: •

Develop awareness—establishment of a website immediately provides the potential of worldwide exposure. However, it does not guarantee it. By establishing a web presence, companies with limited budgets may now be discovered by potential customers, and may establish a website for just this purpose.

•

Disseminate information—perhaps one of the most effective uses of the Internet is that of providing information. No other medium can provide more information, at a faster pace and for less cost than the Internet

•

Build a brand image—websites can also assist a company in providing the market an image or to communicate their positioning

•

Facilitate interaction—all aspects of Internet media facilitate interaction (e.g., reciprocal, responsive, speedy, non-verbal information, page 493 of text).

All of the above constitute objectives for using the Internet. Depending on the nature of the company, each may be more useful. For example, for a small company with a limited budget, the ability to gain awareness may be the most valuable objective. For a large company, with an extensive advertising budget, the ability to provide information may be most important. At any given time, these objectives may also change.

IMC Exercise Have students visit websites in both the consumer and business-to-business sectors. Have them evaluate the sites based on the communication objectives discussed in the text, critiquing the site and offering suggestions for improvement.

IMC Comprehensive Project Develop the Internet strategy. Describe what the website will look like (or design one), and which advertising and promotions forms will be employed. Will the site include public relations sections? How will it contribute to social media usage with respect to the brand?

CHAPTER 18 REGULATORY, ETHICAL, SOCIAL, AND ECONOMIC ISSUES FOR IMC Chapter Overview This final chapter evaluates the regulatory, social, ethical and economic issues of advertising. Advertising is a very powerful and influential force in our society, and this text would not be complete without considering the perspectives and criticisms regarding its effects. The first section of the chapter focuses on the regulation of advertising in Canada. This is followed by summarizing the criticisms of advertising from ethical and societal perspectives. 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 schools of thought: the Advertising = Market Power and Advertising = Information perspectives.

Learning Objectives 1. Describe the advertising regulation system in Canada. 2. Evaluate the ethical perspectives of advertising. 3. Explain the social effects of advertising. 4. Examine the economic role of advertising and its effects on consumer choice, competition, and product costs 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 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 in society is a controversial one and a discussion of the topic would not be complete without considering the regulations affecting advertising and the criticisms regarding its ethical, social and economic effects as well as the responses to these charges. Advertising is subject to considerable criticism because it is judged by groups with different norms, values, and ethical standards. Arguments on both sides of controversial ethical, social, and economic issues will be presented in this chapter. However, students may have to draw their own conclusions as to which position is right or wrong. II.

ADVERTISING REGULATION IN CANADA

Regulation occurs through government and self-regulation. A.

Canadian Radio—Television and Telecommunications Commission (CRTC) – It regulates over 5900 broadcast media organizations and is guided by the Broadcasting Act.

Competition Act—contains guidelines for misleading advertising and is monitored by Industry Canada.

Regulations on Advertising to Children—In this province it is illegal to direct commercial messages to persons younger than 13 years of age.

Advertising Standards Canada—the mandate of this industry body is to create and maintain community confidence in advertising. The ASC’s activities encompass: Chapter 18 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 18-1

1. Canadian Code of Advertising Standards—the Code is used as the criteria to assess whether a complaint is legitimate 2. Gender Portrayal Guidelines—these attempt to ensure that women and men are portrayed appropriately in advertising 3. Complaint process—the ASC’s Standards Division handles consumer complaints, special interest group complaints and trade disputes 4. Complaints report—each year the ASC publishes a comprehensive complaint report 5. Complaints for debate—the most significant decisions of the ASC are summarized for class debate. 6. Clearance process—the ASC provides clearance services for advertisements for alcohol, cosmetics, non-prescription drugs and food. It also provides these services for ads directed to children outside Quebec. III.

ETHICAL EFFECTS OF ADVERTISING

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. 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 ads are misleading or untruthful and end up deceiving consumers. The issue of what constitutes deception is a very difficult one. However, a concern of 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 regulatory groups by making overtly false or misleading advertising claims. Many of the companies involved in outright fraud or deception are often smaller companies using high-pressured direct marketing tactics to push their products. However, national advertisers will test the limits of industry and governmental rules and regulations and make claims that may give their brands an advantage in highly competitive markets. Critics of advertising question whether consumers are receiving proper information to make an informed choice since advertisers usually only present information that is favourable to their brands. They 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 regulatory bodies and mechanisms are sufficient to keep advertisers from deceiving or misleading consumers.

Advertising as Offensive or in Bad Taste—another common criticism of advertising, particularly by consumers, is that ads of certain products and particular types of appeal are offensive, tasteless, irritating, boring obnoxious, and so on. Chapter 18 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 18-2

1. Product Type —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.. 2. Fear appeals—often the inappropriate use of fear appeals receives criticism. This arises from the exploitation of human anxieties of our shortcomings physically or intellectually. Social marketing campaigns have used extreme scenes depicting the consequences of undesired behaviour such as drinking and driving. 3. 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 by depicting them as sex objects. 4. Shock appeals—while not used extensively, certain advertisers use shock to draw attention to their ads. Moreover, the surrounding publicity with such a strategy often ensures even greater exposure. Despite the criticism surrounding this type of advertising, its reoccurrence suggest that in the face of criticism, some advertisers perceive stronger benefits. This could be a source for energetic debate among students who usually are interested in the more unusual aspects of advertising. C.

Advertising and Children—one of the most controversial topics advertisers must deal with is the issue of advertising to children. 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. The Broadcast Code for Advertising to Children recognizes the debate to find a balance between these two points of view. First, 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.

•

Children cannot differentiate between commercials and television programs, do not perceive the selling intent of commercials, and cannot distinguish between fantasy and reality.

Arguments in favor of advertising to children include:

IV.

•

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.

•

Greater market knowledge of the marketplace gives teens a basis on which to evaluate ads and makes them more likely to recognize the persuasion techniques used by advertisers.

SOCIAL EFFECT OF ADVERTSISING

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. Chapter 18 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 18-3

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: •

creating needs rather than showing how a product or service fulfills them

•

surrounding consumers with the images of the good life and suggesting that acquisition of material possessions leads to contentment and happiness and adds to the joy of living

•

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.

The criticism of advertising on the basis of creating materialism assumes that materialism is undesirable and done at the expense of non-materialistic 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. B.

Advertising and Persuasion—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.

Advertising and stereotyping—advertising is often accused of creating and perpetuating stereotypes thorough its portrayal of certain groups including women and visible minorities. 1. 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 many ads recognize the changing role of women in our society and the importance of portraying them realistically. 2. Visible minorities—recent Canadian trends and commentaries by practitioners suggest that the portrayal of minorities – particularly Chinese, South Asians and Blacks can be improved in Canadian advertising even though there has been an improvement in the recent past.

Advertising and the media—since 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. 1. Arguments supporting advertiser control of the media: Chapter 18 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 18-4

•

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.

•

Newspapers and magazines receive a substantial percent 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 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.

2. 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 Canadian media are basically supported by advertising and allow consumers to enjoy them 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 government-supported media. E.

Advertising and social benefit—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 drinking and driving, drug abuse, and are used to raise funds for a variety of humanitarian efforts.

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 Canada 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. Chapter 18 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 18-5

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: •

The large sums of money spent on advertising and promotion are an expense that is passed on to consumers in the form of higher prices

•

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 non-advertising 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. Chapter 18 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 18-6

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 18-6. 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.

Teaching Suggestion In this final chapter we evaluate advertising from a societal, ethical and economic perspective. Advertising is a very powerful institution in Canada 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 behaviour. 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 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.

Vignette 1. Are these issues of accuracy in ads relevant for the products purchased by the average student? These examples open the door with a discussion about what is appropriate or inappropriate content for an advertising message. It will be interesting for instructors to assess the reaction of the students Chapter 18 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 18-7

to suicide and infidelity. Instructors might want to have someone predict what the vote might be before taking one to see varying points of view. Some students might bring religious points of view into the discussion, so some caution may be necessary.

Ethical Perspective 18-1 1. What limits or controls do you believe should be in place for children of varying ages? The online exposure of ads to children will likely be a topic of concern for regulators in the coming decade. As the consumer understanding of Internet media matures, many will realize that much of the www is a repository of extensive advertising as this story shows, the websites children visit are in fact advertising. Thus far the Federal Government has been reluctant to control Internet media the way it has with broadcast media for decades, however, the starting point will likely be with messaging to children as it is a target for which most people will find little reason to question. Instructors should draw students’ attention to the guidelines suggest and assess whether these are reasonable and how they could be implemented. Instructors might also begin the discussion on whether students feel as if they have been corrupted unduly influenced by online advertising as children.

Ethical Perspective 18-2 1. Do you think these fines will ensure that Canadians receive accurate price information in ads in the future? Heated opinions should likely arise if students read and discuss this story. As users of smartphones, this is one product that they will have extensive experience compared to many other product categories. It will be interesting to see if any student determines how significant or insignificant the penalty is for the companies. In fact a simple speeding ticket for a student on a budget is possibly more painful than the money given by the telcos. Despite this, hopefully students will appreciate the fact that the government is acting upon fraudulent messages from major brands.

Answers to Review Questions 1. Explain why you agree or disagree with the rulings of the rulings of the ASC presented in this chapter regarding the Ford Focus and Kia automobile ads. The answers to this question are subjective. Arguments for or against should be based on students’ interpretation of Clause 14 of the Code and principles of the Guideline. Instructors might want to contrast these cases with the others listed, or possibly focus on contrasting these two cases with a few others that have had many complaints. The search function on the ASC website allows for instructors to call up different examples from the past ten years or so. The intention of this question is to open the door for students to understand the content of the code. 2. Evaluate the arguments for and against advertising to children. Do you feel restrictions are needed for advertising and other forms of promotion targeted to children? There are numerous arguments that are offered by those individuals or groups opposed to advertising to children. They argue that children, especially young ones, are vulnerable to advertising because they lack the necessary experience and knowledge to understand and evaluate critically the purpose of persuasive advertising appeals. They also argue that many preschool children cannot differentiate between commercials and television programs and do not perceive the persuasive, selling intent of commercials, and cannot distinguish between reality and fantasy. It has also been argued that advertising directed toward children creates materialism, stifles creativity, creates conflict between the parent and child, and hinders the development of moral and ethical values. In addition to advertising, marketers use various other forms of promotion to target children such as premium offers and entertaining web sites on the Internet. Self-regulatory groups as well as government agencies Chapter 18 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 18-8

have passed guidelines and legislation to ensure that control the use of these promotional tools in marketing toward children. Numerous arguments can be offered in favor of advertising to children. It can be argued that advertising is a part of life and children must learn to deal with it as part of the consumer socialization process. Advertising serves as an information source and teaches children the consumption skills necessary to function in the marketplace. It is also argued that it is the responsibility of the parents to help children interpret advertising, to monitor the shows their children watch and ultimately to decide whether or not to purchase a particular product for their children. 3. 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. The results of an online survey of 200 men and 200 women conducted by MediaAnalyzer Software & Research in September 2005 are shown in Figure 22-2. 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). 4.

Discuss the two major perspectives of the economic impact of advertising: “advertising equals market power” and “advertising equals information.” The Advertising Equals 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 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 Equals 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 results in pressure on companies to provide high quality products at lower Chapter 18 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 18-9

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.

Answers to Applied Questions 1. Why are the laws for advertising regulation not applied to sponsorship and some other IMC tools? The crux of this question pertains to the fact that advertising is heavily regulated however other IMC tools are not under such scrutiny, yet have similar objectives (e.g., awareness, attitude) for communication and behavior (e.g., trial, repeat purchasing). For example, alcohol advertising is not permitted to have a role model for as a source of the message. However, alcohol companies are permitted to sponsor Hockey Canada even though Hockey Canada acts as an important role model in the life of children’s hockey. Hockey Canada certifies the coaches and administers all aspects of children’s hockey. Other examples are likely to be found. It would be incumbent upon the instructor to look at the regulations and see if there is a similar type of message delivered via other IMC tool that appears to skirt the regulations found in advertising. Instructors might draw on the experience of tobacco promotion where much of it is prohibited from advertising to sponsorship to point-ofpurchase displays. 2. Find examples of three ads that you find irritating, offensive, or in bad taste. Discuss the basis of your displeasure with these ads. The Canadian author devotes a day to this material at the end of term with this question as the assignment given at the start of the term, with many reminders throughout the course as ethical issues arise when discussing advertising. Often students have difficulty finding examples, a testament to the fact that much of advertising is perfectly acceptable and it is a very small percentage that truly offends people. The minimal number of complaints the ASC actually receives is also an indicator. Even further, students who do find examples are hard pressed to find Canadian examples where something is exceptionally offensive. Instructors looking for an extreme case to discuss can follow the story of Fluid Hair Salon based in Edmonton. Its story is documented in the ASC complaints report, and follow-up news stories presents an interesting example for interpretation. 3. Explain which position do you agree? “Advertising determines Canadian consumers’ tastes and values and is responsible for creating a materialistic society” or “Advertising is a reflection of society and mirrors it tastes and values” 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. 4. Do you believe advertising power has ever restricted choice in buying products? 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 Chapter 18 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 18-10

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. 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.

Additional Discussion Questions (not in text) A. Discuss the role of ethics in advertising and promotion. How do ethical considerations differ from legal considerations? 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. B. A common criticism of advertising is that it stereotypes women. Discuss how advertising might stereotype men as well. Find an example of an ad that does this. Advertising has received a tremendous amount of criticism for stereotyping women. Critics argue that advertising generally depicts women as homemakers or mothers and has failed to acknowledge the changing role of women in society. They also note that many ads portray women as decorative objects or sexually provocative figures. While advertising is often criticized for its depiction of women, critics argue that men are often portrayed negatively as well. Some ads poke fun at men’s shortcomings while others use reverse sexism. Critics argue that men are often portrayed as insensitive, as chauvinists, as sexists and as narrow-minded. Several companies have been criticized for using ads that take slaps at men. For example a print ad for the clothing accessory Bodyslimmers used a headline that read, “While you don’t necessarily dress for men, it doesn’t hurt, on occasion, to see one drool like the pathetic dog that he is.” Another example is a print ad for Liz Claiborne shoes that used the tagline, “Aren’t there enough heels in you life?” The American Floral Marketing Council was also criticized for using a negative image to portray men in its point-of-purchase ad campaign. A poster from the campaign featured a floral arrangement in front of some rocks, resting Chapter 18 – Advertising & Promotion, 5th Canadian Edition ©2014 McGraw-Hill Ryerson Ltd. 18-11

on nuts and bolts, with the tagline, “Romancing a stone? Send him flowers.” Students should be asked to find other examples of ads that might be portraying men in a negative manner. C.

Many advertisers complain that the regulatory bodies and TV networks scrutinize commercials more closely than the shows. Do you think that commercials should be held to higher standards than programs? Why or why not? Advertisers often complain about the double standard that exists for commercials versus TV programs, noting that even the most suggestive commercials are bland compared with the sex and violence that appears in many television programs. They argue that the regulatory bodies and networks should be more willing to accept commercials that use techniques such as partial nudity or suggestiveness, given what appears in the programs. The networks argue that they have to scrutinize commercials more carefully because advertising encourages people to imitate behaviours, whereas programs are merely meant to entertain. Network executives also note the complaints of parents who are concerned about their children seeing certain ads, since they cannot always be there to change the channel or turn off the set when a suggestive or provocative ad comes on TV.

A common criticism of advertising is that it stereotypes women. Discuss the ways this might occur. Do you think the Airwalk ad shown in Exhibit 18-4 is suggestive and symbolizes sexual submission? Advertising has received a tremendous amount of criticism for stereotyping women. Critics argue that advertising generally depicts women as being preoccupied with beauty, household duties and/or motherhood and has failed to acknowledge the changing role of women in society. Another concern is that many ads portray women as decorative objects or sexually provocative figures. The Airwalk ad has been criticized by some women’s groups who argue that it shows a submissive and sexually available woman. A critic argued that the ads contain a number of symbolic cues that are sexually suggestive and combine to reinforce an image of the woman’s sexual submission to the man. Some of these cues include the heart shaped box indicating love; the color red which symbolizes romantic passion; the heavy lipstick which is sexually suggestive as is the tight slinky red dress. A more detailed interpretation of the ad can be found in an article by Aaron C. Ahuvia in the Journal of Advertising, Spring 1998 on p. 150. You might want to ask students their opinions of the ad and then read them the interpretation to them.

What is meant by shock advertising? Evaluate the arguments for and against the use of shock advertising by marketers. Shock advertising refers to ads in which companies use nudity, sexual suggestiveness, violence, or some other startling images to capture consumers’ interest and intention. One of the primary goals of the “shock-vertising” used by companies is to break through the clutter and ensure that consumers notice their advertising. Most of these ads use various amounts of nudity and/or sexually provocative images that will capture the attention and imagination of readers of their magazines or catalogs. These companies feel that it is necessary to push the envelope and take some risks with their ads. They are very aware that their ads shock and even offend may people, but they feel will argue that most of the younger consumers they are targeting have no problems with the ads. Moreover, the strong visuals used in the ads are seen as a way of creating images for their brands as well as attracting attention to them. Critics of these ads argue that they are offensive and in poor taste. They are particularly concerned with the fact that many of these ads and catalogs are moving beyond various forms of nudity and using themes such as sadomasochism, compromising poses, and pornography stars in their messages. It is very likely that these ads are effective in breaking through the clutter and capturing the attention of readers. However, it may be difficult for these companies to develop a strong brand image and sustainable competitive advantage using this type of advertising. Consumers may eventually become bored with these images over time and the brands they will lose their appeal.

IMC Exercise Find several ads that you 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 or the manner of presentation used.

•

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, an ethnic groups such as Chinese, South Asians and Blacks or some other group such as the elderly.

Be prepared to 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?

IMC Comprehensive Project As a final part of their IMC Comprehensive project, students should be asked to evaluate their advertising and promotional campaigns from a social and ethical perspective. The specific assignment for this chapter is as follows:

IMC Project Assignment for Chapter 18 By now you should have developed a completed integrated marketing communications plan for the product or service you chose to promote. The final part of your project requires that you evaluate your IMC plan from a social and ethical perspective. Do you feel you can defend your advertising and promotional plan from a social and ethical perspective? Are there any potential negative social consequences of your advertising and promotional plan? Could any particular group find your advertising offensive or in poor taste?

