Instructor Manual for Advertising and Promotion An Integrated Marketing Communications Perspective 1 by StudyGuide

Instructor Manual for Advertising and Promotion An Integrated Marketing Communications Perspective 10th Edition By George Belch, Michae Belch.

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

Learning Objectives 1. To examine the marketing communication function and the growing importance advertising and other promotional elements play in the marketing programs of domestic and foreign companies. 2. To introduce the concept of integrated marketing communications (IMC) and consider how it has evolved. 3. To examine the reasons for the increasing importance of the IMC perspective in planning and executing advertising and promotional programs. 4. To introduce the various elements of the promotional mix and consider their role in an IMC program. 5. To examine the various types of contact points through which marketers communicate with their target audiences. 6. To introduce a model of the IMC planning process and examine the steps in developing a marketing communications program.

Chapter 01 - An Introduction to Integrated Marketing Communications

Chapter and Lecture Outline I.

INTRODUCTION TO ADVERTISING AND PROMOTION

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

THE GROWTH OF ADVERTISING AND PROMOTION

Advertising and promotion are integral parts of our social and economic systems. Advertising has evolved into a vital communication system for both consumers and businesses. In market-based economies, consumers rely on advertising and other forms of promotion to provide them with information they can use in making purchase decisions. Corporations rely on advertising and promotion to help them market their products and services. Evidence of the increasing importance of advertising and promotion in the marketing process comes from the growth in expenditures in these areas over the past decade. In 1980, advertising expenditures in the U.S. were $53 billion and $49 billion was spent on sale promotion. By 2013 an estimated $198 billion was spent on advertising while sales promotion expenditures increased to more than $300 billion! Advertising expenditures outside of the U.S. increased from $55 billion in 1980 to $365 billion by 2013. Billions more are spent by both domestic and foreign companies in other promotional areas such as direct marketing, event sponsorship, interactive marketing, sponsorships and public relations. The tremendous growth in expenditures for advertising and promotion reflect the growth of the U.S. and global economies. Expansion-minded marketers are taking advantage of growth opportunities in various regions of the world and taking advantage of integrated marketing opportunities through methods such as event sponsorship and the use of the Internet. Particularly noteworthy is the increase in the amount of marketing communications dollars being spent online. Nearly $21 billion was spent for online and mobile search marketing in 2013 and another $4.6 billion on social media sites. Spending on Internet advertising – which includes mobile, social, display, and search ads – is growing rapidly and is expected to account for over 20 percent of advertising expenditures by 2014. Professor Notes

Chapter 01 - An Introduction to Integrated Marketing Communications

III.

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

Chapter 01 - An Introduction to Integrated Marketing Communications

IV.

INTEGRATED MARKETING COMMUNICATIONS

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

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

Chapter 01 - An Introduction to Integrated Marketing Communications

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

Reasons for the Growing Importance of IMC—There are a number of reasons why marketers are adopting the concept of IMC. A very fundamental reason is that they recognize the value of strategically integrating the various communication functions rather than having them operate autonomously. The move also reflects an adaptation by marketers to a changing environment, particularly with respect to consumers, technology and media. One of the major developments hat has led to the adoption of IMC is the fragmentation of media and the shift from mass to micromarketing. Advances in technology are also impacting IMC, particularly, the transformation of the Internet (Web 2.0) which is discussed in Digital and Social Media Perspective 1-1. The IMC movement is also being driven by a “marketing revolution” that is changing the ways companies market their products and services. Major characteristics of this marketing revolution include: • • •

•

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

V. The Role of IMC in Branding – one of the major reasons for the growing importance of integrated marketing communications over the past decade is that it plays a major role in the process of developing and sustaining brand identity and equity. Brand identity is a combination of many factors including the name, logo, symbols, design, packaging, and performance of a product or service as well as the associations that come to mind when consumers think about a brands. It is the sum of all points of encounter or contact that consumers have with a brand which includes the various forms of integrated marketing communication used by a company. Figure 1-1 shows the world’s 10 most valuable brands from the 2013 Interbrand rankings. IMC Perspective 1-1 discusses how branding has entered the relationship era. This IMC Perspective is based on an article by written by Doug Levy and Bob Garfield that appeared in Advertising Age and might be assigned as additional reading for students. The chart provides an interesting comparison of the older consumer era to the new relationship era.

Chapter 01 - An Introduction to Integrated Marketing Communications

VI.

THE PROMOTIONAL MIX: THE TOOLS FOR IMC

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

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

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

the cost of producing and placing ads can be very high, particularly television commercials it can be difficult to determine the effectiveness of advertising there are credibility and image problems associated with advertising 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

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

Chapter 01 - An Introduction to Integrated Marketing Communications

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

Digital/Internet Marketing –digital media allow for a back-and-forth flow of information whereby users can participate in and modify the content of the information they receive in real time. The major interactive medium is the Internet, which is a global collection of computer networks linking both public and private computer systems. While the most prevalent perspective on the Internet is that it is an advertising medium, it is actually a medium that can be used to for other elements of the promotional mix as well including sales promotion, direct marketing, and public relations. The extensive penetration of smartphones) is leading to a rapid growth in mobile marketing whereby marketing messages are sent directly to these devices. Digital and Social Media Perspective 1-2 provides interesting insight into how Nike has shifted much of its marketing budget to digital media. Advantages: • the Internet can be used for a variety of integrated marketing communication functions including advertising, direct marketing, sales promotion, public relations and selling. The Internet is also the foundation for social media sites such as Facebook and Twitter, which are becoming an integral part of many marketers IMC programs, as well as mobile marketing • messages can be tailored to appeal to the specific interests and needs of the target audience • the interactive nature of the Internet leads to a higher degree of customer involvement when customers are visiting a web site.

Chapter 01 - An Introduction to Integrated Marketing Communications

•

the Internet makes it possible to provide customers with a great deal of information regarding product and service descriptions and specifications, purchase information and more. Information provided by marketers can be updated and changed continually. The Internet has tremendous creative potential as a well-designed 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 • the Internet is not yet a complete mass medium as some U.S. households do not have access to the Internet and many do not have broadband access. In some countries this percentage is much higher. • there are problems with the Internet as an advertising medium as many Internet users do not pay attention to banner ads and the click-through rate on most is extremely low. • there is a great deal of clutter on the Internet which makes it difficult for advertising messages to be noticed and/or given attention. D.

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

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

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

Chapter 01 - An Introduction to Integrated Marketing Communications

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

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

Personal Selling—direct person-to-person communication whereby a seller attempts to assist and/or persuade prospective buyers to purchase a company’s product or service or act on an idea. Advantages: • direct contact between buyer and seller allows for more communication flexibility • can tailor and adapt message to specific needs or situation of the customer • allows for more immediate and direct feedback • promotional efforts can be targeted to specific markets and customers who are best prospects Disadvantages: • high cost per contact ($155 to $300, depending on the industry) • expensive way to reach large audiences • difficult to have consistent and uniform message delivered to all customers

Chapter 01 - An Introduction to Integrated Marketing Communications

Professor Notes

VI.