Teaching Note Benetton Group: Evolution of Communication Strategy Case Overview This case examines the controversial “shock advertising” campaign that was used by Benetton, the Italian-based clothing manufacturer and retailer for nearly two decades. Thanks to its unusual communication strategy, the Benetton Group is one of the most visible specialty retailers in the world. Benetton has used some very controversial images in its communication campaigns. Masterminded by Benetton’s creative director and photographer Oliviero Toscani, the shock ads generated both criticism and accolades throughout the world. However, in 2000 Toscani went too far when he created the controversial “We, on Death Row” campaign which featured ads showing piercing pictures of death row inmates along with their names and date they were to be executed. The criticism surrounding this campaign was so intense that Toscani was forced to resign. Under the new creative director James Mollison, Benetton began using more traditional product-based advertising. This case examines Benetton’s unique communication philosophy and the controversy generated by it. The case can be used as a basis for a lively discussion on the use of shock advertising as well as ethics in advertising. Benetton has always been well known for its colorful and provocative advertisements. The company employs unusual, controversial advertising techniques and themes that use “shock value” and powerful images to grab viewers’ attention. Unlike most advertisements which center on a company’s product or image, Benetton’s advertising campaigns have focused on social and political issues such as racial integration, AIDS awareness, war, poverty, child labor, death, hunger, and pollution. Many of the these ads evoked controversy as critics have argued that the real goal of the shock ads has been to generate publicity for Benetton and the some have criticized the company for exploiting human suffering to sell its products. Following the controversy surrounding the “We, On Death Row” ads, Benetton realized that it had crossed even the boundaries of unconventional advertising. Various surveys suggested that some loyal customers had been put off by this campaign and some retailers refused to carry the company’s products. This case can be used with Chapter 22 which deals with social, ethical and economic aspects of advertising. This chapter includes a discussion of ethical issues of advertising and promotion and notes how companies such as Calvin Klein, Abercrombie & Fitch, and Benetton have received a great deal of criticism for their use of “shock ads” containing controversial images. The case can also be used with either Chapters 8 or 9 which deal with creative strategy. Benetton has used the shock ads to position the ____________________________________________________________________________________ This teaching note was prepared by Senthil Ganesan.

company as a cutting-edge, socially conscious marketer. Many students will be familiar with Benetton and its controversial ads as they are part of the company’s primary target market. Thus, the case should generate a lively discussion as to what Benetton’s was trying to accomplish with the ads, whether they had pushed the envelope too far with the death row campaign and whether the use of more conventional, product-focused advertising will be successful.

Discussion Questions 1. What are the basic objectives of advertising? What are the advertising objectives of Benetton? Advertising may be used to achieve a variety of objectives including building awareness of the brand and/or company, informing customers about the product/service or company, providing information and developing an image Additional objectives include creating favorable attitudes and preferences for a brand, persuading the target audience to switch brands, and encouraging them to try new products. Advertising may also used to maintain top-of-mind awareness of a brand and/or company. The objectives of Benetton’s advertising appear to differ from those discussed above. Benetton’s shock advertising did not focus on the company or its products, choosing instead to address socially relevant issues that might concern the global audience such as war, poverty, AIDS, discrimination and the death penalty. Benetton believed that its advertisements could project the company as a supporter of social causes and that its customers would highly value that stance. Of course many would argue that while Benetton’s goal was to use the ads to position itself as a socially conscious company, the ultimate objective was to use this image to help generate sales of its products.

2. Discuss the pros and cons of the shock advertising campaign that Benetton used for many years. There are few companies in the world that enjoy the global brand recognition of Benetton. The unconventional shock advertisements used in this campaign evoked strong feelings among consumers and helped the company attract attention and generate publicity. One of Toscani’s quotes is appropriate here: “Most good ads are forgotten after six months, but who still remembers the Benetton ad with the priest kissing the nun? Ten years later and people remember! That’s immortality!” Benetton has always had an image as somewhat of a renegade in the advertising community because of the avant-garde approaches the company has used. However, the company is also known for being very socially concerned and trying to make consumers realize the realities of the world in which they live. Benetton’s goal with the shock advertising campaign was to raise public awareness of social issues and position the company as a cutting-edge, socially conscious marketer. However, one might argue that the ultimate goal of the

campaign was to help the company sell more of its products. The controversy surrounding the various shock ads that Benetton used over the past two decades generated a tremendous amount of publicity and made many consumers aware of the company. Also, it is important to note that Benetton’s primary target market is teens and young adults who are likely to be more tolerant of the shock ads as they may identify with the issues and causes the company is raising in these ads. Thus, the campaign might have actually helped Benetton’s image and sales. There are also a number of negative aspects to the Benetton shock ads. Many critics argued that Benetton was exploiting human suffering to sell its products and felt that the company used the ads to create controversy and generate publicity rather than to address social issues. One might question whether the type of publicity Benetton was getting from its shock ads was really beneficial to the company. The Benetton ads were controversial even in more liberal European countries, and advertising self-regulatory bodies in Britain, France, and Spain condemned some of the ads and urged magazines to reject them. As long as the advertisements were just unconventional in nature, Benetton’s image was enhanced and sales grew. However, when Toscani resorted to using “shock techniques” from 1991 onwards with the pictures of a priest and nun kissing, a baby with uncut umbilical cord, etc., it generated huge furor among religious and social groups, not to mention the advertising regulatory bodies in various countries. Toscani argued that the company’s intentions were misunderstood by the public. While many thought the kiss to be inappropriate and the uncut umbilical cord to be disgusting, the position of the company was that all that was meant was to demonstrate love and motherhood. Unfortunately for Benetton, many countries banned the two ads. Another ad which created problems due to its intensity was the scene of a dying AIDS victim. The ad angered many viewers because they thought Benetton exploited the man’s suffering and intentionally made him look like Jesus Christ. 3. Oliviero Toscani has defended Benetton’s use of shock advertising by noting that it constitutes nothing less than a debate between advertising and art. He argues that potentially offensive images are acceptable in the world of art and journalism while in other realms such as advertising they are not. Do you agree with Toscani’s position? The position taken by Oliver Toscani, Benetton’s former creative director, is that advertising should be free from any type of censorship or scrutiny since it is often a form of art. When viewing advertising as art it becomes difficult to say where one ends and the other begins. If one views the Benetton ads as a form of art, this suggests that there should be a wide tolerance for the types of images used. The statement by Toscani which is shown at the beginning of the case summarizes his position very well:

When Life magazine makes a cover about war, it makes the cover to inform, but also to sell the magazine and to sell the advertising pages inside the magazine -- Chivas Regal and all the others. So Time magazine and all the others make a cover to inform and to sell. To do what I do, I do that to sell but also to inform. And as soon as you inform, people point a finger at you and say, "You are exploiting!" No. It's the people who don't even inform [who are exploiting]. I don't care about the rejection; I'm not afraid to be rejected. Actually, it's a big honor in this world. There are other examples which support Toscani’s argument. For example, the December 22, 2003 issue of Time Magazine featured the Year in Pictures 2003 and showed disturbing images of the Iraq and Afghan war injured and dead -- not very different from Toscani’s image of the bloodied uniform of the Bosnian soldier shown in one of the Benetton ads. Ethical or moral standards are very subjective and relative as evident from reactions to the Benetton ads showing an image of a priest and nun kissing. While this ad was banned in Italy, it won the Eurobest Award in Britain. Some people question Toscani’s position, however, and argue that advertising is intrusive in nature and the public cannot decide what ads they will be exposed to in a medium. Advertising must often respond to a different set of standards since consumers often have no way of controlling their exposure to the images used in advertising and these images are often offensive to many people. Benetton has taken a novel approach and people are likely to disagree as to whether the ads are unethical. However, as noted discussed in question five, Benetton may have gone too far with the “We, on Death Row” campaign. The surviving family members of those killed by the inmates shown in the death row campaign were very offended by the ads and opposed to the idea of having the killers lionized in the national media. However, there were also those who feel that capital punishment is inhumane and praised Toscani’s effort to increase awareness of the issue. 4. Can you think of any other companies that use shock advertising? For what type of companies might this type of advertising be effective? Calvin Klein and Benetton are the two companies that are probably best known for using shock ads although there are a number of other companies that have used the technique. Calvin Klein has been using shock ads for nearly two decades and built the company and brand by tapping into both the charge and the cultural unease surrounding youthful sexuality. The company’s controversial ads have explored the taboo of youthful sexuality and appeal to the independent spirit of young people. Calvin Klein was willing to accept the controversy that accompanies its ads because the scandal and sex appeal surrounding them help differentiate CK products. It also helped generated hundreds of millions of dollars worth of free publicity. Like Benetton, CK handles its advertising in-house which means that an agency does not have to become involved with the negative publicity and controversy surrounding their shock ads. However, Calvin Klein also found that there is a limit to how far they could push could push the envelope with their advertising.

Many retailers rebelled against the Calvin Klein ads featuring childlike models in provocative poses which was referred to as “kiddie porn” by many critics. Irate consumer groups also called for boycotts and threatened to picket stores carrying the brand. Another company that has used shock ads is FCUK (French Connection UK) who has been criticized for what many perceive as pornographic images in its campaigns. As discussed in Chapter 22 of the text, clothing retailer Abercrombie & Fitch has also been criticized for using shock techniques its ads as well as in other promotional materials such as its quarterly catalog. It should be noted that all of these companies are involved in the fashion industry and their primary target market consists of young people. Younger consumers are less likely to perceive shock ads as offensive or in bad taste and may even help create favorable attitudes toward these companies because of their edgy, rebellious tone. While other companies have used shock ads, Benetton’s use of the advertising genre is unique. While the ads of Calvin Klein and FCUK are meant to differentiate these brands and increase sales, Benetton’s goal (at least according to Toscanni) was to raise the public’s awareness and make them more conscience of important social issues. Few companies are brave enough to experiment to such a degree with their advertising. One exception is Egg Banking, a United Kingdom based online financial services group that has used campaigns based on stereotyping of men, women and certain ethnic groups. One advertisement shows a dark-skinned man in an orange string bikini that revealed the outlines of his small sex organ. The caption reads, 'Black men are well endowed.' Another ad shows a blonde woman studying a modern painting as the brunette next to her studies an exit sign. The caption reads, “Blondes have nothing in their heads.” However, while some consumers in the UK have viewed the ads as humorous, other have been offended by them and have protested. 5. Do you agree with Benetton’s decision to drop the use of shock ads and return to the use of more conventional ads? Benetton appears to have pushed the envelope too far with the “We, On Death Row” campaign as the ads generated very negative reactions and there were strong repercussions as a result. Families of the victims objected strongly to the campaign and accused Benetton of glamorizing murderers while ignoring the crimes they had committed. The state of Missouri filed a lawsuit arguing that it had been misled regarding the use of the photos. The lawsuit was settled in June 2001 when Benetton agreed to write letters of apology and to donate $50,000 to the Missouri Crime Victims Compensation Fund. In the US, retailer Sears canceled an exclusive $100 million contract to sell a line of Benetton clothes, calling the death row images “terribly insensitive.” Sears ended its contract even after Benetton agreed to allow the retailer to preview future ads. Toscani believed that the sharp criticism in the US was not justified as many countries

in Europe had more already banned the death penalty. However, as a result of the increasing furor, Toscani resigned in May 2000. He was replaced by James Mollison, a graduate of Fabrica, Benetton’s cultural research and development center that backs young artists from all over the world. In 2001 Benetton began running a new campaign featuring product-focused ads that ran in print and on TV and billboards. The ads showed exuberant teen models clad in Benetton sweaters and jackets against a crisp white background and were designed to convey a sense of freedom and a positive, dynamic expression of the Benetton style. The impact of Benetton reverting back to more conventional advertising is yet to be determined, although given the way Benetton had built its brand image under Toscani, this approach does appear rather conservative. As noted in the case, Toscani dismissed the more conventional ads as a “waste of money.” In some countries such as Britain they were panned as “so innocuous as to be invisible.” Benetton may be able to capture the customer’s attention and interest with more conventional ads focusing on young people wearing its colorful clothing and emphasizing product qualities and perceived value. While these types of ads may not generate as much attention and interest as the shock ads, they may be effective in shifting attention to Benetton’s products and image as a retailer rather than as a social crusader. Rather than moving solely into product based advertising after Toscani’s exit, the company could still continue to address social issues like war, poverty, education, child labor and exploitation and the like but with less controversial ads.

In fact, Benetton indicated that it would not be completely

abandoning its social issues messages and planned to run ads speaking to the refugee issue. The subject is very important to James Mollison who wrote a book on Kosovan refugees in conjunction with the United Nation’s High Commission for Refugees as well as an earlier book on foreign workers in the factories of northeast Italy. In 2003 Benetton began a social issues campaign dealing with the problem of hunger that exists in many countries and promoting its work with the World Food Program. The “Food for…” campaign consists of ads promoting the important role the availability of food plays in relations to issues such as education, work, peace, and life. Examples of messages from this campaign, as well as other Benetton ads, can be found on the company’s web site at www.benetton.com.

California Milk Advisory Board Teaching Note This case examines the integrated marketing communications program developed by the California Milk Advisory Board on behalf of the California Cheese industry. It focuses on the “Happy Cows” campaign created by the Deutsch LA advertising agency for the CMAB as well as the effective use of other promotional tools that support the award winning advertising. These successful initiatives have created broad awareness and dramatically increased sales of California-produced cheeses over the past decade. The case can be used to illustrate best practices in integrated marketing communications and the use of a variety of IMC tools including media advertising, public relations, consumer promotion, trade promotion, in-store and on-premise merchandising, and Internet marketing.

It also illustrates the importance of consistency in

marketing communications over time, particularly in light of all-too-frequent tendencies to do otherwise. Lastly, it demonstrates the different metrics that are used to evaluate marketing element effectiveness and identify program improvements. The case can also be used toward the beginning of the course to provide an overview of a successful IMC program or toward the end of the course as a summary of how various IMC tools are used synergistically to support an overall strategy. Students are introduced to the “Happy Cows” campaign in the opening vignette to Chapter 9 which focuses on the creative strategy for the humorous ads and how it has created a successful bond between consumers and Real California Cheese. There are also career profiles in Chapter 9 for Eric Hirshberg, the Executive Creative Director at Deutsch LA who helped develop the ad campaign, and Nancy Fletcher who is the Vice President of Communications for the CMAB and manages the public relations component. Classroom discussion of this case can be enhanced by showing the video case on the California Milk Advisory Board/ Happy Cows Integrated Marketing Campaign that is part of the video supplements package that accompanies the text. The video case can be found on tape on DVD 5 and includes interviews with several executives from Deutsch LA as well as the CMAB. There are also three commercials from the Happy Cows campaign on DVD 2 under Chapter 9.

Discussion Questions 1. Analyze the “Happy Cows” campaign that was developed for the California Milk Advisory Board to promote Real California Cheese from an integrated marketing communications perspective. Why do you think the campaign has been so successful? The “Happy Cows” campaign uses a variety of IMC tools to create awareness of, and preference for, Real California Cheese. Advertising through various media including television, radio, print, outdoor and online is a major component of the campaign. However, the web site also plays an integral role as it includes links to the commercials as well as cheese recipes, nutritional information, interactive games, promotional offers and a merchandise store. Other important components of the IMC campaign include publicity/public relations, as stories about Real California Cheese and the state’s cheese makers have been featured in the a number of local, regional and national media.

These stories have a strong impact on consumers and help

awareness of Real California Cheese. Sales promotion is also an important part of the IMC campaign as both consumer and trade promotions are used extensively. Consumer promotions such as sampling, coupons, and premium offers are an important part of the campaign as are trade promotions with retailers and food service companies. The “Happy Cows” campaign has been so successful because it is a fully integrated program that connects with consumers at a variety of touch points and does an outstanding job of creating brand awareness and preference for Real California Cheese. The tagline for the campaign, “Great Cheese comes from Happy Cows. Happy Cows come from California,” provides a very strong creative platform around which the IMC program has been developed. From a creative perspective, the Deutsch LA agency has developed award winning ads that resonate well with consumers and have established an emotional bond between them and the contented California bovines. The campaign has established and maintains awareness of the Real California Cheese trademark and has created a preference for cheese bearing the seal.

2. What was the role and importance of the Real California Cheese certification mark in implementing the positioning and IMC program elements?

How and where was it

implemented? Do you think it made a difference to the program? The Real California Cheese certification mark was created for the industry as a unifying symbol that provided synergy for all promotional efforts. When consumers see it in one context, it draws

upon other associations. It’s worth discussing all the places the mark has been utilized, as illustrated in the attachments (TV and outdoor ads, on foodservice boxes, menus, retail packages, coupons and premiums, and the website). The mark has also served to support smaller brands that couldn’t afford such an extensive marketing effort on their own. Unifying activities in support of the mark has also impressed trade intermediaries (a key to expanding distribution), by consolidating funds to create greater impact, and more marketing activity. Students can be asked if there are any downsides to this strategy. For example, could negative association accrue to premium cheese brands because of the broad association of the mark with lower-priced cheeses? Do students think awareness of the mark is more subliminal than conscious? Can subconscious associations build over time? 3. Discuss the role of advertising in establishing the Real California Cheese brand personality? What were the constraints the advertising agency had to work around in developing the campaign? How would you describe the personality that was created? What are the pros and cons of the advertising approach? Can the campaign be continued indefinitely? If not, how might it be changed or adapted going forward? The humorous “Happy Cows” ads have played an important role in creating a brand personality for Real California Cheese as they create an emotional bond between consumers and the product. The agency decided that rather than focusing on the cheese, the campaign would revolve around the idea that California cheese is better because it comes from happy cows. Deutsch’s creative team felt the campaign should be all about California and its life style, health consciousness, blue sky and great weather. It was a short path from there to the campaign big idea which is that if the people like California better, maybe the cows do as well. Thus, was born the tag line, “Great Cheese comes from Happy Cows. Happy Cows come from California.” The ad campaign has maintained a singular focus and has centered on the cows’ responses to the unique aspects of their California environment as the source of new creative ideas. The constraints on the development of Real California Cheese advertising include: •

That the advertising cannot showcase any one brand, so none are featured

•

That because it represents such a wide variety of product attributes, specific attribute sell is difficult

•

That only broadly inclusive benefits can be featured

It is not uncommon for a brand’s ad campaign to face constraints or obstacles to overcome. These might include the need to provide health warnings, address recent negative public relations

stories, or reverse misperceptions.

These issues must be communicated explicitly to the

advertising agency creative department before they start to develop the advertising. The pros and cons of using humor to create an affectionate bond with consumers versus hardsell, product attribute focused advertising can be discussed. The brand personality created for Real California Cheese is fun and loveable. The advertising makes people smile and feel good about the ads and this positive affect may carry over to the brand. The approach has resulted in high awareness and a positive emotional response toward Real California Cheese. You might ask your students if they feel that humorous, playful advertising is the best way to promote Real California Cheese.