IMC INVOLVES AUDIENCE CONTACTS

The various promotional mix elements are the major tools that marketers use to communicate with current and/or prospective customers as well as other relevant audiences. Many companies are taking an audience contact perspective in developing their IMC programs whereby they consider all of the potential ways of reaching their target audience with their messages. The various ways that a customer can come into contact with a company or brand is are shown in Figure 1-5. It is the responsibility of those involved in the marketing communications planning process to determine how each of these contact tools can be used to communicate with the target audience and how they can be combined to form an effective IMC program. New to this edition is a discussion of four basic categories of contact or touch points which include: •

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

•

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

•

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

•

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

VII.

THE IMC PLANNING PROCESS

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

which promotional tools to use and how to combine them effectively determining the size of and distributing the advertising and promotional budget determining the influence of various factors on the promotional mix including the type of product, target market, decision process of the buyer, stage of the product life cycle, and channels of distribution

Chapter 01 - An Introduction to Integrated Marketing Communications

This process is guided by the development of the integrated marketing communications plan which provides the framework for developing, implementing, and controlling an organization’s IMC program and activities. At this point it is helpful to go through the Integrated Marketing Communications Planning Model presented in Figure 1-7 of the text. The steps in the Integrated Marketing Communications Planning Model include: 1.

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

Promotional Program Situation Analysis - Internal Analysis - External Analysis

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

Budget Determination – two basic issues must be addressed with regard to the IMC budget: • How much money will be spent on marketing communication • How the money will be allocated across the various IMC tools Developing the Integrated Marketing Communications Program - the most involved and detailed part of the promotional planning process occurs at this stage as decisions have to be made regarding the role and importance of each IMC tool and their coordination with one another. Each IMC tool has its own set of objectives, budget, messaging, and media strategy. These include: • Advertising message and media strategy and tactics • Direct marketing message and media strategy and tactics • Interactive/Internet Marketing message and media strategy and tactics • Sales promotion message and media strategy and tactics • Public relations/publicity strategy and tactics • Personal selling – sales strategy and tactics Integrating and Implementing Marketing Communications Strategies – the various IMC tools must be integrated and steps must be taken to implement them. Most large companies hire external agencies to plan and develop their creative messages and media strategies as well as to implement them.

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

Chapter 01 - An Introduction to Integrated Marketing Communications

Professor Notes:

Teaching Suggestions This initial chapter is designed to provide the student with an overview of the field of advertising and promotion and a brief look at the role of IMC in the marketing process. The instructor should be careful not to go into an in-depth discussion of marketing since this is covered in detail in chapter 2. You should introduce the concept of integrated marketing communications discuss its evolution, and note how this approach differs from more traditional perspectives of advertising and promotional planning. In this edition we have provide an updated perspective of IMC which recognizes that it involves more than just coordinating the various elements into a “one look, one voice” approach. It is important to define the six elements of the promotional mix, discuss their role as marketing communication tools, their advantages and limitations. Note that our view of the elements of the promotional mix goes beyond the traditional communication tools of advertising, sales promotion, publicity/public relations and personal selling, as we also include direct marketing and digital/internet marketing as part of the mix. Direct marketing and digital/Internet have become major methods by which modern-day marketers communicate with their target audiences and we feel they are best viewed as distinct IMC tools. You should also emphasize that there are a variety of ways by which customers come into contact with a company and/or its brands. There is a discussion of IMC involving audience contacts and Figure 1-5 of the text is an excellent way of showing the various contact tools. New to this edition is a discussion of four major categories of contact points which have been noted by Tom Duncan. When discussing these various types of contact points, you might use Figure 1-6 to explain how these four types of contact points differ in terms of their effectiveness and a company’s ability to control or influence them. It is important to review the various factors that underlie the adoption of an IMC approach to advertising and promotion by many companies. You might also spend some time discussing the pros and cons of IMC. Although we advocate the IMC approach in this text, the discipline is still evolving. Excellent articles regarding the role and status of IMC can be found in special issues of the Journal of Advertising Research (March 2004, Volume 44. No. 1) and the Journal of Advertising (Winter 2005, Volume 34, No. 4). During an introductory lecture there is latitude to discuss various issues and aspects concerning each promotional mix variable. For example, various perspectives regarding advertising such as its social and economic effect might be noted along with common complaints and criticisms of advertising. We do not suggest going into a detailed discussion of these charges at this early stage of the course. We feel that students are best able to evaluate and appraise various arguments for and against advertising and other promotional mix elements toward the end of the course. Thus, the final chapter of the text evaluates the social and economic aspects of advertising. We feel that it is important in either the first or second lecture to cover the integrated marketing communications planning model in some detail. This text is built around this model and it provides the student with the “big picture” as to the decision sequence and various considerations involved in the development of an advertising and promotional program. It is also important to communicate to students that advertising and promotion management is a process. A great deal of internal and external analyses, as well as the coordination of the promotional mix elements, is required to develop an effective program of marketing communications that can be integrated into an organization’s overall marketing strategy and tactics.

Chapter 01 - An Introduction to Integrated Marketing Communications

Answers to Discussion Questions 1. Discuss the role of integrated marketing communications in the marketing program of a product such as Gatorade. How can Gatorade use the various IMC tools to achieve its objectives of expanding into the sports nutrition market? (LO2,05) Integrated marketing communications play a very important role in the marketing program for Gatorade. A variety of IMC tools are used to provide consumers with information about the various items in the Gatorade product line as well as to build and maintain its brand image. Gatorade uses all aspects of the promotional mix to market its sports beverages and nutritional products. Gatorade still spends heavily on mass media advertising through television, magazines, and banner ads to drive awareness, communicate information and maintain its brand identity. Gatorade advertises heavily during televised collegiate and professional sporting events such as football and basketball games and also uses print ads in various sports magazines such as Sports Illustrated and ESPN The Magazine and various vertical publications that focus on specific sports and fitness. Digital/internet advertising has also become an important part of the IMC program for Gatorade as online display ads are used as well as a variety of social media tools such as Facebook, Twitter and YouTube. Gatorade, like many other brands, has created its own YouTube channel where consumers can watch commercials for the brand as well as vides such as the “Everything to Prove” webisodes. The Internet has become an important IMC tool for Gatorade as they expand their product line as consumers can visit the their website (www.gatorade.com) to get information about the various G Series products as well as learn more about sports nutrition, hydration and recovery. Publicity/public relations is also an important part of the IMC program of Gatorade. The company’s uses the FleishmanHillard agency to handle its media relations and generate publicity for the brand such as through PR activities that result in stories in magazines, newspapers and various online news sources. Gatorade also uses sponsorships through its partnerships with professional sports leagues such as the NBA, NFL, MLB and NHL and individual teams as well as its sponsorship of major sporting events. Gatorade also uses various forms of nontraditional media to communicate with its core market of 13 to 17-year old performance focused athletes such as the Gatorade Mobile Locker Room which made its way to high schools across the country. Sales promotion is also an important part of the promotional mix for Gatorade including both consumer and trade promotions. Trade promotions are used to encourage retailer to stock and promote the Gatorade product line while consumer promotions such as contests, sweepstakes, coupons, price-off deals and other incentives are used to generate sales in stores. Personal selling is also an important part of Gatorade’s marketing program as the company has a sales force that calls on retail accounts. Gatorade recently rolled out its G-Force, which is a dedicated sales and marketing team that visits retailers and champions its products at a local level. Many of the members of the G-Force team are former college athletes who are hired specifically for their athletic knowledge and sports expertise. 2. Evaluate Gatorade’s decision to launch the new G Series product line and the challenge this represents to the company from an integrated marketing communications perspective. (L02,05) Gatorade’s decision to launch the new G Series product line is part of the company’s strategy to move beyond the sports beverage market and expand into the broader sports nutrition market. This strategic decision was largely based on the decline in sales for sports drinks which are facing increased demand from new types of beverages such as vitamin fortified water, energy drinks, and protein powders. Even though Gatorade maintains a dominant market share for sports drinks, the company has found it difficult to maintain its growth objectives as this market declines. Thus, expansion into the much larger sports nutrition market provides Gatorade with new growth opportunities by providing consumers with a full spectrum of sports nutrition products that go beyond hydration. As part of its new strategy to evolve from a sports drink company to a sports performance innovator, Gatorade is covering the sports nutrition market with a full spectrum of products designed to get the 1-13 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01 - An Introduction to Integrated Marketing Communications

body ready for exercise and help recover afterward including beverages, energy bars, gels, protein shakes and various other nutritional products. The first part of the new plan involved the repackaging and positioning of its three core product lines – the G Series, G Series Fit, and G Series Pro - with each consisting of multiple products designed to help athletes before, during and after practice, workouts, or competition. To implement its new strategy, Gatorade had to achieve a number of marketing communication objectives including driving awareness, trial and scientific understanding of the G-Series among the core performance target market as well as building scientific credibility and trust among key influencers. Consumers had to be educated on how the new G Series was designed to meet their nutritional needs before, during and after activity. Marketing platforms also had to be created through which Gatorade could share information on the new product line, deepen consumer engagement and deliver insights from competitive athletes and sports health professionals. While Gatorade still uses traditional media advertising, it has reduced its media spending and has developed fully integrated marketing campaigns that utilize a variety of tools to connect with consumers including grassroots efforts, sponsorships, the Internet and social media. 3. Discuss the role integrated marketing communications plays in the marketing program of companies and organizations. Discuss some of the reasons for the for the tremendous growth of in advertising and other forms of marketing communications in the United States as well as in global markets (L01). Integrated marketing communications plays a critical role in the marketing program most companies and organizations as it provides them with a way to communicate with consumers and help them influence their purchase decisions or other types of behavior. The fragmentation of mass markets, the rapid growth of the Internet and digital media, changing lifestyles and media consumption patterns of consumers are all factors leading to the growth of IMC. One of the key factors underlying the growth of advertising and other forms of marketing communication in the U.S. is the economic recovery. Advertising spending generally moves with the economy as companies spend more monies on advertising and other forms of marketing communication during good economic times. Many countries outside the U.S. are also experiencing strong economic growth which is leading to more spending on advertising and promotion such as the BRIC nations of Brazil, Russia, India and China. Many companies are also focusing on downstream activities such as marketing and brandings to achieve competitive advantage which is leading to more monies being spent on advertising and other forms of marketing communication. 4. Discuss how integrated marketing communications differs from traditional advertising and promotion. What are some of the reasons marketers are taking an IMC perspective to their advertising and promotional programs? (L01) 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. There are many reasons why the IMC approach is becoming so popular among marketers. Probably the most fundamental reason is that marketers are recognizing the value of strategically integrating

Chapter 01 - An Introduction to Integrated Marketing Communications

the various communication functions rather than having them operate autonomously. By coordinating their marketing communication efforts, companies can avoid duplication, take advantage of synergy among various communication tools, and develop more efficient and effective marketing communication programs. The movement toward IMC is also being driven by changes in ways companies market their products and services. As discussed on pages 11-16 of the text, there is an ongoing revolution that is changing the rules of marketing and the role of traditional media advertising. Important aspects of this revolution include: a shifting of marketing dollars from media advertising to other forms of promotion, a movement away from relying on advertising-focused approaches (which rely on mass media such as television and magazines) to solve communication problems, a shift in marketplace power from manufacturers to retailers, the rapid growth of database marketing, demand for greater accountability from advertising agencies and the way they are compensated, and the rapid growth of the Internet. The growth of the integrated marketing communications is very likely to continue as it is being driven by fundamental changes in the way companies market their products and services resulting from the ongoing revolution that was discussed above. Moreover, many marketers and advertising agencies recognize the importance of taking an IMC approach and are becoming advocates of integration. The move to integrated marketing communications also reflects an adaptation by marketers to a changing environment, particularly with respect to consumers, technology and media. Major changes are occurring among consumers, particularly with respect to media use and buying and shopping patterns. Many consumers are turned off by traditional advertising which is leading marketers to look for alternative ways to communicate with their target audiences. The continued fragmentation of media markets and rapid growth of interactive media and online services are also creating new ways for reach consumers. While IMC will continue to have its critics and may undergo some changes, it is very unlikely that we will see a return to the traditional system where advertising in mass media dominates and advertising and other forms of promotion function autonomously. 5. Discuss how the digital revolution is impacting the way marketers plan and implement their integrated marketing communications programs. Identify three specific technological developments and discuss how each is impacting the IMC program of companies. (L03, 04). As discussed in Digital and Social Media Perspective 1-1, there are many technological developments that are impacting IMC. Cable and digital satellite systems have vastly expanded the number of channels available to television viewers which is contributing to the fragmentation of media markets. The average household in the U.S., as well as many other countries, now receives 135 television channels versus 60 at the beginning of the new millennium. The proliferation of channels as well the penetration of new technologies such as DVRs, video-on-demand, and shows that can be streamed to HDTV sets, personal computers or tablets via Netflix or Hulu Plus is also impacting television. The long predicted convergence of television with computers has become a reality as consumer now have many other viewing options beyond the programming offered by the television networks. The rapid penetration of the Internet is another development which is leading to media fragmentation as hundreds of millions of consumers are now online and can visit a myriad of different web sites. However, time spent on the Internet competes for time spent with traditional media such as television, radio, newspapers and magazines. One of the most significant changes is the penetration of smartphones as more than half of U.S. adults now own one and are using them to access the Internet. The growth in tablets such as the iPad and various devices using Google’s Android operating system are also bring yet another type of screen into the lives of many consumers. Most magazines and newspapers have developed digital versions of their publications for consumers who want to read them online as well as on their mobile devices. Marketers are responding to these changes by increasing their spending on highly targeted media that reach specific market segments. Monies that have traditionally been spent in broadly targeted mass media are now being allocated to more specialized media that reach specific market segments. Marketers are developing mobile marketing