What are other examples of campaigns where humor has been used

effectively to create brand awareness and sell a product/brand? You might ask students if they recommend keeping the approach going forward and how long they think the “Happy Cows” campaign can be used before consumer become tired of it. 4. What role does consumer promotion play in generating trial and awareness of Real California Cheese? How do the consumer promotion tactics reinforce or supplement other marketing elements such as advertising, trade promotion, or public relations? The CMAB uses a variety of consumer promotion tools including sampling, coupons, and premiums. The role of coupons and sampling in generating trial and awareness for the wide range of California cheeses can be discussed, as well as how consumer promotion has more effectively taken the place of traditional in-store merchandising. The importance of sampling should be highlighted, as it generates trial among consumers who otherwise might not try various types of cheeses. The combination and synergy of sampling quality products and accompanying the samples with coupons, significantly increases the odds of purchase (as evidenced by the very high in-store redemption rates). The cross-coupons on packages of wine, crackers, luncheon meats, bread and tortillas cost effectively create reminder advertising for California cheeses throughout the store. Students can be asked to brainstorm other cross-promotional partners. Mention should also be made of the self-liquidating premiums (such as the cow puppets, Janice and Diane, from the commercials) that reinforce the ad campaign in the home and the high-quality coffee table books about the state’s high-quality artesian cheeses, which have a positive halo effect on all California cheeses.

5. Discuss the role of public relations in the CMAB’s integrated marketing communications program? What type of press coverage and stories could be generated about Real California Cheese? What were the different public relations angles that were used to generate the interest of the different media? The objectives of the public relations campaign for the CMAB are to convince the various constituents including consumers, retailers, food professionals, restaurants, and the food media (magazines, newspapers, trade publications and television stations) that California produces high quality cheeses. Many of these constituents had long viewed the cheeses of Wisconsin, Vermont, and Europe as superior to California cheeses. To improve the image of California cheeses, dairies are encouraged to enter national and international cheese competitions. The awards won by California cheese producers are announced through press releases and various media run stories that reach consumers as well as the food service industry. The different types of press coverage, with correspondingly different public relations angles, should be discussed. These include the following: •

Recipe-related stories that are sent to newspapers and food magazines

•

Business-related stories sent to trade publications as well as business and marketing media such as Business Week, Advertising Age, and Brand Week that focus on sales growth and marketing awards

•

Stories targeted to travel magazines regarding ideas for visits to state cheese makers (akin to winery visits)

•

Foodservice magazine stories about national account gains and successful in-store promotional programs

A third leg of the public relations program has been the “influencer” program which has included cheese tastings for chefs, culinary professionals and the food media to create greater familiarity with individual products, and collateral materials or brochures such as “Entertaining with Cheese” and “Wine and Cheese Pairings” that are distributed through high-end specialty wine and cheese shops, as well as offered online.

6. What has been the role of the Real California Cheese website? How does it reinforce or support the other parts of the integrated marketing communications program? The home page of the Real California Cheese website, which is shown in Exhibit 7 of the case, should be used for this portion of the discussion as it shows the various sections of the site which include current commercials; recipes to encourage product usage; information regarding where to purchase Real California Cheeses; product coupons and Real California Cheese merchandise (Tshirts, mugs, aprons with the logo); dairy visit information, including a map of all the state’s dairies that are open for visits; an explanation of the product quality behind the RCC seal; consumer education information about cheese types, storage and handling; information for food professionals and pizza shops; and a library of past and present press releases. The web site is designed to be consistent with the imagery from the advertising campaign. Visitors to the site can see the products, learn about cheeses, view merchandise and even purchase it online. Various parts of the site cater to specific groups such as industry professionals, restaurant chefs, dairy farmers and the media. The most popular parts of the site are the sections where visitors can click and watch commercials as well as the recipe section. Another popular part of the site which is the kids section which includes cute drawings of the cows that kids have sent to the CMAB as well as the Happy Cows Farm Game. 7. Which marketing metrics did the CMAB use to evaluate their IMC program? Are there any others you feel they should focus on? Which do you feel are most important? There are a range of metrics that are used to determine the effectiveness of the CMAB’s marketing efforts and the IMC program. Marketing-related measures include Nielsen and IRI market share data which show how well Real California Cheese is doing in terms of sales and market share. Advertising-related metrics include aided and unaided awareness of advertising for Real California Cheese, brand awareness and message recall. The effectiveness of the various consumer promotions can be measured by coupon, rebate, and premium offer redemption rates. For direct marketing efforts, response rates and further inquiry requests can be measured by type of offer, mailing list, and creative message. Trade promotion effectiveness can be assessed by retail distribution levels, point-of purchase displays, and share of retailer advertising and displays. A variety of measures can be used to assess the impact of the web site including the number of hits, web link click through rates, the number of pages viewed, time spent on the site and keyword search draw. Public relations metrics might include the number of PR mentions by type

of media, the number of stories run in various newspapers and magazines, and coverage on foodrelated television programs. Creative awards in the areas of marketing advertising, public relations, Internet marketing and consumer promotions can also be used to assess the impact of the IMC program. 8. In light of consumer trends (demographics, food trends, and media “consumption”), are there other advertising or promotion opportunities that should be pursued by the California Cheese industry? This question encourages students to utilize their own creativity and apply their knowledge of integrated marketing communication tools derived from the course material. Students can be asked to suggest ways to extend the “Happy Cows” campaign in a different direction or even suggest an entirely new campaign idea they feel might more effectively achieve the future growth objectives of Real California Cheese.

They can brainstorm new promotional partners or

consumer promotion program ideas. You might also discuss relevant demographic trends such as the growth in the Hispanic population, the aging of Americans (who experience calcium deficiency as they age), increased interest in low carbohydrate foods, and increases in out-ofhome and on-the-go consumption. Students can be asked what types of integrated marketing strategies and tactics, as well as other product forms might capitalize on these trends?

Chicken of the Sea International The Jessica Simpson Spokesperson Decision Teaching Note Case Overview This case examines Chicken of the Sea International (COSI), one of the major competitors in the canned/packaged tuna and seafood industry, and the decision facing the company’s senior vice president of marketing as to whether the he should hire pop star Jessica Simpson as a spokesperson. COSI received a tremendous amount of publicity in the Fall of 2003 and early 2004 following the famous fish faux pas that Simpson made on the MTV reality show The Newlyweds: Nick & Jessica. While eating a can of Chicken of the Sea tuna Simpson turned to her co-star husband and asked the whether the product inside is chicken or tuna. Simpson’s gaffe became the target of jokes and a myriad of media stories that resulted in a great deal of publicity for Chicken of the Sea. The company took advantage of the incident by having her make a surprise visit to its annual sales meeting in October 2003. The case focuses on whether COSI should try to capitalize on the publicity and hire Simpson as a spokesperson. There are a number of factors that Don George, the senior vice president of marketing must consider in making this decision including whether the company can afford to hire her, how her image will fit with the brand, and how 25-54 old women who comprise the company’s core target market might react to her as a spokesperson for the brand. It can be used with Chapter 6, Source, Message and Channel Factors, as it focuses on the use of a celebrity as a spokesperson and issues to consider in selecting an endorser. The case provides students the opportunity to evaluate Q scores for Jessica Simpson and see how they vary among different demographic groups. This case can also be used with Chapter 16 on Sales Promotion as COSI is a company that allocates most of its marketing budget to consumer and trade promotion.

A decision to use Simpson will mean more emphasis on media

advertising which will take monies away from the sales promotion budget. This case should be of great interest to students since many of them are familiar with Jessica Simpson and are probably aware of her famous fish or tuna faux pas. Many will feel that COSI should take advantage of her gaffe and hire her as an endorser. However, the case be used to show that the decision to hire a celebrity endorser requires the consideration of a number of factors. Classroom discussion of this case can be enhanced by showing the video case on Chicken of the Sea that is part of the supplements package that accompanies the text. The video case can be found on tape on DVD 5 and provides an excellent overview of Chicken of the Sea, the competitive situation in the tuna industry, the company’s new branding initiative, the various types of consumer and trade and promotions used by the

company and the role the company’s web site plays in its IMC program. A Chicken of the Sea commercial that began airing in 2006 can also be found on DVD 1 under Chapter 5.

Discussion Questions 1. Discuss the consumer decision making process for a product such as canned tuna and the response hierarchy model that is most likely to applicable in the purchase of this product. Canned tuna is a very good example of a product that is a low involvement purchase decision for most consumers. Tuna is essentially a commodity product with very little differentiation among the various brands. While the three major brands (StarKist, Chicken of the Sea, and StarKist) all claim to have superior taste, most consumers do not perceive significant differences in taste and quality among them. Moreover, many consumers recognize that private label brands are produced by the same companies that process and can the national brands and find them acceptable substitutes. The lack of perceived differentiation among the competing brands means that canned tuna is often purchased on the basis of price. Marketers of canned tuna must keep their shelf prices competitive with the other national brands as well as the private label brands offered by the various retailers. Sales promotion plays a very important role as consumers are usually looking for brands that are on sale or for which they might have a coupon. The low involvement response hierarchy is likely to be applicable in the processing of information and purchase of canned tuna. As discussed in Chapter 5, this hierarchy views the consumers as engaging in passive learning and random information catching rather than active information seeking. Consumers are likely to engage in peripheral processing of advertising messages and may focus more on elements such as music, characters, symbols, and slogans or jingles than actual message content. These peripheral cues become salient when the consumer is actually in the store and making a purchase decision among the various brands. All three of the major tuna brands appear to be marketed with the low involvement hierarchy in mind. Advertising for StarKist relies on the personality symbol of the Charlie the Tuna animated character (see Chapter 9 for a discussion of this execution technique). Chicken of the Sea relies on its iconic mermaid and the use of a catchy jingle (“Ask any mermaid you happen to see..What’s the best tuna? Chicken of the Sea.”) while Bumble Bee also uses its Bee character and a jingle as well (“Yum, yum Bumble Bee, Bumble Bee tuna”). A classic Bumble Bee commercial can be found on the company’s web site (www.bumblebee.com) under products. In discussing the consumer purchasing process for canned tuna it is important that you do not lead students to conclude that this product has become totally commoditized and no brand differentiation is possible. There are several key points you might want to make to students who try to draw this

conclusion. First of all, the three national brands (StarKist, Bumble Bee and Chicken of the Sea) account for 82 percent of the market share in the tuna category. If tuna was indeed a commodity, one might expect that private label brands would have a greater share of the market. A second important point is that there is strong brand loyalty in the canned tuna category. Figure 4.5 of the text shows that 44 percent of consumers indicate that they are loyal to one brand of tuna. Moreover, brand preference for tuna is also somewhat regional as Bumble Bee does very well in the Northeast and Florida while StarKist and Chicken of the Sea are stronger in the North Central and West regions of the country. While there is a strong level of brand loyalty for the various brands, it is important to note that many consumers remain loyal to a brand only if it is priced competitively. Thus, marketers of the three national brands recognize that it is important that they maintain shelf prices that are the same or within a few cents of their competitors as well as the store brands. This means they will rely heavily on price oriented types of sales promotion such as trade and promotional allowances. One area where the tuna marketers have been able to break away from the heavy emphasis on price and promotion is with new pouch products such as the tuna salad kits and Lunch To-Go. 2. Discuss the role integrated marketing communications plays in the marketing of canned/packaged tuna for a company such as Chicken of the Sea. How might the company use the various IMC tools as part of its marketing program? Integrated marketing communications plays a very important role in the marketing of canned/tuna as the various companies use all of the IMC tools, although to different degrees. Media advertising is used to create and maintain brand awareness and to help differentiate a brand. The major product attributes that are emphasized in media advertising are taste and quality. As noted in question 1, given the low involvement decision making process for tuna, the companies use peripheral cues in their ads such as catchy slogans and jingles as well as personality characters and symbols. Media advertising is also important in the introduction of new types of tuna products. As discussed in the case, there have been several important product innovations in the category in recent years such as tuna in a pouch, tuna salad kits, flavored tuna, and Lunch To-Go products. StarKist and Chicken of the Sea have used media advertising to introduce these product innovations to consumers. It is important to note that the level of media advertising in the tuna category is really very low as most of the promotional budgets of the three major competitors are being allocated to sales promotion. StarKist spends the most on television advertising for ads featuring its Charlie the Tuna personality character. Chicken of the Sea spends nearly its entire media budget on radio, print ads and floor signage ads. Bumble Bee has not been running any media advertising for several years, choosing to focus its attention on consumer and trade promotion.

The primary IMC tool used by the marketers in the canned/packaged tuna category is sales promotion. As discussed in the case, price competition as well the significant market share of private label brands have shifted the power from the marketers to the retailers who demand, and usually get, trade and promotional allowances from the manufacturers. The three competitors also rely heavily on consumer promotions in the form of national FSIs, check out coupons, point-of-purchase displays, premium offer, price-off deals, and contests and sweepstakes. You might ask students to examine Exhibit 16-26 of the text which contains a promotional calendar showing the various promotions Chicken of the Sea uses for its products over the course of a year. Chicken of the Sea International has also recently implemented the Mermaid Club which is a consumer loyalty program that is designed to encourage repeat purchase and get consumers more involved with the brand. The heavy emphasis on sales promotion in the tuna industry is a very good example of a promotional trap which is discussed in Chapter 16 and shown in Exhibit 16-8. It will be very difficult for the competitors to break out of this trap unless they agree to cut back promotional spending. However, they are afraid to do so because of a fear of losing market share to other national brands and/or private label brands offered by the retailers. While sales promotion and media advertising are the IMC tools used the most by the marketers of canned/packaged tuna, they also used direct marketing, the Internet, publicity/public relations and personal selling. Direct marketing is used by periodically sending target direct mail pieces that contain coupons or premium offers to consumers. COSI is also beginning to do direct marketing through email to consumers who join its Mermaid Club. Publicity/public relations is also an important part of the IMC program of the various companies. Each company regularly issues new releases dealing with health and nutritional issues related to tuna and other products. For example, the industry recently has had to deal with negative publicity concerning the mercury content in tuna and its potential impact on pregnant women.

Each company as well as the industry’s major trade association, the United States Tuna

Foundation, have ongoing public relations efforts that address major issues facing the industry. Each company also works to generate publicity for its products and marketing efforts. As noted in the case, Chicken of the Sea’s public relations firm issued video news releases to generate publicity over Jessica Simpson’s visit to the company. StarKist and COSI often issues news releases regarding their upcoming advertising campaigns to advertising and marketing publications such as Advertising Age, AdWeek and Brand Week as well trade publications such as Progressive Grocer, Grocery Headquarters and Food Engineering. Another type of public relations activity that is used by the competitors in the tuna category is event sponsorship. For example, Chicken of the Sea sponsored the U.S. Synchronized Swim team that competed in the 2000 Olympics and used its sponsorship to offer a sweepstakes whereby consumers could win a trip to games in Sydney, Australia.

The Internet has also become an important IMC tool for the tuna companies as they all maintain web sites that contain company information, product information, recipes, health and nutritional information, new releases and examples of their advertising. As discussed in the video, Chicken of the Sea’s web site is an important part of their IMC program. The site contains an easy-to-use recipe generator, resources on health and nutrition, as well as games and educational content. It also includes the Mermaid Store, where consumers can shop for everything from T-shirts to watches to sporting goods featuring the classic mermaid logo. The web site has become an integral part of Chicken of the Sea’s IMC program as the company uses other forms of media to drive consumers to the site and engage them in the brand. COSI uses its web site as the vehicle through which consumers can join their customer loyalty program called the Mermaid Club. 3. Discuss how Chicken of the Sea’s marketing personnel and advertising agency might evaluate the appropriateness of using Jessica Simpson as a spokesperson for the company and whether she is a good fit for the brand.

This question provides the instructor with the opportunity to apply the information in Chapter 6 that discusses the use of celebrities as endorsers. There are a number of ways Chicken of the Sea International marketing personnel and ad agency can evaluate how well Jessica Simpson might work as a spokesperson for the company.

One basic consideration is whether she might overshadow the product and the

advertising message. This is important since consumers might pay attention to Simpson and not notice that she is promoting the Chicken of the Sea brand. However, since tuna is a low involvement product, it is likely that any advertising using Simpson will contain a simple message promoting attributes such as taste or quality. Thus, it should not be difficult to generate strong brand and advertising awareness by using her. Another consideration is overexposure. Simpson did sign an endorsement deal with Pizza Hut and appeared in a commercial that premiered on the 2004 Super Bowl. However, at the time of the case she was not serving as a spokesperson for any other companies or brands so this should not present a problem to COSI. The company must also consider whether there is any risk associated with using Simpson as an endorser. In general this should not be a problem since she has a wholesome image and is not as controversial as other young female pop stars such as Brittany Spears or Christina Aguilera. However, Simpson has become known for her ditzy behavior and comments on The Newlyweds MTV show and COSI may have some concern that she might say or do something that would be even more embarrassing than the fish or chicken gaffe. As with any celebrity, there is a certain amount of risk associated using her as any inappropriate acts or behaviors she might engage in would be covered heavily by the media and could reflect negatively on COSI if she was a spokesperson for the company.