Chapter 01 - An Introduction to Integrated Marketing Communications

applications that can deliver messages and promotional offers directly to consumer’s mobile devices and can be targeted to specific locations or consumption situations. They are also recognizing that it has become increasingly difficult to reach consumers through the mass media and are using a variety of other IMC tools such as sponsorships, branded entertainment, publicity/public relations, digital and social media (such as Facebook and Twitter) and in-store media to reach consumers. The Internet is another technological development having a tremendous impact on the way companies design and implement their entire business and marketing strategies as well as their integrated marketing communications programs. Companies ranging from large multinational corporations to small local firms have developed websites to promote their products and services by providing current and potential customers with information, building images for their companies and brands and even selling their products or services directly over the Internet. While many view the Internet as an advertising or promotional medium, it really is a marketing communications tool that can be used to execute all elements of the promotional mix. Companies can advertise on the Internet by running banner ads or sponsorships on the websites of other companies or organizations. Marketers can offer sales promotion incentives such as coupons over the internet and they can offer contests and sweepstakes online and encourage consumers to visit their web sites to enter them. Many companies are using the Internet for direct marketing. Companies such as Dell, L.L. Bean and Under Armour have made the Internet a major part of their direct-marketing efforts and encourage consumers to visit their websites to view their merchandise and to place orders online. Companies are also using the Internet for publicity and public relations activities as many activities such as the sending of press releases can now be done online. Many companies also maintain press releases on their web sites which can be accessed by the media and other relevant publics to learn more about these companies and their products and services. 6. Discuss how brand building is changing as marketing moves from the consumer era to the relationship era. Find an example of a company that has made the transition to the relationship area and discuss how it has done so. (L03) Branding involves building and maintaining a favorable identity and image of the company and/or its products or services in the mind of the customer. It involves building and maintaining brand awareness and interest, developing and enhancing favorable attitudes, and building and fostering relationships through interactions between customers and the brand. Brand identity is a combination of many factors including the name, logo, symbols, design packaging and performance of a product or service as well as the image or type associations that come to mind when consumers think about a brand. It is the sum of all the points of contact and/or interaction that consumer have with a brand. These contacts often come from various forms of IMC activities used by a company including media advertising, sponsorships, websites on the Internet, social media, sales promotion activities, direct mail and collateral materials. Consumers can also have contact with or receive information about a brands through in-store media such as point-of-purchase displays; articles they read, see and//or hear in the media; or through direct interactions with a company representative such as a sales person. Some companies are finding that finding new ways to build brands that include more than just spending large sums of money on media advertising. In the relationship era, companies are recognizing that trust and transparency are key factors that consumers use to evaluate companies, decide whether to purchase their products and services, and become loyal to their brands. Companies must be able to build sustainable relationships with consumer s based on honesty, engagement and authenticity rather than through a clever ad slogan. Some firms are recognizing that an effective way to build brand equity is by letting consumers experience their brands. Apple has opened hundreds of retail stores where consumer come in and experience products such as iPod, iPhones, iPads and Mac computers first hand. Starbucks has relied very little on media advertising to build its brand but rather has created a hip, relaxed atmosphere where consumer can receive quality products and excellent customer service. Some companies are also turning to branded entertainment as a way of 1-16 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01 - An Introduction to Integrated Marketing Communications

connecting with consumers and making their products and services part of movies and television shows. Google is another example of a company that has built a very strong brand image without using mass-media advertising. The company receives a tremendous amount of publicity because of the popularity of its search engine and its expansion into new markets and areas of advertising and marketing. The key to building successful brands in the future is not just for marketers to get consumers to buy their brands but to get them to buy into their brands. Students should be encouraged to find examples of companies that have built their brand equity through strong relationships with consumers. You might encourage them to visit the Interbrand website which ranks the world’s best global brands (http://www.interbrand.com/en/best-global-brands/2013/Best-Global-Brands2013.aspx) each year for examples. 7. Discuss the opportunities and challenges facing marketers with regard to the use of mobile marketing. What are some of the ways marketers can use mobile marketing as part of their IMC program. (L04,05) The Mobile Marketing Association defines mobile marketing a set of practices that enables organizations to communicate and engage with their audience in an interactive and relevant manner through any mobile device or network. It involves the use of wireless media, primarily smartphones, as an integrated content delivery and direct response vehicle within a cross-media marketing communications program. The growing popularity of smartphones, tablet PCs, and other handheld mobile devices along with the decision of the various wireless carriers to open their mobile phones services to these messages is opening up new marketing opportunities. Marketers are already sending interactive messages to consumers that contain promotional offers such as coupons that can be redeemed at the point-of-purchase. Many of these mobile messages are specific to a consumers’ location or consumption context. One of the major factors driving the growth of mobile marketing is the development of shopping services and apps that consumers can use to make shopping more efficient, productive and fun. Marketers are also developing their own brand specific applications such as games, video, and promotional offers as part of their mobile marketing programs. One of the challenges marketers will face with mobile marketing is possible resistance from consumers. Many consumers do not want to be bombarded with messages to their cell phones or other mobile devices. Thus, marketers will be dependent upon consumers “opting in” to receive these messages. There is also the issue of screen size which may limit the type of messages that be sent to mobile devices. However, it is likely that most marketers will tie-in their mobile marketing efforts to other components of their IMC programs such as sales promotions or incentives to visit a web site. Thus, mobile marketing will become yet another way for marketers to deliver messages to consumers and get them to take some form of action that helps in the marketing process. 8. What is meant by a customer contact or touch point? Choose a specific company or brand and discuss how it is using the four categories of contact points discussed in the chapter. (L05) 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

Chapter 01 - An Introduction to Integrated Marketing Communications

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. 9.

Evaluate Nike’s decision to move away from the use of traditional mass-media advertising and focus more of its marketing budget on digital media. Do you agree with this decision or do you think Nike should be allocating more of its IMC budget to traditional media advertising? (L05,06) For decades Nike relied primarily on mass-media advertising as their primary way to communicate with consumers and deliver its marketing messages. However, Nike is moving away from the use of mass-media advertising as they feel there are other IMC tools that may be more effective and provide a better return-on-investment for their marketing expenditures. Nike now views digital media as a more cost effective way to reach its target audience of younger consumers as they can be reached more easily online rather than through traditional media. Moreover, it is often very difficult to measure the return-on-investment for mass media advertising as there is no direct way to determine who is viewing, hearing, or reading a television, radio or print ad. Nike, like many other companies, prefers to use more targeted integrated marketing tools such as the Internet and social media where it is easier to measure response to an ad using various measures such as page views, click throughs, and other analytics. Nike is also using digital media to conduct direct marketing as well as build online communities of customers with whom they can interact on a regular basis. The use of social media has also become very important to Nike as they now have a Facebook page for nearly all of their brands which can be used to communicate with consumers and engage them in various ways. Rather than relying on traditional media, Nike often will release new commercials and other types of videos through various forms of social media such as Facebook as well as on their YouTube channel. Nike also recognizes that the use of social media is important is maintaining its image as a cool, interesting, innovative, and relevant brand among younger consumers. Most students will agree with the decision by Nike to allocate most of their IMC budget to digital media. However, there are also strong arguments as to why Nike should continue to use traditional media such as television and magazine advertising. Nike built its brand through the effective use of television and print advertising developed by its long-time agency Wieden+ Kennedy. For several decades W+K developed very powerful and impactful TV commercials that used some of the world’s top athletes such as Michael Jordan, Bo Jackson, Tiger Woods and others. One can argue that Nike should not totally abandon the approach that was very successful in making it the world’s most valuable sports brand. There is also a great deal of selectivity available today for traditional media through cable television, sports programming and magazines that reach various segments of the athletic and fitness market. Nike may be able to reach the younger consumer through traditional media and do so in an impactful way with ads created by W+K.

10. Why is it important for those who work in the field of advertising and promotion to understand and appreciate all the various integrated marketing communication tools, not just the area in which they specialize? (L05, 06) In today’s business world, marketers use a variety IMC tools to communicate with their customers. The various promotional mix elements have to be viewed as component parts of an integrated marketing communications program. An individual IMC activity such as advertising or sales promotion cannot be managed without considering its relationship to other promotional mix elements. Individuals working in various areas of advertising and promotion are expected to understand and use a variety of marketing communication tools, not just the one in which they specialize. For example, advertising agencies no longer confine their services to creating and placing ads. Many agencies are involved in sales promotion, public relations, Internet/interactive media, direct marketing, event

Chapter 01 - An Introduction to Integrated Marketing Communications

sponsorship and other communication areas. Thus, it is important for those who work in advertising and promotion, either on the agency or client side, to understand and appreciate the value and limitations of all the promotional mix elements and how they can be combined to develop an effective program of integrated marketing communications.

Additional Discussion Questions (not shown in text) 11. Compare the definition of integrated marketing communications developed by Don Schultz with the original definition that was developed by the American Association of Advertising Agencies. How do they differ? (L02) The new definition of IMC developed by Don Schultz of Northwestern University is as follows: “Integrated marketing communications is a strategic business process used to plan, develop, execute and evaluate coordinated, measurable, brand communications programs over time with consumers, customers, prospects, employees, associates and other targeted relevant external and internal audiences. The goal is to generate both short-term financial returns and build long-term brand and shareholder value.” This definition differs from the seminal definition of IMC developed by the 4As in several ways. It views IMC as an ongoing strategic business process rather than just tactical integration of various communication activities. It also recognizes that there are a number of relevant audiences that are an important part of the marketing communications process. These include customers, prospects suppliers, investors, interest groups, and the general public as well as internal audiences such as employees. The definition also reflects the increasing emphasis that is being placed on the demand for accountability and measurement of the outcomes of marketing communication programs. The original definition developed by the 4As has been criticized for focusing primarily on coordinating the various communication tools with the goal of making them look and feel alike. Both academicians as well as practitioners are recognizing that the broader perspective of IMC offered in the definition by Schultz is needed as it views the discipline from a more strategic perspective. 12. Choose a company and discuss how it communicates with its customers at the corporate, marketing, and marketing communications levels. (L01) Messages can originate at all three levels since all of a company’s corporate activities, marketing mix activities, and marketing communications efforts have communication dimensions and play a role in attracting and maintaining their customers. Students should be encouraged to choose a company and analyze how it communicates with its customers at each of these levels. At the corporate level the analysis should focus on how a firm’s business practices and philosophies, policies and procedures, hiring practices, corporate culture, and other factors communicate with customers and other relevant stakeholders. At the marketing level, the analysis should focus on how the company communicates through various elements of the marketing mix. The physical product communicates a great deal to consumers through elements such as shape, design or appearance of the actual product or the packaging. The price of a product may also send a message about quality. The brand name of a brand also is a form of communication. Companies also communicate with consumers through the choice of retail outlets where they choose to sell their products. Selling a product only through upscale specialty or department stores may communicate that it is a high quality item. On the other hand, selling a product through discount stores or mass merchandise outlets may send a cue of lower quality. There are many examples of how consumers communicate with consumers through their marketing activities. You might talk about products such as expensive watches (Concord, Movado, or Rolex) and how they are priced high, sold only through jewelry store or high end department stores and designed to reflect an image of quality, prestige and style. On the other hand brands such as Timex and Casio are designed more for function or sport, are priced lower, and sold in drug stores, sporting goods stores and mass merchandise outlets. At the marketing communications level, the analysis

Chapter 01 - An Introduction to Integrated Marketing Communications

should focus on the various IMC tools the company uses such as advertising, direct marketing, its web site, sales promotion messages, publicity/public relations activities such as event sponsorships, and personal selling efforts. The analysis of the company should consider whether all of these IMC tools communicate with one look, voice, and image and position and identify the company and/or brand in a consistent manner. 13. Why are marketers putting so much emphasis on developing strong brands? Choose one of the World’s 10 Most Valuable brands listed in Figure 1-1 and discuss how the company has used integrated marketing communications to build a strong brand image. (L03) There are a number of reasons why marketers are putting so much emphasis on building strong brands. Consumers have a tremendous number of choices available in nearly every product or service category and are have less time available to make purchase decisions. Thus they are putting a great deal of emphasis on well-known and trusted brand names to help simplify their decision making process. Also, consumers are often willing to pay a price premium for well-known brands which provides marketers with higher profit margins and helps them avoid price competition. Consumer product companies, as well as business-to-business marketers, recognize that brand equity is a very important asset and they are taking steps to build and maintain brand equity. Students should be encouraged to select one of the top 10 brands listed in Figure 1-1 and analyze how the company has used IMC to build a strong image. This analysis might include examination of the company’s advertising, sales promotion programs, product and service quality, public relations efforts, sponsorships, web site and other communication elements. 14. The various classifications of advertising to consumer and business-to-business markets are shown in Figure 1-4. Choose one category of advertising to consumer markets and one to the business-tobusiness market and find an ad that is an example of each. Explain the specific goals and objectives each company might have for the ad. (L04) Students should be encouraged to choose one of the various classifications of advertising to consumer and business-to-business and professional markets, find an ad that they feel is an example of each and explain the company, association or organization’s goals and objectives for the ad. Basic descriptions of each classification of advertising is provided in Figure 1-4 along with insight as to what the goals or objectives might be for using this type of advertising. This assignment is helpful in getting students to recognize that the nature and purpose of advertising varies from one industry to another and/or across situations. For example, you might encourage them to find an example of advertising done either by a company or an industry trade association where the focus is on primary demand stimulation. Advertising campaigns by the Beef Board, National Pork Producers Council, or Potato Board are all very good examples of primary demand advertising Students might also be encouraged to look in some industry or trade publications for examples of business-to-business or advertising targeted at retailers. Publications such as Progressive Grocer or Drug Store News are a good source of trade advertising. 15. What is meant by primary versus selective demand advertising? Provide examples of each. Discuss when a marketer might focus on primary demand stimulation versus selective demand stimulation. (L04) Primary demand advertising is designed to stimulate demand for the general product class or entire industry. Selective demand advertising focuses on creating demand for a specific company’s brand or a product or service. Primary demand advertising is often done by industry trade associations to generate demand for the product category. This is often done for commodity products where it is difficult to differentiate an individual brand or association members recognize the value of promoting the product category. Examples include products such as milk, orange juice, pork, beef, potatoes, 1-20 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01 - An Introduction to Integrated Marketing Communications

avocados and raisins. Primary demand advertising is sometimes done by a company whose brand(s) dominates the market and will benefit the most from demand generation. For examples Gatorade has over 70 percent of the sports drink market and its ads often promote the value of its products for hydration versus water. Most advertising focus on selective demand as the goal is to create demand for a specific brand. Thus the advertising will emphasize reasons for purchasing a particular brand and focus on differentiating a particular brand of a product or service from the competition.