One of the most important considerations for COSI regarding Simpson is that of target audience receptivity. As noted in the case the core target market for Chicken of the Sea is 25 to 54 year old women and it is unlikely that this group will identify with Simpson and may even have negative opinions toward her because of her ditzy blonde image. Moreover, the company must consider whether these women would see her as a credible spokesperson for Chicken of the Sea, particularly considering the fact that she was not even aware of whether the product was tuna or chicken. Chicken of the Sea’s advertising agency will be challenged to develop a campaign using Simpson that will be received favorably by the core target audience. On the other hand, younger consumers may be more receptive to Simpson as a spokesperson since she is very attractive and popular celebrity. The information from the Marketing Evaluations/TVQ study supports this argument as Simpson has a Q score of 23 among 12-17 year olds but only a 9 among those 18-34 and a 10 among those 25-49. It is also important to note that the percentage of those familiar with Simpson is very high among the 12-17 year old group (72%) as well as the 18-34 year olds (76%). However, the familiarity score drops to 49 percent for those in the 35-49 year old age group. Exhibit 1 also show that Simpson’s Q score among the core target market of 25-54 females is an 8 while the percentage of those familiar with her is 55. Students should be encouraged to analyze the Q scores and other information provided in Exhibits 1 and 2 for both Simpson as well as other female musical performers. Another factor COSI must consider is how well she fits with the company and brand as an endorser. As discussed in Chapter 6, advertisers must try to match the desired image for the company and/or brand with the image and characteristics of the celebrity. Students should be encouraged to consider how McCracken’s meaning transfer model might be applied to Simpson as a spokesperson for Chicken of the Sea. This requires them to consider the cultural meaning of Jessica Simpson and whether this is the image that COSI wants to have transferred to the company and/or brand. Students should be asked to discuss the meaning/image of Simpson and how it was acquired. They are likely to note that her image originally was that of a young, attractive singer with somewhat of a wholesome image. However, her meaning changed dramatically as a result of her role on the MTV show Newlyweds as she became known more as a “ditzy blonde” who often says and/or does dumb things. COSI must consider if they want their brand associated with this image as it might be a turn off to older women in their core target market. Some students may argue that Simpson can be portrayed in a role as the Chicken of the Sea mermaid since she is a very attractive young woman who bears a resemblance to the latest version of the well known icon. One way of evaluating this suggestion is to consider how well Simpson image matches the characteristics COSI tries to portray in the mermaid. The case notes that the attributes of the mermaid include being trustworthy, magical, attractive, friendly, approachable, contemporary and fitting with the

Chicken of the Sea brand. Simpson’s image actually fits well with most of these attributes although it is questionable as to whether she would be perceived as trustworthy and as fitting with the Chicken of the Sea brand. 4. Discuss the pros and cons of Chicken of the Sea International hiring Jessica Simpson as a spokesperson for the company. Can the company afford to hire her and spend the money on TV advertising to use her effectively? Many of the pros and cons of COSI hiring Simpson as an endorser have been addressed in the answer to the previous question. However, it still may be helpful to have students make a list of reasons why the company would benefit from having her as a spokesperson as well as why this would not be a wise decision. Arguments in favor of hiring her include the opportunity for COSI to build on the favorable publicity that has resulted from her famous fish or chicken faux pas. Using her as an endorser may be a particularly effective way to increase awareness and interest in the brand among younger consumers. Awareness of Simpson is probably even higher in early 2004 than the Q scores results indicate since she received a tremendous amount of exposure and publicity in late 2003 and early 2004. Moreover, since tuna is a low involvement product, consumers may be receptive to advertising for Chicken of the Sea featuring Simpson. One option that the company was considering was to feature her in print ads with the headline stating “Our mermaid has never looked so good.” It is likely that COSI could generate a great deal of publicity if the company hired Simpson as a spokesperson which would result in exposure and attention for the company and brand that would extend well beyond the media time or space that was actually purchased.

There are, however, a number of arguments that could be made against using Simpson. One of the primary arguments against using her is that the 25 to 54 year old women in COSI’s core target market may not respond favorably to Simpson and may even be turned off by seeing her in ads for the brand. This group purchases most of the tuna and may not be influenced by Simpson because of her ditzy blonde image and or lack of relevance to the product. Another problem with using Simpson is that COSI really does not have a large media budget and probably cannot afford to use television on a regular basis. A celebrity such as Simpson would be more effective in TV commercials than print or radio ads, which is where COSI spends most of their advertising dollars. The case notes that COSI is planning on spending approximately $11 million on advertising in 2004. However, Simpson’s endorsement fees would have to come from this budget as would production costs for commercials. This means there would be less

money available to run ads in media traditionally used by COSI such as radio, print and in-store. Students might note that COSI is now a $600 million company and the proposed media budget of $11 million is less than two percent of sales. However, the company spends a great deal of money on consumer and trade promotion so the overall marketing communications budget is a much higher percentage of sales than two percent. 5. What would you do if you were Don George? Would you recommend that the company hire Simpson as a spokesperson? Why or why not? The ultimate decision Don George and COSI must make is whether to hire Jessica Simpson as a spokesperson. As noted in the case, COSI will probably have to pay her more than a million dollars which is a very large sum of money for a company that does not spend much money on media advertising. The main question George must try to answer is what type of return on investment the company would get if it were to hire Simpson. While she would probably be effective at increasing advertising and brand awareness, the ultimate issue is whether using her would help increase sales as well. One way of looking at this is to consider what the return would be if she helps COSI increase its market share. One market share point in the canned tuna market (including food service, and warehouse/club stores) represents approximately $20 million in sales. If COSI’s profit margin is 4 percent, the company would generate $800,000 in profits for each share point gain. Based on these figures, Simpson would have to help the company increase its share of the canned tuna market by a little over one point to cover the costs of using her. However, Simpson could also be used to endorse other COSI canned seafood products so the cost of using her could be allocated across these items as well. Of course there is no guarantee Simpson will help the company move the sales needle as increases in advertising and brand awareness do not always result in sales increases. While it is important for COSI to analyze this decision from a financial and ROI perspective, there are other considerations that factor into the decision. One of COSI’s goals is to try to attract new and younger users to the brand and Simpson may be helpful in achieving this. Of course George must also consider whether there might be some type of backlash among the older women who comprise the core target audience as they may not like the ditzy blonde image that Simpson has come to personify. COSI decided not to hire Simpson as a spokesperson. In the authors’ discussion with Don George, he indicated that the company was reluctant to pay the large amount of money that would be required to retain Simpson and felt that COSI’s limited media budget would not allow them to use her effectively. Moreover, he felt that COSI was benefiting from all of the publicity that was generated by the Simpson faux pas and thus she was serving as a type of quasi endorser but not really costing the

company any money. George was also concerned as to how retailers might react if COSI retained Simpson as they might view this as evidence that the company had marketing funds available and thus put more pressure on them to provide more trade promotion dollars. Since the time of the case, Jessica Simpson has gone on to become a major celebrity as she has starred in several movies including Dukes of Hazard and also released a new album in 2006 called “A Public Affair.” In 2006 her marriage to singer Nick Leachey ended and the couple was divorced which resulted in a tremendous amount of media attention.

Simpson has become one of the hottest stars in the entertainment industry and commands

seven figures for endorsement deals. It is extremely unlikely that Chicken of the Sea could afford to use her as a spokesperson nor would she be likely to agree to promote the brand given her high profile status.

Teaching Note Gateway: Searching for the Right Agency Case Overview This case examines Gateway, one of the major competitors in the personal computer industry, and its search to find the right advertising agency and positioning platform for the company. Gateway has switched advertising agencies nine times from 1997 to 2005 and three times in a 14 month period from early 2002 to 2003. Gateway’s sales have declined from a high of $9.6 billion in 2000 to $3.8 billion in 2005, which includes approximately $1 billion of revenue from eMachines which the company acquired in 2004. Gateway has undergone several changes in management as well as its business strategy over the past five years. These changes have had an impact on its agency relationships and are a major reason why the company has changed its ad campaigns and agencies so often. The case can be used with Chapter 3 as it deals with reasons why agencies lose clients and ways how they gain new accounts. The case provides an excellent opportunity to discuss reasons why Gateway has changed agencies so many times and the factors that have contributed to its agency switching. It also provides an opportunity to discuss the role of in-house agencies and the value of using an outside agency versus handling advertising internally. The case can also be used with Chapter 8 where we discuss creative strategy and how some companies are constantly searching for the right advertising campaign. The classroom discussion of this case can be enhanced by showing the series of Gateway commercials that are provided on the DVD provided in the instructor’s supplement package that accompanies the text. Ten Gateway commercials appear on tape one including four spots from the “People Rule” campaign developed by McCann-Erickson and six developed by Siltanen/Keehn during its brief tenure as Gateway’s agency in 2001-2002. Three of the commercials develop by S/K are spots from the campaign featuring Ted Waitt and the talking cow who advises him on ways to entice customers to buy Gateway products.

The other three commercials are stylish, product-focused ads including a

comparative ad used to take on the highly successful Apple iMac personal computer. You should review these commercials and read the background information on them provided in the Instructor’s Video Manual before teaching the case. You might also pay attention to advertising being run by Gateway at the time the case is being taught. Gateway print ads can often be found in PC enthusiasts magazines such as PC World, PC Magazine, Wired, and Computer World. Ads targeting business customers can be found in publications such as Fortune, Forbes, and BusinessWeek. Examples of current Gateway advertising can be found on the Woo Agency web site at www.wooagency.com.

Discussion Questions 1. Analyze Gateway’s decisions to change advertising agencies so many times over the past six years. Identify and discuss specific factors that may have led to each decision to change agencies. As noted in Chapter 3, some companies have long-lasting relationships with their advertising agencies while others change agencies more frequently. Decisions to switch agencies can be driven by a variety of factors including increases in the client’s size, changes in the markets it serves, reorganizations that lead to changes in top management, changes in a company’s marketing and/or marketing strategy, poor performance or service by the agency, and declining sales. A detailed list of reasons why agencies lose clients, along with a discussion of how agencies gain clients, is provided in Chapter 3 (pp. 93-95). A good way to approach this question is to consider what factors may have contributed to each agency change made by Gateway over the past six years. The first issue that should be discussed is Gateway’s initial decision to hire an outside agency. As the case notes, up until 1993 Gateway relied solely on print advertising that was produced inhouse. However, as the company grew rapidly, it decided to add television ads to the media mix and retain the services of an outside agency to work with its in-house advertising department. Some discussion should focus on Gateway’s hiring of the Carmichael Lynch, Minneapolis and the company’s need for an outside agency. It is very unlikely that Gateway’s in-house advertising department had the ability to produce quality television commercials and the expertise of an outside agency was needed. As discussed on pp. 75-78 of the text, companies may rely on an in-house advertising department initially, but often hire outside agencies as they grow and their advertising budgets and needs increase. Outside agencies usually have more highly skilled personnel such as creative talent and other marketing communication specialists and provide a broader perspective to companies than they might get from an in-house advertising department. Carmichael Lynch served as Gateway’s agency for four years until Gateway decided to move its advertising to a larger global agency, D’Arcy Masius Benton & Bowles. The decision to hire DMB&B was made because Gateway wanted a larger agency with global capabilities that could help the company with its growing international business in Europe and Asia. This is an example of a situation where a client changes agencies because it feels a larger agency is needed to handle its business and, in this case, an agency that could handle its growing international business. The next agency change Gateway made the decision to drop DMB&B and take its advertising back in house, while using a small creative boutique, DiMassimo Brand Advertising, to handle its creative work for television advertising. The decision to drop DMB&B appears to have been the result of personality

conflicts, a lack of rapport between agency personnel and Gateway’s in-house advertising department, and dissatisfaction with the type of ads the agency was creating. As the case notes, Gateway CEO Ted Waitt is known for his dislike of traditional advertising that uses actors and scripted approaches and favors more unscripted, folksy ads with “real people.” You might note that in addition to moving the advertising back in house and hiring DiMassimo, Waitt brought back Henry Corra to work on Gateway’s advertising. This is a very good example of the important role personal relationships often play in agency decisions. Waitt was always been very fond of Corra and his creative style and a strong trust and personal relationship had developed between the two. The next agency change to discuss is the decision to move from DiMassimo Brand Advertising and once again hire another large outside agency, McCann Erickson Worldwide. This decision was made after Jeff Weitzen, a former AT&T executive, was brought in to run Gateway in early 1998 as Ted Waitt decided to step back from the day-to-day operations of the company. The decision to hire McCann appears to have been based on several factors including the preferences of Weitzen and other new top managers, as well as a change in Gateway’s corporate strategy. Gateway had begun implementing its “beyond the box” strategy and transforming itself from a manufacturer of personal computers into a company that would derive its revenue from a variety of sources. Weitzen and other felt that new advertising was needed to help communicate this new strategy to the market. Many advertising and industry analysts felt that the “People Rule” campaign developed by McCann was a very good campaign and was successful in positioning Gateway as a customer friendly company. However, McCann Erickson’s tenure ended after a management shake-up that resulted in Weitzen’s resignation and Waitt resuming control of the company in January 2001. It should be noted that Gateway posted a financial loss in the fourth quarter of 2000 as its core PC business was not profitable. There are a number of factors that appear to have led to the decision to dismiss McCann Erickson including the management shake-up, the decline in profits, and Waitt’s dislike for large agencies. The case also mentions that there was speculation that Gateway was dissatisfied with the level of service it was receiving from McCann after the agency had won the Microsoft account. After dropping McCann Erickson, Waitt decided to move Gateway’s advertising back in house and once again rely on Henry Corra to direct its commercials as the company returned to the “You’ve got a friend in the business” tagline. However, during this period, the Siltanen/Keehn agency was working with Gateway on a project basis. The founders of S/K had worked on the Apple Computer account when they were with the TBWA/Chiat/Day agency in Los Angeles which meant that they had very good insight into the personal computer industry. This is a good example of how experience in a particular industry and reputation can be important factors in gaining new business. S/K also did

some very good creative work for Gateway including the campaign featuring the commercials with Ted Waitt and the talking cow. The next agency change to discuss is the decision to drop S/K after only 10 months and hire the Arnell Group, New York. This decision appears to have been driven by the decision by Gateway to change its positioning and image from folksy to hip. The Arnell Group was known of its branding work with retail clients such as Banana Republic and was hired to help with the makeover of the Gateway Country stores as well as the advertising. Again, we see an example of how a change in strategy often results in a decision to change agencies. The next agency change made by Gateway was from the Arnell Group to Leo Burnett. A factor that may have played an important role in this decision was the fact that Gateway’s new executive vice president of consumer marketing was a former Leo Burnett executive who was very familiar with the agency and the work it has done through the years with various clients. It might also be noted that Leo Burnett is based in Chicago and thus might be perceived by Ted Waitt as better able to identify with and understand the folksy, Midwestern culture of Gateway. Leo Burnett’s 16 month tenure represented Gateway’s longest agency relationship since McCann Erickson had the business from 1998 to early 2001. However, Burnett became the next agency to go through the revolving door due to changes occurring at Gateway as the company hired Grey, San Francisco to handle its business-to-business advertising as well as some of its consumer advertising. Neither of the campaigns developed by Leo Burnett was successful including “The Comforts of Gateway” consumer effort and the b-to-b-campaign that used the “Humanology” tagline. Grey had been brought in to handle Gateway’s B-to-B advertising but as new management took over the company, they were given the opportunity to compete against Burnett for other parts of the business including back-to-school ads and ads touting Gateway’s Olympic sponsorship. However, Leo Burnett sensed that the nature of Gateway’s advertising was changing to focus more on response driven ads such as ads in retailer circulars and direct response ads. Thus, Burnett decided to pass its defense of the account to its below the line unit, Arc North America, which specialized more in this area. Although Gateway acquired eMachines, the company was now being run by the latter as Wayne Inouye took over as CEO of the company and put his own management team in place. T. Scott Edwards also was replaced as Senior V.P. of Marketing by Cathy Stauffer who came from electronics retailer The Good Guys. The new management team favored the type of advertising used by eMachines which involved striking deals to get its products featured prominently in Sunday circulars for consumer electronics retailers such as Best Buy and Circuit City. The next agency change came when Gateway decided to hire Crispin Porter Bogusky as its agency in September 2004. The company’s new strategy involved positioning feature-packed

Gateway computers as a premium brand while eMachines-branded PCs would be positioned as a value brand. The company was looking for big ideas for a new campaign that would be launched to help differentiate the Gateway brand and under the direction of its new Senior V.P. of marketing began contacting new agencies. As discussed in the opening vignette to Chapter 3, Crispin Porter Bogusky had become one of the hottest agencies in the advertising industry and was known for taking companies with smaller ad budgets and using a variety of IMC tools to successfully build their brand image. Thus, it is not surprising that Gateway would feel that CP+B might be able to help restore some luster to its brand image and help differentiate Gateway-branded PCs. However, as noted in the case, CP+B and Gateway could not agree on the strategic direction of the company and the two ended up parting ways. It really is not clear as to what happened between Gateway and CP+B. However, in 2005 the agency acquired several other new accounts including Volkswagen and Miller Lite and may have decided to focus its energy more on these clients. Also, given the problems Gateway was having, CP+B may have felt hat it was better off resigning the account rather than become the next agency to be shown the door. Following the departure of CP+B, Gateway moved its advertising to the Woo Agency, a small independent shop in Los Angeles which specializes in brand and responsedriven advertising. Its clients also include Tire Pros, The Coffee Bean & Tea Leaf, LA Fitness, Gold’s Gym, Winchell’s Donuts, Mattress Gallery and The Good Guys. Its experience with retail and direct-response advertising is one of the reasons Gateway chose Woo as its agency. As of Fall 2006, the Woo Agency was still handling Gateway’s advertising. 2. Discuss how Gateway’s frequent agency switching has affected the company’s branding and positioning efforts. What recommendations would you make to Gateway management regarding its agency switching and its impact on the company? Gateway’s frequent agency switching has obviously affected the company’s branding and positioning efforts, particularly more recently, as the changes have made it difficult to establish any continuity and consistency in its advertising.

Over the past nine years Gateway has used a number of

tagline/campaign themes including the following; •

“You’ve got a friend in the business ( 1994 to 1997)

•

“From South Dakota to the rescue” (1997)

•

“Let’s talk about your Gateway” (1998)

•

“Yourware” (1999)

•

“Gateway@Work (business-to-business) (1999)

•

“People rule” (2000/2001)

•

“You’ve got a friend in the business (2001)

•

“Gateway: A Better Way” (2002)

•

“The Comforts of Gateway” (2003-2004)

•

“Humanology” (business-to-business) 2003/2004

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“Technology You Can Trust” 2005/2006

As can be seen from this list, Gateway has used more than 10 different advertising themes over the past nine years and six since early 2001. Most of these taglines have lasted less than a year which has made it difficult for the company to establish a clear identity and image. You might ask students to discuss whether they feel there is a consistent theme running through all of the different taglines. As discussed in the case, Gateway has always tried to position itself as a company that assists its customers in understanding technology and how it can help them in their daily lives. This theme is reflected in the most recent campaign which uses the “Technology You Can Trust” theme. It should be noted that most of the recent changes in positioning themes have come about following a change in Gateway’s overall corporate strategy. It is not surprising that the company would develop a new advertising tagline that might better represent its new strategic direction of trying to expand beyond personal computers and become more of a provider of a wide range of digital electronic products. However, it will be important for Gateway to settle on an advertising theme and stay with this tagline. Unfortunately, when companies are in Gateway’s position and experiencing declining sales and profits, it is not unusual for them to keep changing their positioning and advertising in hopes of finding an approach that will strike a responsive chord with their customers. It is likely that Gateway will always strive to be a humanistic brand, holding true to its core philosophy that, no matter how much technology evolves in the future, it is of little value unless it can do something to improve the user's life today. The challenge facing Gateway is to find a way to deliver this message and stay with it long enough. 3. If you were an executive at an advertising agency and Gateway’s decided to switch agencies again, would you advise your account development team to pursue the company’s business? Why or why not? An interesting issue to discuss is why large agencies keep pitching Gateway when the company has a history of changing agencies so often. First, it should be noted that despite its recent problems, Gateway is still a very large company with sales of nearly $4 billion and is the third largest personal computer company in the U.S. Moreover, Gateway spends an estimated $40 million a year on advertising which makes it a very large account that will attract the interest of many agencies. Large Fortune 500 or 1000 companies such as Gateway are very high profile accounts that are coveted by many advertising agencies. Most agencies are likely to view Gateway as a significant opportunity since the company still has a

significant market share, a strong product line, and a viable business model as one of the two major direct sellers of personal computers and other electronic products. Gateway may be able to return to profitability as the economy rebounds and spending on personal computers and other electronic products by both businesses and consumers increases. Some agencies may be reluctant to pursue an account such as Gateway for several reasons, not the least of which is the company’s track record of switching agencies so often. Agencies often invest a great deal of money to pitch a new client and become involved with them. A great deal of time, effort, and money is often spent by an agency when they take on a new client to become familiar with the company’s industry, market segments, competition, its marketing strategy, and its customers. Primary and secondary research studies are often conducted which the agency bearing some of the cost of these studies. For a large account such as Gateway, additional personnel may be hired in various areas such as account management, creative, and other areas of the agency to service the account. Agencies view all of this as an investment that they can recoup over several years. If the client drops the agency after only a year or so, this may result in the agency losing money along with the opportunity costs of not pursuing some other account. Another issue agencies must consider is the tendency of Gateway founder Ted Waitt to meddle with the company’s advertising. Although Waitt is no longer active in Gateway, he is still the company’s largest shareholder and thus his opinions may still find their way to Gateway’s management. As described in the case, Waitt is not considered to be a fan of traditional advertising and has played a major role in the decision to dismiss several of Gateway’s agencies. Consideration must be given to whether Waitt might interfere with an agency’s ability to develop good advertising for Gateway. Moreover, even if the agency developed effective advertising, there is still the possibility that Gateway may still find it difficult to increase its sales and market share given the formidable competition the company faces from Dell, Hewlett-Packard, Lenovo and Apple. This might result in a decision by Gateway’s top management to once again change agencies. The problems facing Gateway extend beyond its advertising as the personal computer market has become extremely competitive and profit margins on PCs are very narrow. Gateway is now getting most of its sales from its low margin retail business and is struggling to compete in the business and government markets as well as in direct-to-consumer sales which have higher profit margins. The cost cutting measures which were begun by Inouye have also resulted in reductions in Gateway’s advertising and promotion budget which makes it more difficult to build brand equity and also makes them a less attractive account to many of the larger agencies.

IBM Brand Equity Restoration and Advertising Evolution Teaching Note Case Overview This case examines the various advertising campaigns used by IBM from 1995 to 2006, a period during which “Big Blue” has undergone a transformation in its business strategy that has resulted in one of the most dramatic and successful turnarounds in American corporate history. The case deals with the role of advertising in business-to-business marketing as well as advertising campaign evolution and brand equity restoration. It also provides insight into the challenges of marketing a complex, multifaceted brand to a broad array of customers with many different needs across a variety of industries. The case illustrates how a company’s branding and positioning strategies change over time. It also gives students the opportunity to track the evolution of IBM’s advertising and to evaluate how the various campaigns used by the company over the past 11 years have communicated the desired message to the target audience. A Power Point presentation file accompanies the case which provides examples of print, outdoor and television advertising from the various campaigns. Students should be encouraged to down load the power point file and evaluate the ads as they read and prepare the case. You might also encourage them to visit the IBM web site and examine the various types of online marketing tools that are used by the company, particularly in support of its advertising campaigns. This case is very broad in scope and can be used in a variety of areas. However, it may be best suited for use with Chapters 8 and 9 of the text, which focus on Creative Strategy Development and Implementation and the development of advertising campaigns.

The case

allows students to analyze the creative strategy and executions used by IBM for the various campaigns. It also provides insight into how each campaign was developed in response to changes in IBM’s marketing strategy. It is important for students to understand that the various IMC campaigns developed by Ogilvy & Mather were done to reflect changes in the way IBM wanted to position itself to businesses. The case can also be used with Chapter 20 on International Advertising and Promotion as nearly all of the campaigns discussed in the case were global in scope.

Discussion Questions 1. What is the primary objective of IBM’s advertising? How have the objectives of its advertising changed over the years? The primary objective of IBM’s advertising is to start a dialog with companies that might benefit from its various products and services. IBM is a well known company and nearly everyone in the business community is aware of them and believes they have a general understanding of what they do. However, IBM has to create a better understanding among Clevel executives (Chief Executive Officers, Chief Financial Officers, and Chief Information Officers) and middle managers in the businesses it is targeting for its technology products, as well as its consulting services. In some cases the advertising is designed to drive a potential user to IBM’s website to learn more about its products and consulting services. Like most business-to-business marketers, IBM has a well trained sales force that calls on key decision makers in the companies it targets. An important objective of IBM’s advertising is to help get the company into the consideration set of these decision makers so they will accept the sales call to learn more. The purpose of the advertising is also to ensure that key decision makers in companies are aware of IBM and its capabilities. A further goal is to generate leads that IBM’s sales force can follow up on to provide more information and hopefully create a relationship. The call to action is to encourage them to make some form of contact with IBM, either by calling for more information, or checking out IBM’s capabilities and offerings on the Internet. The objectives of IBM’s advertising have changed over the years to reflect changes in its business strategy. In the mid to late 1990’s, during the height of the dot-com craze, the advertising had to communicate that IBM was “still in the game,” that it’s technology was not obsolete, that it could help companies adapt their businesses to new ways of doing business on the Internet, that it was nimble and flexible, and that it could handle a variety of business needs, encompassing different industries and businesses.

After IBM purchased Price

Waterhouse Coopers, its Business Process Transformation Services and consulting related to this area became a major growth priority. IBM wanted to communicate that there was another entire side to the business, aside from technology, which was the rationale for “The Other IBM” campaign. Most recently, with the “Innovation That Matters” campaign, IBM is communicating that it customizes solutions and recommendations based on each firm’s needs and strengths and can help firms develop new ways of doing business to give them a unique competitive advantage.

2. Evaluate each of the campaigns described in the case and the accompanying ads shown in the Power Point file. Are the intended branding messages being communicated clearly and do the ads speak equally well to users, as well as non-users, of IBM products and services? Students should be asked to analyze each campaign discussed in the case and evaluate the various print ads, commercial photo boards, and out-of-home ads that are provided. They should put themselves in the position of a CIO, CFO or a CEO who is currently not using IBM’s services and consider whether they understand IBM’s offerings from the ads. Do the ads peak their interest? Do they make them want to contact IBM to learn more? Do they communicate the message that IBM is a credible supplier of those products and services and a good option to fulfill their needs? Does the copy seem to be at the right level of complexity and does it interact well with the imagery to communicate effectively? 3. What were the pros and cons of staying with the “e-business” campaign? Could it have been updated and retained or did it lose its relevance? The e-business campaign served IBM well as it positioned them at the forefront of the trend in moving business processes onto the Internet, a movement that was a priority for nearly every company during the mid to late ‘90s. Most businesses wanted to move more of their operations to the web, but because so much was new and evolving, they needed the help of a knowledgeable partner with expertise in this area.. By coining the term “e-business” and focusing on it in their advertising, IBM became indelibly linked with best practices in doing business on the Internet. However, once IBM had established their expertise in this area, focusing on “e-business” alone became limiting. It was for this reason that IBM shifted away from “e-business” to the “ON Demand” campaign. “ON Demand” was introduced at a time when supply chain management and just-in-time operations had come to be highly valued by companies as a better way to do business. In this way, IBM was able to broaden the way they were perceived, from being an “e-business” expert to being an expert in supply chain management processes and making businesses more responsive to customers needs and emerging opportunities. 4.

How was the “ON Demand” campaign adapted to keep the umbrella tagline, while providing the specifics needed to communicate the “sub-business” component details? The “ON Demand” campaign used a series of print ads, television commercials and out-ofhome ads to communicate all the different types of businesses and problems that were helped by IBM. Examples included: “Fighting Cancer is ON” to show how IBM helped analyze medical data; “Napster is ON” to show IBM helped Napster work with universities so their

networks were not overwhelmed by demand for music from students; “China is ON” to show how IBM was helping China develop the infrastructure it needs to prepare for future growth; “The PGA Tour is ON” to demonstrate how IBM helps sporting events transmit data. Using case examples is a tactic that IBM often incorporates into its advertising. These cases serve two purposes. First they provide examples of companies as well as business problems with which other firms can identify. Also, by showing the breadth of problem-solving skills IBM possesses, businesses will deduce that IBM can help them find solutions to their issues or problems, thereby enabling them to better capitalize on their unique opportunities. The challenge IBM faces in its advertising is that the business is exceedingly complex and it is difficult, if not impossible, to communicate all the products and services IBM offers to all its potential customers. The dilemma is whether to create one generic campaign that might be too general and not address the needs of individuals or being too specifically focused on any one type of problem. The approach taken in the “ON Demand” campaign seems like a good advertising solution, for the reasons stated above. 5. Do you think IBM’s advertising campaigns have changed too often over the past 11 years? Were the changes made because the campaigns were not working well or was it an intentional evolution in the advertising and branding message IBM wanted to communicate? Over the 11 year period discussed in the case, IBM has had five major campaigns including a sequence of changing taglines. These have included “Subtitles - Solutions for a small planet” which ran from 1995 to 1997; the “e-business” campaign which had several sub-campaigns and ran from 1998 to 2002; the”ON Demand” campaign which ran from 2002 to 2005; “The Other IBM” and “Help Desk” campaigns which ran from 2005 to early 2006; and the “Innovation That Matters - What makes you special?” campaign which began in March 2006. The campaigns have really not communicated specific information about IBM’s products such a servers, networks, software, and computers, as the primary focus of each has been on total business solutions. They have mirrored the aspects of better business processes and management that have been priorities for key company decision makers in the target audience at each point in time. In this way, IBM has communicated that they understand their customers’ most pressing business issues and opportunities. The succession of campaigns has also broadened the branding message for IBM, from the earlier perception that IBM only meant technology to the more recent positioning of the company as a total business partner. The most recent “What makes you special?” campaign theme is designed to counter the perception that IBM is a large bureaucratic monolith that tries to use the same approach to

solve each customer’s problems. Rather it communicates that IBM is a valuable business partner that works with customers to understand their specific problems and needs and can help them do special things. This message, combined with the lack of pretension in the tonality of the ads, may appeal to small and mid-sized businesses, which constitute one of IBM’s largest growth opportunities in the future. The changes have enabled IBM to seem relevant and up-to-date. Some students may argue that IBM has changed campaigns too often, particularly over the past few years. However, it is important to note that IBM competes in a very dynamic and competitive industry that is constantly changing. The marketplace has undergone a transformation.

The IT consulting industry has matured and companies are seeking

relationships with partners who can provide deep industry and business process consulting and management expertise. IBM’s corporate strategy has changed over the past decade and continues to evolve as the company strives to maintain its competitive advantage. The marketing challenge for IBM has been to increase awareness and consideration of its capabilities in areas such as business process transformation services.

Thus, it is not

surprising that changes have been made in IBM’s advertising to inform customers of its capabilities and to differentiate itself from competitors. The downside of frequently changing campaign tagline changes is that it makes it more difficult to solidify one message or perception in consumers’ minds. It often takes repeated exposure to an advertising campaign before the branding and positioning message is effectively communicated. By changing it’s advertising campaigns and taglines frequently, IBM may have difficulty communicating its desired branding and positioning message with its entire target audience before moving on to the next major campaign. 6. Is there value to business-to-business marketers such as IBM in advertising through mass media that also reaches the general consumer market? Evaluate the media choices used by IBM such as advertising on golf tournaments, on Sunday morning news shows, in airports, and even on the Super Bowl. Since IBM divested its personal computer business, should they continue to advertise to consumers, for example on the Super Bowl? The target audience for IBM’s advertising is clearly business executives as well as middle managers who might be involved in making decisions regarding the choice information technology and consulting services providers. Thus, much of the company’s advertising is going to be targeted to media that reaches these individuals including general business magazines such as Business Week, Forbes, Fortune, and Business 2.0 as well as newspapers

such as The Wall Street Journal and Barron’s. IBM also runs ads in vertical publications that target specific areas of business such as information systems, finance, marketing and management as well as specific industries. Television advertising can also be targeted to business executives through cable networks such as CNBC, Bloomberg Financial News and various programs on CNN such as “Lou Dobb’s Money Line.” IBM, as well as other business-to-business marketers will often advertise in mass market media even though many people outside of their target audience will be exposed to the ads. B-to-B marketers recognize that they may have to accept a certain amount of “waste coverage” or overexposure whereby the media coverage is broader than the target audience, particularly if a media vehicle does a good job of reaching a high percentage of those in the target audience.

For example, IBM advertises on televised sporting events such as

professional golf and tennis matches and NFL football games as well as news programs. While not all the viewers of these events are business people, a high percentage of its potential customers can be reached through these media vehicles. IBM also advertises in USA TODAY which is a general consumer newspaper. However, it also reaches a very large number of business executives who read it while traveling. IBM also uses out-of-home advertising in places such as airline terminals and executive lounges in airports worldwide. This is an effective way to reach its target audience which spends a great deal of time traveling for business. These advertisements often mirror the print work by featuring c-level executives asking thought provoking questions and suggesting that that IBM has the answers. Selective advertising through mass media may be used by IBM for several other reasons even though it reaches many consumers who are outside of their primary target audience. Some studies have shown that purchasing advertising time and space in consumer mass media may be more cost efficient, despite the wasted coverage, than trying to reach the target audience through a variety of business media. Ads in these media help increase awareness for IBM and editorially cast them in a favorable light because of a favorable association with the editorial content of a publication or television program. Advertising to viewers in a more relaxed environment, without the clutter of a lot of other business-to-business ads, increases the chance the message will register with their target audience. According to the theory of effective reach, target consumers need to see an ad, on average, between 3 and 10 times in order to register the message. By reaching the target through a variety of media, he or she is more likely to notice it than if the ad was repeated solely in the same vehicle, which they might ignore or tune out. Advertising in high profile media vehicles also can motivate IBM’s internal employee organization when they see their company sponsoring an event such as the

Super Bowl or Masters Golf Tournament, advertising boldly on prestigious programming, or making a statement in leading magazines and/or newspapers.

Since spinning-off its

personal computer division to Lenovo, IBM no longer sells products to the end consumer market so they are not trying to deliver a sales message to this group. However, IBM may still be concerned with its image among the general public and feel that there is value in having them see some of its image-oriented advertising. 7. How has the target audience for IBM’s products and services evolved over time? How have the types of business problems that IBM addresses in their advertising changed? Prior to the mid-1990’s, IBM was viewed almost exclusively as a technology company, selling mainframes, servers, and software to IT professionals. Since that time, IBM has gradually expanded it products and services to focus more and more on solving a range of business problems, enabling businesses to innovate, respond more quickly to consumer needs and business opportunities, and to develop unique competitive advantages. IBM’s B-to-B dialogue has therefore expanded to include “C-level” executives (chief executive officers, chief information officers, and chief marketing officers). IBM has positioned itself as a partner in developing overall business strategies that will move their customers ahead. Their advertising has shifted over the years from focusing on products and technology to showing how IBM partners with clients and customizes solutions to meet their needs by drawing from all of IBM’s areas of expertise. They have positioned themselves in essence, as opportunity identifiers, problem solvers, and implementation facilitators. 8. What were the advantages and disadvantages of using a creative tactic such as the metaphorical King Arthur’s Round Table commercial and print ads that were part of “The Other IBM” campaign? The King Arthur ads were a departure from previous IBM ads as well as from advertising done by other technology companies. This was intentional as the ads grabbed the attention of viewers and/or readers which increased the likelihood that they would be noticed. However, they also were a clever way to deliver the message as the ads portray age-old business problems that are faced by companies and organizations, from supply-chain issue to human resources. They were an effective way to make the point that the types of problems, issues and opportunities that affect organizations have really not changed that much over time. Students can be asked if there are any downsides to this approach. Do the characters from King Arthur’s court seem relevant today? Are C-level executives likely to identify with them? Do the problems really seem parallel? Is the comparison meaningful? Is the humor

likely to be appreciated? Is there a limit to how different a B-to-B ad can look and feel? Do the characters have to be appealing to be effective? It was important for IBM to call attention to the “other side” of its business as business consulting services is a huge and increasingly large part of IBM’s future growth plans. “The Other IBM” tagline communicates that Business Consulting is as large and important as the tech side, which has long been the company’s heritage and primary association.