Chapter 02 - The Role of IMC in the Marketing Process

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

Learning Objectives To examine the marketing process and the role of advertising and promotion in an organization’s integrated marketing program. 1. To understand the marketing process and the role of advertising and promotion in an organization’s integrated marketing program. 2. To know the various decision areas under each element of the marketing mix and how they influence and interact with advertising and promotional strategy. 3. To understand the concept of target marketing in an integrated marketing communications program. 4. To recognize the role of market segmentation and its use in an integrated marketing communications program. 5. To understand the use of positioning and repositioning strategies.

Chapter and Lecture Outline I.

INTRODUCTION TO MARKETING AND PROMOTIONS PROCESS MODEL

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

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

Chapter 02 - The Role of IMC in the Marketing Process

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

II.

MARKETING STRATEGY AND ANALYSIS

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

Opportunity Analysis—a careful analysis of the marketplace should lead to alternative market opportunities or areas where the company feels there are favorable demand trends, where customer needs and/or wants are not being satisfied and where it could compete effectively. Market opportunities are usually identified by examining demand trends in various market segments. The discussion can focus on how market opportunities are identified and recent examples of companies finding and exploiting them. The chapter lead-in discusses the Millennial market and its idiosyncrasies. IMC Perspective 2-1 discusses the growth of the Hispanic market, and the difficulty in reaching it, which could be an interesting point of departure for a discussion about the opportunity created by new and growing segments. Competitive Analysis—in developing marketing strategies and programs a company must analyze the competition its products or services face in the marketplace. Competition can range from direct brand competition to other products and services that satisfy consumers’ needs and/or compete for their dollars. Competitors’ marketing programs have a major impact on a firm’s marketing strategy and must be carefully analyzed and monitored. Various aspects of advertising and promotion such as promotional spending, media and creative strategy, and sales promotion are often directly affected by competitors. An important aspect of marketing strategy development is the search for an advantage over the competition. A competitive advantage refers to something unique or special a firm does or possesses that gives it an edge over competitors. Competitive advantage can be achieved in a variety of ways, including having quality products that are differentiated from the competition and command premium prices, providing superior customer service, having the lowest production costs or dominating channels of distribution. Competitive advantage can also be achieved through having excellent advertising and promotion that creates and maintains product/service differentiation and brand equity. You might want to discuss how many companies have used advertising to achieve brand equity. It is also important to note the concerns of many advertising and marketing people that reductions in media advertising and increased spending in trade promotions may lead to losses in brand equity and competitive advantage.

Chapter 02 - The Role of IMC in the Marketing Process

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

Professor Notes

III.

THE TARGET MARKETING PROCESS

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

Identifying Markets—Target marketing involves the identification of the needs and wants of specific groups of people (or segments), selection of one or more of these groups as targets, and the development of marketing strategies aimed at each. This approach has found increased applicability for a number of reasons. • the diversity of consumers’ needs • increasing use of segmentation by competitors • more managers are trained in segmentation The instructor should note that this process leads to a more homogeneous grouping of potential customers, which allows the marketer to develop more precise strategies designed to reach them. Market Segmentation—Once the marketer has identified who it is that is to be targeted; these potential customers are grouped based on the fact that they have similar needs and/or behaviors that are likely to cause them to respond similarly to marketing actions. This breaking up of the market is referred to as the market segmentation process. This process includes five distinct steps: • Finding a way to group consumers according to their needs • Finding a way to group the marketing actions—usually the products offered—available to the organization • Developing a market-product grid to relate the market segments to the firm's products or actions • Selecting the target segments toward which the firm directs its marketing actions; and • Taking these actions. A number of bases for segmentation are available to the marketer including the following: (Figure 2-4 will be helpful here.) • Geographic—the market is divided into geographic units with alternative marketing strategies targeted to each • Demographic—division involves demographic variables such as age, sex, family size, income, education and social class among others

Chapter 02 - The Role of IMC in the Marketing Process

•

Psychographic—markets are divided based on the personalities and/or lifestyles of consumers. (The instructor should note that lifestyles have become a commonly employed segmentation strategy.) Programs such as VALS and PRIZM are commonly employed by marketers for this purpose. • Behavioristic—this form of segmentation divides consumers into groups according to their usage, loyalties or buying responses to a product. These characteristics are then usually combined with one of the previously mentioned bases to develop segment profiles. • Benefits—specific benefits offered by a product or service may also constitute a basis for segmentation. In many instances a variety of benefits may be derived for the same product among different groups. (For example, the instructor might ask students to suggest benefits to be derived from the purchase of a watch, noting that at certain times of the year these benefits will change based on the recipient of the watch!) The Process of Segmenting a Market—This section concludes by reminding the student that market segmentation is indeed a process that develops over time and is a critical part of the situation analysis. Selecting a Target Market—Having conducted the segmentation analysis, the marketer will be faced with two subsequent decisions: 1. Determining how many segments to enter 2. Determining which segments offer the most potential. The first of these decisions may lead the marketer to three potential strategies: • Undifferentiated marketing would involve the decision to ignore the segment differences and develop one product for the entire market. It should be noted that few firms pursue this strategy today. •

Differentiated marketing involves the decision to compete in a number of segments, developing different marketing strategies for each. • Concentrated marketing takes place when a firm decides to concentrate its efforts on one specific segment in an attempt to capture a large share of that market. (The examples of Volkswagen and Rolls Royce provided in the book will illustrate this point well.) Marketing Positioning—positioning has been defined as "the art and science of fitting the product or service to one or more segments of the broad market in such a way as to set it meaningfully apart from the competition." 1. Approaches to Positioning—this section discusses the approaches to positioning as well as a number of strategies for developing a position. Several distinct positioning strategies are offered including: a. positioning by product attribute/benefit—setting a product apart by stressing a specific characteristic or benefit offered. b. positioning by price/quality—in this strategy price/quality characteristics are stressed. For example, some products set themselves apart by assuming a very high price/quality association, while others become "price products." c. Positioning by use or application—how a product is to be used may in itself lead to a positioning strategy. The shoe industry example offered in the text, and products such as Arm and Hammer baking soda and Black & Decker have capitalized on this strategy. d. positioning by product class—the Amtrak example provided in the text in reflects this strategy in which the product is positioned against others that, while not exactly the same, provide the same class of benefits. The pork campaign ("The other white meat") is another example that might be cited, as well as the Dole campaign cited in the text.

Chapter 02 - The Role of IMC in the Marketing Process

e. positioning by product user—in this strategy the product is positioned at a particular group of users. The DC Shoes example in Exhibit 2-19 demonstrates this strategy in practice. f. positioning by competitor—in many cases the competition may be used to define the positioning strategy. Companies can position their products to set themselves apart from the competition, show superiority, etc. g. positioning by cultural symbol— the Jolly Green Giant and Chicken of the Sea’s mermaid are all examples of cultural icons, as are the Wells Fargo stagecoach, and Ronald McDonald. h. repositioning—declining sales or changes in market conditions may lead a firm to reposition. Companies such as Sears, and J.C. Penney are a few of the examples of companies that have attempted (both successfully and unsuccessfully) to assume a new position in the market. The Gatorade and MTV examples provide more current examples. 2. Determining the Positioning Strategy—while not noted in the text, the development of a positioning strategy involves six distinct steps: • Identifying competitors • Assessing consumers' perceptions of competitors • Determining competitors' positions • Analyzing consumers' preferences • Making the positioning decision • Monitoring the decision Professor's Notes

IV.