The

campaign encouraged potential customers who weren’t aware of IBM’s capabilities in this area, to seek more information to learn more. The King Arthur’s Round Table ads were a clever way of executing the creative strategy for this campaign. 9. What is the value of using testimonials and case studies across a variety of businesses and industries integrated marketing communications campaigns? Throughout the different campaigns, IBM has used testimonials and case studies across a variety of business sizes and industries to illustrate how its products and services have helped companies. These have included the nuns who were excited about IBM’s new technology in the “Solutions for a small planet” campaign; the surprisingly wide array of organizations that became “e-businesses” and benefited from transitioning to the Internet (e.g., “the Hermitage Museum in Russia is an e-business”, “Vespa is an e-business”, “National Geographic is an ebusiness”, “Olympics.com is an e-business”); the businesses that became more “ON Demand” with IBM’s help (Napster, China, the PGA); and most recently, the businesses that were able to innovate in ways to make them even more special and successful (a grocery chain, a university, or insurance companies). The use of examples and mini-case studies makes the benefits that IBM’s help can bring to an organization seem more real and easier to envision. Without these examples, IBM’s services and capabilities might seem very abstract and potential customers would have difficulty envisioning what IBM might do for them. The testimonials and case studies have been an extremely effective way to make an umbrella campaign, that often has had to be summarized in a 30 second spot or a single page insertion, translate to a wide variety of potential customers. 10. Does IBM’s advertising provide enough information to decision makers and does it matter that no references to the prices of its products and/or services are made in the ads ? One key piece of information that is missing from the IBM ads is pricing. From a practical standpoint, it would be nearly impossible to quote prices, given IBM’s wide variety of products and services. IBM could, however, communicate that the price for their services is “less than you’d think”, or “surprisingly affordable.” Instead, any reference at all to pricing

is omitted. A major source of business for IBM is mid-size companies, defined as having 500 employees or more. There is a risk that a firm that has never used IBM before might feel they cannot afford their services, or that any benefits in operations might be wiped out by consulting fees. Concerns of what it might cost to hire IBM might be one of the primary reasons a firm will not take up IBM’s call to action and contact them. This is testable. If IBM finds price is one of the primary obstacles they must overcome, they might address it in future advertising. The downside to mentioning pricing in their ads is that they might be calling attention to pricing early on, before a sales representative can demonstrate how IBM might help the prospect. Pricing is also a tricky and complex matter. Aside from varying by the scope of the project, the value of the services might depend on cost savings from changes in operations, which could require an in-depth analysis to identify. 11. Evaluate the decision by IBM to consolidate all of its worldwide advertising with the Ogilvy & Mather agency. What are the pros and cons of using one agency to handle all of its advertising? As noted in the case, IBM made a major decision in 1994 to dismiss more than 40 agencies around the world and consolidate all of its advertising with Ogilvy & Mather Worldwide. A number of factors were behind this decision. One of the major reasons given by IBM for consolidating all of its advertising with Ogilvy & Mather was that the company had been projecting too many images with its advertising divided among so many agencies. IBM recognized that it was competing in a global market for computers and other information technology products and services and felt that it was important to deliver clear, consistent messages that reinforced and built on the equity in the IBM name. The agency consolidation move allowed IBM to gain greater control over and facilitate coordination of its worldwide advertising. IBM also felt that a high tech product such as computers and information technology services consulting could be advertised using a global advertising campaign since the reasons for purchasing them are the same 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 the Internet, e-mail, video conferencing, and other communication tools 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 an 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. However, major companies such as IBM recognize that hey must develop a consistent global image for the company and/or its brands and speak with one coordinated voice to customers around the world. This teaching note was prepared by Professor Michele Greenwald, Visiting Professor at HEC, Paris, as an aid to instructors in the classroom use of the case.

MAZDA – POSITIONING A PRODUCT LINE TEACHING NOTE Case Overview This case examines Mazda North American Operations and the efforts of the automobile company and its advertising agency, Doner, to its position its vehicles in the highly competitive U.S. automotive market. The case begins by describing the IMC program developed by Doner to reposition the subcompact Mazda Protegé model in the late 1990s using the “Get In. Be Moved” tagline. The repositioning of the Protegé was very successful and Doner began using the tagline in advertising for other Mazda vehicles.

However, Mazda’s marketing executives were

concerned that “Get In. Be Moved” theme was too passive and vague and was not effective in positioning Mazda as a company that makes sporty vehicles that appeal to the driving enthusiast. In 2001 Mazda began using a new creative platform in advertising and replaced the “Get In. Be Moved” tagline with a new theme based on the phrase “Zoom-Zoom.” The case provides an opportunity for students to evaluate the change in Mazda’s positioning strategy and the IMC campaign used to reposition the Protegé, as well as a new campaign for the MAZDA6 sports sedan.

A Power Point file containing print ads for the Protegé5 and MAZDA6 are included with

the case. Students should be encouraged to review these ads when analyzing the case to gain more insight into the advertising used for these models. You should also encourage students to visit the Mazda web site at www.mazda.usa.com where information is available on the various Mazda models including the MAZDA6, Mazda5, MX5-Miata, CX-7, MPV, Mazda Tribute and

the RX-8. It should be noted that Mazda has dropped the Protégé name and this model is now called the Mazda3.

Discussion Questions 1. Analyze the role of integrated marketing communications in the marketing of automobiles such as the Mazda Protegé and MAZDA6. How is each IMC tool used to market automobiles? Integrated marketing communications play a very important role in the marketing of automobiles such as the Mazda Protegé and MAZDA6. Many automobile buyers base their purchase decisions on product related attributes such as price, quality, reliability, durability and performance, as well as on factors such as style and brand image. A variety of IMC tools are used to provide consumers with information about the Protegé as well as to create an image that will appeal to the target market for

the car. The case notes that Mazda’s turnaround strategy in 1997 called for a change in the positioning of the Protegé. The car was originally positioned as a step up from a compact sedan and but as a car that retained compact attributes such as fuel efficiency and a low price. The new strategy called for positioning the Protegé as a cool, fun, hip-to-drive car for young professional women in their early 20s to mid-30s. To accomplish this repositioning, the advertising for the Protegé began focusing on attributes such as the car’s euro-chic styling, room for friends, value, reliability, and cool features such as CD players and air-conditioning. Mazda uses all aspects of the promotional mix to market its automobiles and other vehicles. Advertising on television as well as in magazines played a very important role creating and reinforcing an image of the Protegé as a car that is cool, fun, and hip-to drive. The TV commercial depicting the group of hip 20-somethings carpooling in the Protegé and driving through the surrealistic cityscape was designed to help create the above noted image and positioning for the car. Direct marketing was used by building a data base of customers who enter the sweepstakes on the Mazda web site and/or request more information about the Protegé. These customers were sent information about the Protegé and occasionally received direct mail pieces. Interactive media and the Internet were also used as part of the IMC program for the Protegé. Mazda’s interactive agency created the “Protegé road trip” on Mazda’s web site where consumers could take a cyber journey to learn more about the car. Mazda also mailed a CD-ROM with music, movie reviews and interviews to consumers who requested more information about the Protégé. Sales promotion techniques such as a consumer sweepstakes and dealer incentives and contests were also part of the Protegé launch. Mazda also generated a considerable amount of publicity for the Protegé and its advertising campaign through press releases and various public relations activities. Finally, promotional efforts for the Protegé were extended to dealerships to support the personal selling effort and to convert the showroom into a “Protegé World” that extended the advertising and positioning theme to the showroom floor. Sponsorship of events such as auto racing and motocross is also a very important part of Mazda’s IMC program. An integrated approach was also used in the introductory campaign for the MAZDA6 that involved the use of media advertising; a direct mail program which included the mailing of videos and CD-ROMS to prospective buyers,; event sponsorship; participation in various promotions sponsored by ESPN; showroom displays in Mazda dealerships; online advertising, and a specific section on the MadzaUSA web site. You might go through each of the IMC tools used for the Protegé and the MAZDA6 and discuss the role each plays in the marketing communications program for these vehicles.

2. Evaluate Mazda’s decision to drop the “Get In. Be Moved’ tagline for the Protegé and adopt the “Zoom-Zoom” theme for its advertising. The decision to drop the successful “Get In. Be Moved” tagline would appear to be based on Mazda’s desire to return to and build upon its heritage and long-term positioning of making fun-to-drive cars that are sporty and appeal to the driving enthusiast in everyone. While the “Get In” tagline may have worked well for the Protegé, Mazda’s marketing team felt that it really did not differentiate the brand very well nor contribute to the aforementioned positioning platform. To effectively position an automobile, it is necessary to develop an image over time. Mazda positioned itself as a company that made sporty cars that appealed to driving enthusiasts way back in the 1970’s, and attributed much of its early success in the U.S. market success to this image. The success of the Mazda RX-7 sports car and the Miata roadster reinforced this positioning platform. The highly successful launch of the Mazda Tribute sport utility vehicle, which was positioned as having the “soul of a sports car” and accompanied by ads using the “ZoomZoom” mantra, provided further support that the sports car tie-in would be beneficial to Mazda. Subsequent use of “Zoom-Zoom” in advertising for other vehicles led to increases in advertising and brand awareness. For a company that struggled with a brand identity in the 1990’s, the adoption of the “Zoom-Zoom” advertising was a smart move. In part, the mantra contributes to the positioning that has made Mazda successful in the past. The “Get In. Be Moved” theme would not have been as successful in achieving the sporty positioning that Mazda is trying to achieve.

3. Evaluate the strategy Mazda of North America is using for the new MAZDA6 sports sedan. Do you agree with the decision to use a more mature and less playful approach to advertising for the MAZDA6? As noted in the case, the MAZDA6 introduction was one of the most important in Mazda’s history. The MAZDA6 competes in the mid-size sedan segment, which is the most important segment of the automobile market due to its size, and success or failure in this segment may have a halo effect that carries over to the rest of the product line. In addition, cars that compete in this segment often constitute the foundation upon which the product line is based. To compete in this segment, Mazda will have to go head-to-head with the Toyota Camry,

Honda Accord and Nissan Altima, all of which are highly successful and worthy adversaries. In addition, the target market for the MAZDA6 is consumers in their mid-30’s, typically male, and somewhat less of a car enthusiast, which makes this group somewhat different than the customer for the other Mazda models. Mazda’s strategy for the “6” must strike a balance between the sporty positioning and a more reserved, mature approach. They must be careful not to give up on the positioning that has made them successful, but recognize the needs of a more mature audience, and translate “sporty” into “enthusiast.” At the same time, they must find a way to differentiate themselves from the firmly entrenched competitors such as Toyota, Honda and Nissan. The MAZDA6 strategy appears to be well designed. The retention of the “Zoom-Zoom” mantra helps to maintain the sporty positioning strategy, which should serve as a basis for differentiation. The ads themselves appear to be more mature, less playful and suggest that the MAZDA6 is a more “grown-up” option, without abandoning the fun aspects of driving. The focus on handling, performance and mechanical aspects should appeal to the enthusiast, who may be looking for something different from the standard midsize car (after all, getting older doesn’t mean one has to act older!). The highly integrated media campaign also looks promising. An increase in print ads may be necessary to explain some of the sporty features of the new MAZDA6, while the television spots are still exciting and fun to watch. The media schedule, which is heavily weighted to ESPN, the NFL and NCAA College Football, reinforces the sporty aspects of the car, while reaching the sought target audience. Tie-ins to other sports programming such as ESPN’s Pigskin Pick’Em, Exhilarating Moments and Truck 2 Promo should help reach the target for the MAZDA6. Mazda has also integrated elements of previously successful campaign including the Internet, publicity and public relations, direct mail, and event sponsorship into the IMC program. Receiving recognition from automotive magazines such as Car and Driver’s award for one of the 10 Best Cars for 2003 is great publicity that can be promoted in media advertising and other venues such as the web site for the MAZDA6.

4. What recommendations would you make to Mazda regarding its integrated marketing communications strategy as the company moves forward? When Mazda has been successful, it is due in large part to having an image as a company that makes sporty, fun-to-drive cars. This positioning helped them achieve success with the RX-8 and the Miata. When Mazda has gone away from this positioning the company has lost its basis for differentiation and its models have become “just another car”. To be successful, companies must develop a sound positioning strategy and maintain it over time. In the 1990’s it was not clear as to what Mazda brand stood and the company had trouble differentiating its vehicles from the competition. However, by establishing and maintaining the sporty positioning strategy, Mazda now has a stronger image and identity for its various models. For those consumers that want some exhilaration and fun in their driving, Mazda models such as the Mazda3 (formerly the Protégé) and MAZDA6 should appeal to them. A lesson can be learned by observation of the BMW’s strategy of differentiation. Their “Ultimate Driving Machine” position has been used for nearly two decades and has been very successful over the years.

Case Teaching Note Under Armour Enters The Basketball Shoe Market Case Overview This case examines Under Armour (UA), the highly successful athletic apparel and footwear company that was founded in 1996 and is now approaching $1 billion in sales. The case discusses the factors that have led to the rapid growth of Under Amour, the company’s marketing strategy, and the important role integrated marketing communications has played in helping build UA into one of the most valuable brands in the sports industry. A major focus of the case is Under Armour’s efforts to enter the athletic footwear market. UA has been successful in marketing cleated footwear for football, baseball, softball, lacrosse and soccer. However, the company’s efforts to enter the mainstream athletic shoe market with products such as cross training and running shoes has not gone very well thus far. Despite its limited success with these products, UA launched a new line of basketball shoes in late 2010 in an effort to compete with industry leader Nike which controls 95 percent of this market. The case discusses UA’s strategy for entering the basketball shoe market by using Milwaukee Bucks NBA star guard Brandon Jennings as its primary endorser. Jennings was beginning only his second season in the NBA when Under Armour launched its new Micro G product line and despite his future potential as an up and coming player in the league, one can question whether this was an effective way to compete against Nike and its stable of NBA stars such as Kobe Bryant, LeBron James, Dwayne Wade and Kevin Durant. This case can be used as a basis for analyzing the factors that have led to the tremendous success of Under Armour and the important role IMC has played in this process. It can also be used to discuss issues such as sponsorships, the use of athletes as endorsers and branding, as well as the consumer decision making process for athletic shoes. The use of this case can be enhanced by showing the Under Armour video case that is available on DVD 3 as well as various Under Armour commercials that are available on DVD 2. Some of the commercials used by UA to enter the cross training, running, and basketball shoe markets are available on this DVD. You can also find examples of Under Armour advertising

the

company’s

web

site

under

the

Brandon

Jennings

blog

section

(http://blog.underarmour.com/wheninrome). Discussion questions are provided at the end of the case and are covered in the remainder of this note.

Discussion Questions 1. What are the reasons for the success of Under Armour since its founding by Kevin Plank? What do you view the most important factors that have contributed to the growth of the company? There are a number of factors that account for the tremendous success of Under Armour. The company had a first-mover advantage in the performance apparel market as UA pioneered this category by developing compression clothing that wicks sweat away from the body and provides athletes and fitness buffs a way to stay cool and dry during workouts, practices, and games. Under Armour products are of very high quality which allows the company to command a price premium and help differentiates them from other brands of sports apparel. A second reason for the success of Under Armour is that the company has a very strong brand image as they have focused on brand building as a core asset and a source of competitive advantage. UA’s brand image is particularly strong among younger consumers as a survey by Piper Jaffray & Co. of 700 students found that Under Armour is the solid number 2 athletic brand in the U.S. behind Nike and finished nearly tied with them as the preferred clothing brand. Under Armour is becoming the sports apparel brand of choice among the younger generation as brand recognition and preference among this segment is very high. Another reason for the success of Under Armour is that its “Protect this house” advertising campaign was very unique and struck a responsive chord with consumers. The tagline became part of popular culture and helped differentiate the UA brand, particularly among young athletes. It is also important to note that UA has been successful because it has been able to secure distribution in key sporting goods stores such as The Sports Authority, Dick’s Sporting Goods and many specialty retailers. Under Armour also generates a significant amount of sales through its direct to consumer channel which includes its own stores as well as online sales. In the UA video case Steve Battista , Senior Vice President of Brand, notes that the four keys to success for the company are: • Build a great product • Tell a great story about the product • Provide great service (support for retailers as well as consumers) • Build a great team of people (management, employees, athletes/endorsers) 2. What are the key components of Under Armour’s integrated marketing communications program? Discuss the role IMC has played in helping build the Under Armour brand. Under Armour has used a full repertoire of integrated marketing communications tools to build its brand. The components of the IMC program include: •

•

Media advertising - UA developed a very effective advertising campaign based on the “Protect This House” theme. The initial advertising tapped into the raw emotion of football and helped position UA as a high performance brand for serious athletes as well as those who train for and participate in various sports. Sponsorships - UA has made effective use of sponsorships at the high school, collegiate and professional levels. They sponsor high school All American games for a number of sports which help them to tap into the young male and female market. They have sponsorship deals with a number of high profile Division 1 collegiate teams which gives help generate exposure for the brand, particularly on television. The sponsorship agreement with the NFL to provide football cleats also is an important deal as it has helped the company gain market share in the cleated footwear market. UA also has sponsorship deals with several professional baseball teams such as the Chicago Cubs as its logo appears on the ivy-covered wall at Wrigley Field (the only brand allowed there).

•

Athlete endorsers – Under Armour has also signed a number of high profile athletes to endorsement deals including numerous NFL athletes as well as Major League Baseball players. The company also has endorsement deals with a variety of athletes who compete in individual sports such as swimmer Michael Phelps, skier Lindsey Vonn, UFC champion Georges St. Pierre, and freestyle skier Jen Hudak among others. Product placements – UA used product placements very effectively in its early days in movies such as “Any Given Sunday” and the ESPN series “Playmakers.” Under Armour gear is often worn by athletes who appear on sports talk shows and on many television shows such as “The Amazing Race.” Internet – UA has made very effective use of online marketing to help build its brand, communicate with consumers and generate sales. The company often creates micro sites to help with the launch of new products and also uses a variety of social media as part of its IMC program including YouTube, twitter, Facebook and blogs. Public relations/publicity – Under Armour has become a very high profile company that generates a considerable amount of attention from the media. Stories on the company often appear in the media and help tell UA’s authentic story and generate exposure for the brand.

All of these IMC tools play a very important role in building and maintaining Under Armour’s brand identity. It is important to note that product quality is a key component to the strong brand image of UA as IMC programs are more effective when they are promoting a quality product that enjoys a loyal customer base. However, Under Armour has been able to create a very unique brand image that resonates well with both men and women who are competitive and confident. 3. Evaluate Under Armour’s decision to enter the mainstream athletic shoe market and compete in product/market segments such as cross training, running and basketball shoes? One of the challenges Under Armour has faced since going public in 2005 is that the company must continue to grow revenue as well as profits to satisfy the demands of the investment community. As can be seen in Figure 1 of the case, UA has a 33% compounded growth rate over the past 5 years and is approaching $1 billion in sales. The company has a 70% market share in compression apparel and now faces strong competition from other sports apparel companies in this market including Nike’s Dri-fit products and the adidas Climacool line. While UA has been expanding into other segment of the apparel market such as golf, tennis, skiing/snowboarding, running, and hunting, it is not surprising that they would look beyond apparel for growth opportunities. Athletic footwear is a very large market, particularly the running and basketball shoe segments, as consumers wear these types of shoes on a daily basis as well as for sports activities. As noted in the case, basketball shoes are $2.5 billion market while the market for running shoes is even larger and has been estimated to be as high as $5 billion. Thus, even if UA could gain small amount of market share in these segments, the revenue would be significant. You might point out to students that each market share point in the basketball shoe market is worth approximately $25 million in revenue. Thus, if UA could capture 4% of this market it would add $100 million to the company’s total revenue. Of course, the key question is whether UA can capture even a small amount of market share given that they must compete against industry giant Nike as well as other major athletic shoe companies such as adidas and Reebok. It is worth noting the success UA has had in cleated footwear such as football, baseball, softball, soccer and lacrosse. However, these markets are closer to UA’s core business and brand image and the company’s strong relationships with retailers such as The Sports Authority and Dicks Sporting goods were helpful in entering these markets. They are likely to find that the running and basketball shoe markets are much more difficult to penetrate. They have had only limited success with running shoes which may be due to the fact that many runners are loyal to brands such as Nike, Asics, New

Balance, Saucony and others. A major challenge they will face in the basketball shoe market is the presence of Nike which has a 95% market share. Nike has dominated the basketball shoe market in the U.S. for years dating back to when they signed Michael Jordan as an endorser and created the Air Jordan shoe line. Michael Jordan remains a very effective endorser for Nike even though he retired in 2003 and the Jordan line remains a top seller. Nike has most of the NBA’s top players under endorsement contract including Kobe Bryant and LeBron James and has shoe lines named after these super stars. Under Armour will have to battle adidas and Reebok for the remaining 5% of the market not controlled by Nike and each of these companies has large promotional budgets. Adidas has endorsement deals with Derrick Rose and Dwight Howard, while Reebok signed John Wall who was the number one pick in the 2010 NBA draft. It will be very difficult for UA to match these three companies in terms of advertising and promotion spending as well as for endorsement deals. 4. Evaluate the strategy used by Under Armour to enter the basketball shoe market and compete against Nike as well as adidas and Reebok. Discuss the pros and cons of the company’s decision to use Brandon Jennings as their primary endorser for its new basketball shoe line. It should be noted that Under Armour is taking a very cautious and measured approach to entering the basketball shoe market. While the company did debut the shoes at an exclusive media party in penthouse of hotel in New York, they did not utilize a major public relations campaign for the launch. The company is working closely with retailers to determine where the shoes will be sold as they are using a selective distribution strategy that may include the use of smaller independent retailers in various markets, such as Jimmy Jazz in New York City and Baltimore’s Downtown Locker Room. Under Armour’s launch strategy is based on limiting the distribution of its new shoes which could create pent-up demand and help generate buzz for the shoes as they may become a musthave, hot item among younger consumers. Under Armour is relying very heavily on Milwaukee Bucks guard Brandon Jennings to help draw attention to its Micro G line of basketball shoes. The company has developed print ads featuring Jennings that will be used in various sports publications that reach the key market segment of young males as well as TV commercials that can be aired during basketball games on cable networks such as TNT, ESPN and NBA TV. They are also using an online marketing campaign that include social media such as Facebook, Twitter and YouTube as well as The Brandon Jennings Diary blog on the UA web site. UA’s decision to use Jennings as the primary endorser for its new basketball shoe line is interesting and can be viewed as somewhat risky. The pros of using Jennings is that he appears to be an up and coming NBA star as he had a very successful rookie season and started out well in his second season before being injured. UA was also able to sign him to a four year endorsement deal for $2 million while he was playing in Europe which is relatively low by NBA standards. Note that Reebok recently paid John Wall $25 million for a 5 year deal which is more than 10 times what UA is spending for Jennings. Under Armour rarely signs high profile athletes to endorsement deals, as the company does not have the marketing budget to out bid companies such as Nike, adidas and Reebok for the star players. The company often looks for up and coming players who can develop into stars and are loyal to the company. If Jennings recovers from his injury and continues to play well, he can be an effective endorser for the Micro G line. The cons of using Jennings as the primary endorser is that he is still somewhat of an unproven player and may not have the ability to influence consumer purchase decisions to the same degree as proven NBA stars such as Kobe Bryant, Lebron James and Kevin Durant (all of whom wear Nike shoes) or Dwight Howard and Derrick Rose (who wear adidas). Brandon Jennings is also playing in Milwaukee which is not a high profile city and for a team that does not command much media attention. Bryant plays for the Los Angeles Lakers which won the NBA championship in 2010 and whose games often appear on national television. Lebron James

signed with the Miami Heat in 2010 where he joined star players Dwight Howard and Chris Bosch to form what has been called a new dream team. One might argue that Under Armour should have signed a more established and high profile NBA star as the primary endorser for its new line of basketball shoes. However, it is important to note that many of the top players are already under contract and the company would have to be willing to spend large sums of money to sign a super star player. As noted above, since its founding UA has always sought the up and coming athlete rather than compete with Nike, adidas and Reebok for the super star endorsers. Under Armour is likely to sign more players to endorsement deals if the Micro G line gains traction in the market and generates revenue for the company. 5. Do you think Under Armour will be successful in entering the basketball shoe market? Why or why not? A major challenge UA faces in entering the basketball shoe market is to seen as a legitimate brand in this space. UA feels that their brand image and strong presence in performance apparel, as well as cleated footwear, may help them be perceived a viable competitor in this market. A key determinant of success in this market will be the quality of the UA Micro G line as companies such as Nike, adidas and Reebok all have quality basketball shoes. Under Armour feels that they have a quality shoe and that features such as being lightweight and low to the ground provide an alternative to heavier, thicker foam shoes. Basketball shoes must be able to perform well and provide cushioning and comfort for the foot. Any problems with product quality can lead to negative word-of-mouth that will travel very fast, particularly in social media circles. UA has done extensive testing of their shoes and feels they can compete on a quality basis. Given this, success will be determined by how well they market the new Micro G line and whether the shoe can gain traction in the basketball market. Students should be asked to take a position as to whether Under Armour will be successful in its efforts to enter the basketball shoe market and to offer support for their prediction. They have a lot riding on this launch as success in basketball shoes can help Under Amour solidify its position as a major competitor and brand in the athletic shoe market, open new distribution channels and, of course, provide a new source of revenue. If UA is not successful, they may find it very difficult to become an athletic footwear company and will have to rely on the apparel market for future growth. Instructors should monitor various online sources to track how Under Armour does over the next two years in its efforts to enter the basketball shoe market as well with the re-launch of its running shoes.

Using Advertising to Fight the War on Drugs: The Power of Social Marketing or a Waste of Money? Teaching Note Case Overview This case examines the advertising efforts that have been used by the Partnership for a Drug Free America (PDFA) for the past nearly 20 years, and more recently the U.S. government through the Office of National Drug Control Policy (ONDCP), to deal with the problem of illicit drug use. The PDFA consists of a coalition of advertising, marketing and media people, and has been conducting the largest public-service advertising and social marketing campaign in history with the goal of helping kids and teens avoid drug use by influencing their attitudes through persuasive information. In 1998 the U.S. government became involved in the use of advertising to fight the war on drugs when the U.S. Congress approved The Media Campaign Act of 1998 which directed the ONDCP to conduct a national media campaign for the purpose of reducing and preventing drug abuse among young people in the United States. As part of this legislation, the federal government allocated a billion dollars over a five year period for a mass-media based drug prevention campaign. However, after only a few years, the PDFA and ONDCP found themselves in a battle for control of the anti-drug advertising efforts over issues such as the type of ads that should be used, and whether monies should be allocated primarily to media advertising or to support a more broad-based integrated marketing communications program. Moreover, both organizations have had to deal with questions regarding the effectiveness of the anti-drug advertising campaign in reducing drug use and whether the government should continue to fund their efforts. This case can be used with Chapter 19 which deals with measuring the effectiveness of the promotional program, as well as with Chapter 22 which deals with social and ethical aspects of advertising and promotion and the use of advertising to deal with the problem of drug abuse. This case should be of interest to students as they have probably seen many of the anti-drug ads run by the PDFA and the ONDCP and can discuss whether they feel these messages have had any effect on them or their peers with regard to attitudes toward drug use or actual behavior. The classroom discussion of this case can be enhanced by showing some of the anti-drug ads created by the PDFA that are available on DVD 4 of the video supplement package. The DVD contains recent commercials developed by various ad agencies for the Partnership that address various drug problems such as the use of methamphetamines, prescription/over-the-counter drug abuse, steroids and an intervention campaign. Several of the print ads from the ONDCP’s campaigns can be found in the set of acetates that are provided in the supplement package. You might also encourage students to visit the web sites of the PDFA (www.drugfree.org) and

the ONDCP (www.whitehousedrugpolicy.gov). The PDFA web site has a section containing many the Partnerships latest commercials by category including drug, agency, audience and medium. The ONDCP site has a Media Campaign section that contains the latest television and radio commercials as well as print ads.

Discussion Questions 1. Evaluate the creative strategy used by the Partnership for a Drug Free America in its advertising campaign, particularly with respect to the use of strong fear appeals. In the early years of the PFDA campaign, numerous agencies provided pro bono creative. Many of the messages attempted to employ strong fear appeals to “scare” the audience into not using drugs. Ads showing a rat eating cocaine until it died, or in which an analogy was drawn between using drugs and pointing a gun to one’s head (a shot is heard at the very end of the commercial) along with others of this nature were commonly employed. In many of the cases, the commercials were not effective as viewers engaged in selective exposure by not watching, paid little attention to the ads or counter argued with them. As noted in the case, the ads were often exaggerated, distorted or misrepresented. The effective use of fear appeals, particularly those indicating physical harm, is often a difficult task to achieve. As noted in the text, some studies have demonstrated a curvilinear impact of fear, in which the message increases in effectiveness to a point, then decreases. In some of the early PFDA commercials, the appeals may have been too strong which limited their effectiveness. Research has also indicated that fear appeals are likely to work best with nonusers as opposed to users of drugs. Given that one of the goals of the campaign was to reach young people before they started using drugs, the use of fear appeals could be effective, as long as the level of fear is not too high. On the other hand, the likelihood of impacting users is lower. Some studies have demonstrated that more rational messages are likely to work than fear appeals, particularly with adolescents. Noting that this age group tends to be skeptical and even cynical, approaching them with a matter of fact approach might prove to be more useful than attempting to scare them. A good example of this skepticism was the famous ad “This is your brain on drugs” commercial which featured an adult frying an egg and drawing an analogy to frying one’s brain. The commercial was parodied on TV shows, bumper stickers, and t-shirts and likely did more harm to the anti-drug cause than good. Later in the campaign, the appeals were considered by the drug czar John P. Walters to be too “soft” and “indirect”. He argued that the anti-drug ads were ineffective and that the message had become diluted. Walters and the ONDCP called for stronger appeals and ads linking drug use to terrorism. The PDFA refused to produce spots that contained this message, so the ONDCP had them produced

themselves. Reaction by teens to the terrorism linked spots would seem to favor the PDFA position. While 60% of those participating in the research said that if drug money went to support terrorism they would think about not using drugs, most of the feedback indicated that the commercials were an over reaction, a “typical adult overstatement”, and insulting to them. As noted by one creative executive: “Kids told us, “I did not bomb the World Trade Center. I just smoked a joint at lunch.” The research on fear appeals indicates that they must be used carefully and pre-tested prior to being used. 2. Discuss the market segmentation strategies used by the PDFA and ONDCP in the anti-drug campaigns. Which of these segmentation strategies would be most likely to be effective? As noted in the case, a number of segmentation bases have been used in the anti-drug advertising campaign of the PDFA and ONDCP. The segmentation strategy used most often is based on demographic variables, specifically age. Throughout the PFDA campaigns, specific messages have been developed for different age groups, ranging from the very young to adults. When the ONDCP became involved, segmentation took on an even more critical role, with socio-economic, ethnicity, and geographic factors being used. The research indicating the importance and value of reaching parents led to additional attention being placed on them as a segment as well. Another important segmentation strategy used in these campaigns is based on reaching drug users and nonusers. As noted earlier, responses to various types of appeals may differ depending upon whether the individual is using drugs. Users may be less rational and less receptive to the anti-drug messages than nonusers. The latter might internalize the anti-drug messages and view them as support for the decision that they have made not to use drugs. Segmentation on the basis of geographical criteria has also been employed. Many of the commercials developed appeared to target “inner city” or urban youth, particularly those involving appeals for hard drugs like crack cocaine. In the early days of the campaign there seemed to be a perception that only those living in the inner cities used drugs. However, studies have shown young people living in the suburbs, as well as rural areas are not immune from drug abuse. Depicting drug abuse as a problem limited to the inner cities could lead to a false sense of security for suburban and rural inhabitants, or a basis for denial that the problem exists where they live. Age is another important market segmentation base. Reaching children before they begin using drugs is an important goal of the campaign. Previous research has shown that the appeals have had different impact on various age groups. Earlier research provided by the PFDA indicated that the appeals were not working with well with 13-18 year olds and considered them the most difficult segment to reach. It is obvious that appeals must be developed for different age groups, as they will have different lifestyles, needs, and motives that may impact their likelihood of using drugs. Additionally, the distinction between

appealing to kids and their parents is a critical one. For many children, their parents are their role models, and they are respected if not revered. As noted, many parents did not recognize that they still could make an impact on their children’s decision to use drugs. Thus the development of advertising strategies to reach them as well as their children is a critical one. As noted toward the end of the case, the emphasis on targeting continues to change. First there was emphasis on youth and nonusers. Then the appeals targeted parents, with the belief that they could impact their children. By the end of 2003, there was again a shift back to focusing on youth. This switch lead to a change in creative as well as media strategy. There is also a lack of consistency in respect to the appeals based on the type of drugs used. Early ads focused on hard core drugs, then the campaigns addressed less addictive substances as well as marijuana and hard core drugs, and then again shifted back to a strong focus on marijuana. This lack of concentration over the years may be contributing to the perceived ineffectiveness of the program. Regardless of the segmentation strategy employed, it is obvious that an undifferentiated strategy is not going to be successful. It should also be noted that there are different media habits for the various segments as they will not all watch the same TV shows nor read the same magazines. The Internet has become a more important medium to some segments than others. Thus, the PDFA and ONDCP will need to continue to segment the market, understand these segments and determine the most effective way to reach them if they hope to be successful. 3. Much of the controversy surrounding the anti-drug advertising campaigns has involved the determination of the effectiveness of the ads. Evaluate the various approaches used to determine the effectiveness of the anti-drug ads. What types of measures should be used to evaluate the effectiveness of the campaign? Given the tremendous amount of money spent each year to develop and run the anti-drug advertisements, measuring the effectiveness of the campaign is essential. If the government is to continue to expend hundreds of millions of dollars on the anti-drug campaigns and advertising and media companies are going to continue to contribute their time and effort, they need to be sure that this money is being well spent. In addition, they need to know which program elements are working and which are not. Therefore, the issue is not whether there measures of effectiveness should be taken, but rather what these measures should be. What is interesting about this case is that the criteria used to measure the effectiveness of the campaign may not be in line with the objectives of the campaign. As noted, many of the objectives involved the changing of attitudes toward drug use by enhancing positive aspects of not using drugs and negative aspects of social use which ultimately would lead to behavioral change. Unfortunately, many of the bases for evaluation have involved a direct attempt to equate declines in drug usage to the campaigns themselves. For example, the last two studies cited in the case used effectiveness measures that included

attitudinal and behavioral intention results, but then seemed to focus on the fact that drug had not decreased. As with other attempts to measure advertising effectiveness, it is extremely difficult to determine the direct impact of the ads on behavior. As is the case with product/service advertising, there are many other factors that will influence behavior. For products and services it may be price, availability, quality, competition and other factors. With respect to using drugs, other factors will also have an impact including peer pressure, availability, price, and characteristics of the user such as his or her self-esteem. Attempting to relate increases and decreases in drug use figures directly to the impact of the advertising campaigns is likely to be extremely difficult. Many of the studies also may have been influenced by the fact that they employ self-report measures. Asking respondents whether they saw and recall the ads may be valid measures, but attitudinal and/or behavioral measures may be impacted by socially desirable responses—particularly among adolescents. If you asked a teen their reaction or attitude toward an anti-drug ad, they will be inclined to overstate the amount of influence. If you asked them if they did drugs, or if the ads would make them less likely to do so, they may be unwilling to respond positively to the first question and negatively to the second. Thus, the survey results may be distorted. Perhaps the greatest value of the research used to measure effectiveness would be an attempt to assess recall of the messages and assign a value to the appeals themselves.

In this way, some

communications measures of the impact of the campaigns would be taken, with the information useful in developing future commercials. This information might also be useful for determining the relative effectiveness of media placements, if it could be determined where these commercials and ads were seen or heard. However, equating the effectiveness of the campaign to increases or decreases in the use of drugs may be too much to ask. 4. Discuss the merits of using an integrated marketing communications program that encompasses a variety of communication tools to prevent drug use versus an approach that relies primarily on media advertising. One of the basic premises of IMC is that the various marketing communication tools offer different advantages and disadvantages and that the utilization of an integrated approach will lead to a more effective and cost efficient communications program. This is likely to be the case for the war on drugs, though many of those involved in the PDFA might disagree. However, the anti-drug campaign may benefit from the use of a variety of IMC tools to deliver the message regarding the dangers of using drugs. However, the requirement that as much as 80% of the budget be spent on media does not support the use of an IMC approach. As noted by Richard Earle, the use of an integrated campaign designed to drive viewers to the websites of the PDFA and/or ONDCP offers great potential. As noted in the text, a number

of companies and organizations have used this strategy such as the U.S Army, Nike, Mazda, and many others. The PDFA and ONDCP would best be advised to consider a combination of mass media and other IMC tools to achieve their communication goals. A problem that might hinder the use of a more integrated campaign could be the ability to measure its effectiveness. It is very difficult to measure the effectiveness of media advertising and adding more communication tools to the mix may make it even more difficult to do so. However, the fact that an integrated approach may complicate the measurement of effectiveness, does not mean it should be abandoned. In the case, it is mentioned that the Allen Rosenshine, vice chairman of the PDFA, criticized the integrated marketing communications effort, noting that it is too complex and that establishing 19 communications objectives complicated things. He argued for an effort in which advertising and message repetition is the core of the strategy, thus simplifying the process. However, it has been noted by advertising industry journalists that that Mr. Rosenshine’s advertising agency, BBDO Worldwide, has used IMC programs for many of its clients. An additional consideration in whether the PDFA should move to more of an integrated approach is where the support for this effort will come from. The PFDA relies heavily on with pro bono work and media support which is donated by the advertising agencies and media companies. A factor to consider in the allocation mix is the impact that the shifting of the emphasis of the campaign to other IMC tools such as direct media or the Internet might have on the pro bono support the PDFA receives.

5. Evaluate the advertising campaign developed by Ogilvy & Mather for the ONDCP linking drug use with terrorism. Do you think these ads were an effective way of changing the attitudes and behavior of young people with regard to the use of drugs? Why or why not?