DEVELOPING THE MARKETING PROGRAM

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

Product Decisions—an organization exists because it has some product, service, idea or cause to offer customers. Discussion can focus on benefits or values offered by the product and the fact that products and services satisfy not only functional but social and psychological needs as well. Product decision areas of branding and packaging are particularly important from a promotional perspective because of the role the brand name and package play in communicating attributes, information and meaning to the consumer. 1. Branding—choosing a brand name for a product is important from a promotional perspective because brand names communicate attributes and meaning. One important role of advertising in respect to branding strategies is creating and maintaining brand equity. Brand equity can be thought of as an intangible asset of added value or goodwill that results from the favorable image, impressions of differentiation, and/or the strength of consumer attachment to a company name, brand name, or trademark. 2-5

Chapter 02 - The Role of IMC in the Marketing Process

2. Packaging – the role and function of packaging has changed because of the self-service emphasis of many stores and the fact that as many as two-thirds of all purchases made in the supermarket are unplanned. The Bumblebee Tuna package is an excellent example of how packaging can create new opportunities—sometimes for existing products. Price Decisions—the price variable of the marketing mix refers to what the consumer must give up in exchange for a product or service, Marketing managers must be concerned with establishing a price level, developing pricing policies and monitoring consumers’ and competitors’ reactions to price in the marketplace. Factors a firm must consider in determining price levels include: • costs • demand • competition • perceived value Interesting findings from the PIMS project concerning the relationship between price, product quality and advertising are discussed in the text. Distribution Channel Decisions—marketing channels or the place element of the marketing mix refers to the set of interdependent organizations involved in the process of making a product or service available to customers. Differences in direct versus indirect channel arrangements should be discussed. In discussing the latter, the importance of resellers in marketing and promotional strategy should be introduced. The Internet has become a new channel for a number of companies, and has had a demonstrable impact on the distribution system. Attention should be given to the need to develop promotional programs for the trade or resellers to encourage them to stock and promote a product. Developing Promotional Strategies: Push or Pull? – When a promotional push strategy is used, the goal is to persuade the trade to stock, merchandise and promote a company’s products by aggressively selling and promoting to resellers. This can be done by having the company’s sales representatives call on resellers and offering special programs such as promotional allowances and cooperative advertising. Trade advertising in publications that serve the industry such as Progressive Grocer or Drug Store News may also be used as part of a push strategy. When a promotional pull strategy is used, the goal is to create demand among end users which will in turn encourage retailers to carry a brand. Heavy spending on consumer advertising and sales promotion is an important part of a pull strategy.

Professor’s Notes

Teaching Suggestions This chapter is designed to provide the student with an overview of the overall marketing process and the role advertising and promotion play in the marketing program. The chapter may be somewhat of a review for some students, particularly those who have had a basic marketing course. However, we feel that this chapter is more than just a review of marketing principles or fundamentals. We have written the chapter to show the role advertising and promotion play in the marketing process as well as how promotional strategy is influenced by and interacts with marketing strategy and the various elements of the marketing program. Students will benefit from the discussion of the marketing mix from a promotional strategy perspective even if they have had an introductory marketing course.

Chapter 02 - The Role of IMC in the Marketing Process

We have found that the model of the marketing and promotion process is a very good framework for analyzing how promotion fits into an organization’s marketing program. The three components of the model cover the basic areas of marketing and the model shows that promotional programs must be developed for the trade as well as for the ultimate customer in the target market. It is important to stress to students the important role resellers play and the need to develop promotional programs to motivate the trade to get them to stock, merchandise and promote a company’s products. You might point out to students that the recent trends in the allocation of promotional budgets have seen a shift in monies away from media advertising and toward trade promotions. Another shift in budgets has been affected by the advent of the Internet. Students will see that the Internet has both benefited and negatively impacted traditional media. These issues are discussed is considerable detail in the sales promotion and Internet chapters.

Answers to Discussion Questions 1. The lead in to this chapter discussed the millennial generation. Discuss some of the ways this segment is different from previous age cohorts. (LO3) It seems that each generation has been seen as different. First it was the Baby Boomers, then Gen X, and now Millennials. While one has to be careful when stereotyping, it does seem that Millennials are different from previous generations and require different IMC strategies to effectively reach them. The world of this generation has changed. Consider that: The average salary for young college graduates has dropped 15 percent, or about $10,000, since 2000. In 1990 youth unemployment was 11%; now it is 16%. It costs about 5 times as much to go to college as it did 20 years ago. Financial security is uncertain, as is Medicare and Social Security. As a result, Millennials have very different lifestyles. Many move home after college, others live in apartments with one or more roommates. Many live close to the city center so they have transportation and don’t have to buy a car. They often don’t buy cars, as their salaries are not that high, and they would rather have a smart phone than a car payment. In general, they are just much less materialistic than their predecessors. Media wise, this is the Internet generation. YouTube is used way more often than TV. Print usage (both newspapers and magazines) barely exists. Millennials sleep with their phones, and are mesmerized with social media. Mobile is transforming almost every aspect of their lives. (For additional information on Millennials, see the chapter lead-in.) For previous generations who saw the introduction and growth of digital media, the transition has been slow to quickly. For Millennials, there was no transition. Digital has been their life from birth, and it is reflected in almost everything they do.

2. IMC Perspective 2–1 discusses the importance of the Hispanic market. What makes this subculture different, and what must marketers do to successfully target them? (LO2) Like other segments, the Hispanic segment must be understood if one hopes to successfully market to them. As noted in IMC Perspective 2-1, this segment is not constituted by just one group. Hispanics include those with descendants from Mexico, Cuba, Puerto Rico and other Latino countries, with each having its unique set of values, beliefs, lifestyles, etc.

Chapter 02 - The Role of IMC in the Marketing Process

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

3. What is meant by repositioning? Discuss some companies that have successfully employed this strategy. (LO4) Sometimes due to a downturn in sales, changing marketing conditions, or other reasons, companies may need to change their positioning strategy, also known as re-positioning. Perhaps the most often cited example of this is Rolling Stone Magazine which changed from a predominantly music oriented medium to include articles that reach a broader audience. Another example, is MTV, which started as a channel playing music to one that now contains much broader programming and only a small portion of music playing. It is not difficult to find companies that have repositioned themselves in recent years. A few of these include: Cadillac—the flagship of the GM line has tried to move away from the image of “my grandfather’s car to attract a younger market. Using rock stars, young athletes and others involved in sports and entertainment, and product placements are just a few strategies Cadillac has employed. IBM—once a computer company, IBM now has a completely different image as a solutions provider. Xerox—the copy machine company has almost no identity with copying services. Kia and Hyundai—these Korean manufactured automobiles have been forced to reposition from a low price positioning to one of higher quality. Both are doing so quite successfully.