The goal of the drugs-and-terror campaign developed for and sponsored by the ONDCP was to link drug use with the support of terrorism by suggesting that illegal drug sales are a major source of money for terrorists. The ads implied that the weapons and other supplies used by terrorists were paid for by the money they get from drug sales. The idea behind the campaign was that people would be less likely to use illegal drugs if they understood that by using them they might be supporting terrorism. The campaign was launched five months after the September 11, 2001 terrorist attacks and was designed to capitalize on the public’s outrage over the terrorist attack as part of the effort to fight drug abuse in the United States. A second part of the campaign was designed to refute the notion that illegal drug use is a victimless crime and shifted the focus from terrorism to personal harm with ads suggesting that the purchase of drugs supported drug-cartel attacks on innocent people.

The campaign was very controversial and was criticized by many different groups. Some were critical of the government’s effort to draw a connection between drug money and terrorism, arguing that it was not fair to blame nonviolent drug users for the actions of terrorists or drug cartels. Other groups such as the National Organization for Marijuana Legalization argued that the campaign created a false impression that terrorism is caused by drugs rather than the illegality of drugs. Groups such as NORML argued that legalization of some drugs is the answer to the problem rather than trying to discourage drug use. The Partnership for a Drug-Free America was also opposed to the campaign, as it did not agree with the strategy behind the ads. The Partnership feels that the best way to deal with the problem is to promote drug resistance techniques, positive alternatives to drug use and parental involvement. The ONDCP decided to stop running the controversial campaign in May of 2003. The reason given for the decision was that the campaign put the ONDCP in a battle with the PDFA since the ads were produced outside of the Partnership by the drug office’s agency, Ogilvy & Mather. The ONDCP wanted to present a more united front with the Partnership to Congress which has to vote to extend the anti-drug campaign. The drug office announced that it would be directing more of its money toward youth-oriented media and focus its effort on halting drug use among kids rather than trying to deter them from starting to use drugs.

6. Evaluate the merits of the anti-drug advertising campaign from a social perspective. Should the government be involved in this effort or is the PDFA the more appropriate organization?

It is unlikely that anyone would challenge the goal of the anti-drug campaigns of the PDFA and ONDCP as drug use among young people is a major societal problem. As noted in the case, the original founders of the PFDA had no political agenda, and established the organization with truly altruistic goals in mind. The fact that the original concept was based on pro bono work and contributions speaks even more to the intentions of the founders and participants. The work of the PDFA over the past two decades is often recognized as an example of an effective cause-related marketing campaign and how advertising can be used to deal with a social problem. However, many experts feel that the involvement by the ONDCP altered the landscape in the use of advertising to fight the war on drugs. Critics argued that government involvement politicized the effort and interfered with the efforts of the PDFA. In addition, many disagreed with the use of tax dollars to fund the anti-drug campaign arguing that it was not really a good investment of government funds. Perhaps the biggest concern is that of direct involvement of the federal government. The PFDA consists of practitioners in the advertising and media industries and the campaign is an extension of their expertise to a worthy cause. It entails the use of advertising which is what they do day-to-day and they are

good at it. Government officials are not likely to be as knowledgeable of advertising and media strategy as those who work in these industries. The case notes the fact that the marriage between the PDFA and ONDCP was not a happy one and one might speculate as to the reasons why and who was to blame. Nevertheless, an adversarial relationship has developed that is likely to be counterproductive unless steps are taken to address the problems between the two organizations. Another factor to consider is the actual amount of government money being allocated to the campaign. One might argue that so long as the creative and media time is being provided on a pro bono basis, the effort is worthwhile as there is no direct cost to the taxpayer. However, when tax dollars are being spent to run the ads, accountability becomes much more of an issue. People want to know where their tax dollars are being spent and if it is a worthwhile use of these monies. Thus, there will be more pressure to produce positive results to demonstrate the value of the investment. The war on drugs is not the first time that advertising has bee used to address a social problem, nor is it likely to be the last. Drug use among young people is a major problem in the United States and that steps must be taken to remedy the situation. The best way to do this may yet to be determined, but advertising and other IMC tools can be of value in this ongoing battle.

XM Satellite Radio: Competing in the New Digital World Teaching Note Case Overview This case examines XM Satellite Radio Inc., the leader in the satellite-delivered radio market. XM’s founding was promoted by the radio industry’s first major technological development since the popularization of FM radio in the 1970s – the transmission of radio signals by satellite. XM launched its satellite radio service nationally in November 2001 while Sirius, its only direct competitor, launched its service in June 2002. The challenge facing both companies has been to sell consumers on the concept of satellite radio which requires the purchase of a receiver unit and payment of a monthly subscription fee for the service. The two companies are engaged in a battle for subscribers and technological leadership and have spent large sums of money over the past two years to acquire programming for their satellite systems. Many analysts predict that the two companies will have 18 to 20 million subscribers by 2010. By the end of the second quarter of 2006, XM had 6.9 million subscribers while Sirius had 4.6 million. While XM and Sirius continue to compete with one another, they also are facing competition from other digital-based technologies including MP3 players such as the immensely popular Apple iPod, Internet radio and developments that are occurring among traditional terrestrial AM and FM radio stations. The case provides a brief history and overview of XM and its programming content. There is also a discussion of the integrated marketing communications program used by XM to create awareness and generate trial when its new service was launched, including media advertising and demonstration programs that made it possible for consumers to experience the benefits offered by satellite radio. The case also includes a discussion of the competition XM is facing from Sirius, as well as other digital technologies. It concludes with a section on the current status of XM and the challenges the company faces as it struggles to attract more subscribers and achieve profitable growth. This case is based in part on an interview with Steve Cook, Executive Vice President Automotive for XM Satellite Radio, who joined the fledgling company shortly after the launch of the service.

The case illustrates how classical consumer

package goods marketing tactics can be successfully utilized to generate trial and repeat purchase in a different type of industry. The case also shows that as with all new product introductions, there is a learning curve regarding integrated marketing communications strategy and tactics. We recommend using the case with Chapter 11 of the text which deals with Broadcast Media. IMC Perspective 11-4 introduces students to the digital revolution that is impacting the radio industry. In teaching the case, the focus should be on the challenges facing XM in terms of

integrated marketing communications and what the company needs to do to continue to attract subscribers and compete with Sirius. In addition to media advertising, both companies are using a variety of sales promotion tools such as rebates, price deals, spiffs and other tactics to attract and retain customers. The case can also be used as the basis for an interesting discussion regarding developments in the radio industry and how satellite, as well as traditional terrestrial radio, is being impacted by new digital technologies. A number of ads and collateral material used by XM Satellite Radio are available in the accompanying power point file for students to examine as they prepare the case. You might also encourage them to visit the company’s web site at www.xmradio.com for current information on XM satellite radio.

Discussion Questions 1. Which competitors should XM target in the future: Sirius, terrestrial radio, MP3 players and podcasts, or Internet radio? Sirius – Targeting its only direct competitor might be the smallest opportunity strategy as Sirius currently, and over the short term at least, has the smallest user base of all the competitive options. Spending too much time focusing on Sirius might divert attention from the larger, more important job facing XM which is growing satellite radio as a viable product category. Moreover, targeting Sirius legitimizes them as an alternate satellite radio form and attacking them could undermine XM’s advertising strategy which has been to position itself as the best option to AM and FM radio. While Sirius is a direct competitor, they also are helping to grow the satellite radio category which is important for both companies if they are going to survive. It may be too early in the product life cycle of satellite radio for XM to focus its attention on trying to take customers away from Sirius. Terrestrial Radio- XM has the strongest package of benefits versus terrestrial radio and its efforts might be best applied to pointing out these advantages which include more content and program options, commercial free music, better sound quality, and the ability to listen to the same programming anywhere in the country. The greatest potential for new subscribers is in converting the huge segment of the U.S. population that currently listens to terrestrial radio. XM’s tagline, used in advertising and on their website, “Beyond AM. Beyond FM. XM.” positions the brand as the best satellite radio option and as better than traditional radio. MP3 Players - XM’s advantages versus MP3 players are primarily in the ease of use area, as XM does not require searching, downloading and uploading and there is little change required in radio listening behavior. XM is at a disadvantage, however, because it does not provide the customized play list and being able to listen to your own music whenever you want as can be done with a MP3 player. XM’s advantages relative to MP3 players are most

appealing to older consumers who seem to like the element of surprise radio gives them and enjoy listening to the personalities and genre experts XM provides. Also, they may not want to bother spending the time customizing music or other content for an MP3 player. A campaign following this approach could be run in publications that target the older segment of the market such as people over the age of 50. Internet Radio - The pros and cons of XM versus Internet radio are similar to those of the MP3 player market. However, Internet radio may be even more threatening as the streaming format allows for “real time” communication of content, and doesn’t require all the time spent to download and upload listening material. However, it may be some time before Internet radio is available in cars which is where much radio listening occurs. Combination - If only one competitor were to be chosen, XM might focus on competing against MP3 players by heavily marketing its combination XM/MP3 player unit. This would provide the most benefits to the most people, both now and in the future, as the market for MP3 players and Internet podcasting continues to explode. The combination offers the best of both “new age” formats: the infinite choice of MP3 players as well as the personalities, expertise, live content, and ease of use of XM satellite radio, including the ability to record audio content for subsequent listening. The best way to determine the optimal strategy is to assess: ▪

The size of the market segments represented by the various forms of competition

▪

The advantages XM has versus each competitor and determining whether they are important to consumers

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Projected growth rates and trends for each form of competition

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New technologies on the horizon that will make XM’s points of difference and advantages versus each competitor more or less compelling in the future

2. Should XM try to appeal to all demographic groups or target specific segments? If the latter, which segments should they target and why? What types of advertising and promotion tactics can be used to market XM to these groups? The fact that Sirius is becoming inextricably linked with Howard Stern, who appeals most strongly to young adult males, may create an opportunity for XM as Sirius may be boxing itself in from an image standpoint. This young, macho male association is further reinforced by Sirius’ other deals with NASCAR and the NFL and gives XM the opportunity to position itself more broadly to a wider age male demo as well as to the female demo, which at this point is underdeveloped. Females currently make up 35 percent of XM’s users but account for

50 percent of the U.S. population.

Another group XM can target with specific

programming and marketing is the Hispanic market. Hispanics currently make up 15 percent of the U.S. population; they have the highest growth rate of any ethnic group, and are above average consumers of radio. Since Sirius has less revenue and a smaller marketing budget than XM, the company may be unable to afford a marketing program targeting this ethnic group. Hispanics also have a tendency to be very loyal if they are satisfied with a product or service. 3. What are XM’s options for their advertising creative strategy going forward? Should they focus on their content and programming, digital sound quality, ease of use versus the other alternatives, their innovative hardware, a combination of these factors, or some other attributes? The key issue for XM is whether to pursue the same advertising creative strategy for every market segment and demographic group or whether to customize the message based on each user groups’ “hot buttons” and areas of interest. Decisions also have to be made regarding points of difference that should be communicated for XM versus the competition. The major points that can be used as the basis of the creative strategy are that XM has: a. The best overall content due to its breadth (best for families/something for everyone) b. The best sound quality as rated by objective sources such as Sound & Vision magazine c. Ease of use versus MP3 players that require searching, downloading and uploading d. The latest innovations in hardware e. A combination of these factors The print ads provided with the case shows how XM is positioning itself as the best satellite radio option based on a combination of attributes such as best hardware (portability, storage and playback features) and breadth of content (commercial free music, sports, news and talk radio, comedy, and business programming). The earlier magazine insert that appeared when XM was first introduced focused on the breadth of programming by showing all of the channels. Students can be asked what they think of XM’s advertising. They can be asked what approach they might recommend as an improvement and why. XM needs to consider

whether it should have one campaign that it uses to communicate with all of its potential customers across various media, or whether it should vary the advertising message by medium. For example, if targeting the senior population, ads might be placed in Modern Maturity (the magazine of the American Association of Retired People and the largest circulation magazine in the United States). Such an ad might focus on those XM channels that play music from the decades of the 1940’s, 1950’s and 1960’s, Frank’s Place

(that features songs by Frank Sinatra), and/or “old time radio” with shows such as “The Lone Ranger” and “Dragnet”, as well as news programming. To target females, XM might place ads in magazines such as Good Housekeeping, Redbook, Family Circle, and Oprah Magazine that feature XM’s programming for women such as Oprah & Friends, Ellen DeGeneres, iVillage, and Take 5 as well as cooking, fashion, and celebrity news. Ads aimed at the younger target audience might be placed in magazines such as Rolling Stone, Vibe, Seventeen, and Cosmo and might feature XM programming that appeals to younger audiences such as various music formats and its irreverent talk shows. Advertising that focuses on hardware might be used for specific target audiences. The new Samsung, Delphi and Pioneer products that combine an MP3 player with XM might be featured in ads directed at the 18-34 year olds, touting the benefits most important to this target - that XM provides the ultimate in choice.

Ad copy might focus on the unique

combination of benefits including the ability to have your own play list, the benefit of XM’s hip and cool stations that are the first to feature new artists, and the ability to record what is heard on XM for later listening pleasure. 4.

Are there any other sampling or promotional programs that XM should pursue to attract new subscribers and retain them? XM is doing a thorough job of sampling the product at retail through in-store demos and in automobiles, both with pre-purchase installations and through rental car programs. However, there are other opportunities to allow potential customers to sample its service in environments where they will be spending a good deal of time and be receptive to hearing music, news, or talk radio. Two examples would be on the more upscale, Metroliner and Acela train routes, similar to the Jet Blue and AirTran Airways programs, and in sports clubs where people are working out. The demographics of sports clubs are desirable for XM, as the customers tend to be young, hip, and have slightly higher incomes. The three primary ways to impact repeat purchase should be identified: 1) Increasing the percent of free trials through new user promotions that result in conversions or commitments to at least a one-year plan 2) Encouraging longer contract commitments 3) Encouraging users to buy multiple units for their homes, cars, boats, and family members

Students can be asked to identify additional tactics to encourage customer retention. For example, while XM has encouraged customer retention through the pricing of their different plan options, they could develop a buzz marketing/tell-a-friend type of promotion whereby

current users become evangelists for the product. Current users who refer a friend that signs up would get one month of XM service for free. To maximize conversion from car dealer programs, it’s important to make sure that users who have not activated the units know how to do so and how to use the service. These people can be contacted via phone several weeks after purchasing their new vehicles to see if they need help or have questions. To encourage longer contract commitments, users whose initial contract period is about to expire should be contacted via direct mail and phone and given incentives to trade-up in length of commitment, such as a special offer on the latest hardware (like cell phone companies do). 5. What type of programs can XM develop with retailers to increase their share of “aftermarket” installations? Key to creating impact at point-of-sale is the trial/display of units that allow customers to sample the XM’s sound quality and programming. Attached to these units are marketing materials such as brochures and signage that communicate XM’s marquis programming. Products should also be displayed out of the box, as impulse purchase decisions are affected by the look of the products (as with Apple iPods, where the sleek/stylized look of the product has been a key feature). It’s nearly impossible to replicate the factory installation trial programs through retail outlets, since consumers would have to purchase the hardware and pay for the installation to try the product. If consumers choose not to subscribe, they would be unable to return the hardware. To create excitement at point-of-sale, promotions could be considered such as providing a free CD with the purchase of a unit and/or a CD with commitment to a one-year subscription. This would be a win/win for retailers, as it would both drive users into the store for the promotion and would encourage them to visit both the satellite radio departments and CD music departments of the store. They might also consider using a sweepstakes whereby people who purchase an XM system would automatically be entered, or prospective customers might be encouraged to visit the company’s web site to enter. The sweepstakes prizes might include a car with a factory-installed XM satellite radio system, the opportunity to be a guest on the show of their favorite XM radio channel host, or other prizes such as a portable XM receiver or combination XM receiver/MP3 player. Both XM and Sirius currently use rebates as an extra incentive for retail buyers of their satellite radio systems. Sirius has been offering rebates of up to $100 while XM reduced its rebates to around $20 to $30 in the summer of 2006. XM has indicated that it wants to continue cutting the costs of its components to reduce prices rather than rely on rebates. However, the use of rebates has been a very effective for Sirius as the sales promotion tactic helped the company win nearly 60% of retail sales in the second quarter of 2006. XM may

have to reconsider its position on rebates if it continues to lose sales to Sirius because of the difference in the rebate offer. Consumers may be attracted to Sirius because of the larger rebate and retailers may find it easier to sell the brand over XM because of the cost savings. This may result in retailers pushing Sirius over XM and may continue to be a problem unless XM can clearly differentiate its products and programming or lower its equipment costs. Another trade promotion tool being used by XM and Sirius is push money or spiffs, as the case notes that both companies pay between $10 and $20 to retailers each time someone buys a satellite radio in a store and activates it. As long as the incentive fees are equal, neither company will gain a competitive advantage by using them. However, they may find themselves in a promotional trap whereby neither of them can eliminate the use of spiffs unless the other does so. 6. How can XM best combat the momentum Sirius gained from the advent of Howard Stern? To maximize the benefit of signing Howard Stern, Sirius focused much of their advertising budget in the four months prior to his coming and the two months after his arrival on promoting his show. A great deal of the advertising for Sirius continues to focus on Stern which means there is less emphasis on communicating the breadth of their programming. Moreover, Sirius has become inextricably linked to Stern. While Howard Stern is enjoyed by many, the “shock jock” is perceived negatively by perhaps even more.

XM has the

opportunity to differentiate itself from Sirius, seem like a better value, and appear more “wholesome” by focusing on its breadth of content. However, XM may have to be somewhat careful here as their line up includes Opie and Anthony, whose program also includes irreverent content. 7. Is there a cooperative advertising message (such as Intel Inside) that XM can further promote with its distribution partners to increase the synergy and awareness for the brand and its unique benefits? XM may be able to work with automotive companies to deliver a type of ingredient/component branding message about the benefits of having its satellite radio system as an accessory in a vehicle. XM benefits greatly when prestigious partner brands such as Lexus, Cadillac, Infiniti, Audi and others advertise that they offer XM Satellite radio in their vehicles. Since XM has 60 percent of auto makers as exclusive partners, it should receive the majority of automotive advertising that promotes satellite radio. XM might further encourage its automotive partners to promote the availability of its satellite radio system as a factory installed option by providing a cooperative advertising allowance. XM might also co-sponsor

research that demonstrates the value of having XM in a new vehicle and how it increases purchase intentions. Encouraging XM product mentions in advertising done by its automobile partner will also help increase awareness and prestige due to favorable associations with these brands. ___________________________________________________________________________ This teaching note was prepared by Professor Michele Greenwald, Visiting Professor at HEC Paris, as an aid to instructors in the classroom use of the case.