Chapter 02 - The Role of IMC in the Marketing Process

Abercrombie—previously Abercrombie and Fitch, the difference between the Abercrombie of today and 20 years ago is worlds apart. While many companies successfully re-position, many others are less fortunate. To successfully reposition, brands must commit to the strategy in total. Failure to do so, will lead to failure in the marketplace.

4. Many companies have maintained their same brand identity for years by keeping the same logos, packaging, and so on, while others have made changes. Give examples of companies employing both of these strategies and discuss their results. (LO5) What comes to mind when you see the package or logo of Coke, Jaguar, Budweiser, Target or the Penn State football team? Each of these brands is clearly identifiable, with strong recognition and image identification (In 2012, Penn State changed its uniform for the first time in over 50 years by putting names on the back of the players’ jerseys.). When a consumer sees a Target store logo, as an example, it is clear as to what it means, and what is inside of that store. The BMW and Jaguar logos are clearly recognizable. UPS has extended its brown label to their packaging and shipping stores. On the other hand, what comes to mind when you see the package or logo of less well known and identifiable brands? Can you tell me what the Xerox logo looks like? What about Duracell batteries? Do you easily recognize a Postal Annex sign? While the first group sends a clear signal about what they stand for through their packages and or logos, the latter does not—either as a result of not building the brand image, or changing it too often. To establish a strong brand image, brands must promote and establish their logos and packages to add an extra communications contact point. They must also stick with this position and identity and not change it too often. In 2013, Saab, American Airlines, VH1 and the Miami Dolphins NFL team all changed their logos—some drastically, others minimally. Time will tell how this works out.

5. Some marketers feel that grouping consumers into age cohorts like Millennials, baby boomers, and so forth, results in unreliable generalizations and that such strategies might not be successful. Give the pros and cons of this argument. (LO2) This chapter discusses the strategy of segmentation, whereby groups exhibiting common characteristics (demographic, psychographic, etc.) are targeted with similar marketing and IMC strategies. Simply put, the assumption is that the commonalities between the groups allow for efficiencies in implementation, cost savings, and more effective strategies overall. Some believe that this strategy may not be as effective—particularly if taken to the extreme. We already noted in the chapter that not all Hispanics are the same, and that stereotyping them as such could backfire on the marketer. Likewise, all Millennials are not the same. While you may be very similar to your friends, for example, you no doubt know many others who are in your age range, in your college, etc, who are very different from you. Their lifestyles, values, interests, etc. make them seem almost alien, and you share nothing in common. When marketers segment, they are stereotyping to an extent. And while this strategy has been proven to be effective, it can also be dangerous if the marketer is to assume that by segmenting on any particular basis leads to one homogenous group that requires only one marketing strategy.

Chapter 02 - The Role of IMC in the Marketing Process

6. Discuss the role that integrated marketing communications plays in creating a brand image. How do media contribute to the development of these images? (LO1) IMC can be used to develop a brand image by focusing on the source, message, and media available to create the image sought. The source of the message (consider the use of Tiger Woods or Lance Armstrong as a spokesperson before and after their problems) creates an image of the type of person that might use the brand. The message—that is, what is said about the brand—positions the brand the way the marketer wants it to be perceived. Is it a luxury brand (Jaguar) or a low-cost brand (WalMart) or a combination (Kohls, Target). The photography, the background and the message all contribute to the brand’s overall image. Advertisers have discovered a new-found emphasis on media in developing a brand image. As one might expect, the medium in which the ad appears impacts the perception of the brand. An ad appearing in Vogue or GQ will be impacted differently than one in Time or The Economist. Ads appearing in or on different websites will be impacted by that medium as well. Recently, an ad featuring U2’s Bono appeared in a number of upscale print media including Vogue and Vanity Fair. The clothing ad had a setting with a small aircraft in the background in what appeared to be Africa. As one might imagine the ad was designed to create a high class image for the brand by using well known and liked celebrities in an image that spoke to high class. At the same time, ads for other brands may use non-celebrities such as everyday looking people to create their own image of being for everyone not just beautiful people. The Dove campaigns targeted to women are a classic example of successfully employing this strategy.

7. Choose a company and discuss how it communicates with its customers in different market segments. (LO4). Perhaps the best example might be an automobile company like Toyota. First of all, Toyota makes cars, trucks, SUV’s and vans, offering a vehicle for the needs and wants of a variety of segments. The car segment offers a range from its low-priced entry the Yaris to the higher end Avalon. In between are sports oriented vehicles, family vehicles and, of course, the hybrid Prius. Toyota also offers six varieties of SUV’s again, reaching various segments based on price as well as lifestyle, as the selection ranges from a small fuel-efficient RAV 4 to the large V8 Land Cruiser. Models at various prices offering specific benefits are offered in between. Lexus, made by Toyota is targeted to the luxury car market. Another good example is the Marriott hotel chain. A visit to the Marriott website shows that the chain includes offerings from over 15 brands ranging from economy pricing to luxury suites, and appealing to pleasure travelers, business travelers, families and long-stay occupants. The Marriott products reach a variety of segments based on a number of segmentation criteria.

Chapter 02 - The Role of IMC in the Marketing Process

8. Discuss the strategy of market segmentation, and some of the reasons marketers are employing such techniques. Are there any ethical issues involved in the strategy? (LO4) As noted in the text, market segmentation is the dividing up of markets into distinct groups that have common needs and will respond to the same marketing actions. Figure 2-4 lists a number of criteria for segmenting the market. Some examples of the various types of segmentation and companies employing this strategy include: Geographic

Automobile companies—import cars are purchased more in certain states or regions of the country—with the MidWest being the least likely to purchase. Mt. Dew sells better in the Suth than in other parts of the country.

Demographic

Age: Pottery Barn, among others, offers catalogs for adults and teens (PB Teen.) Sex: Secret and Soft & Dry Deodorants targeted to women. Old Spice Deodorant for men for men.

Psychographic

Alloy, Lucky Brands and Tommy Hilfiger targeting Gen Y. Burton targeting snowboarders; Rossignol targeting skiers.

Benefits

DSL companies offering more speed on the Internet Volvo offering safety; Kia low cost.

Usage

Lexus and Infinity targeting previous lower cost Toyota and Nissan brand owners moving up. Software companies providing different types of software for users.

Demographics (business markets) Sprint segments the market by size of company

In and of itself, the practice of segmentation imposes no specific ethical or moral issues. The basis for such a strategy is to improve product and service offerings, not to take advantage of consumers.

9. Marketing strategies are placing more and more effort on target marketing. What is target marketing? Give examples of companies currently employing this strategy. (LO4) Years ago, marketers could offer products to the entire market (Coca-Cola) (Ford), with pretty much one offering. As markets increasingly fragmented, this no longer became a viable marketing strategy. As a result, segmentation increased, and companies focused more and more attention to one or more of these segments, developing specific marketing strategies for each. This process of target marketing allows companies to operate more efficiently in the marketplace. It may be harder to provide examples of companies that do not target than those that do. Whether in the consumer or business markets, targeting is the mainstream practice today. Companies offer brands that reach the specific needs of a variety of consumers, even within segments, based on the specific needs and wants of these consumers.

Chapter 02 - The Role of IMC in the Marketing Process

10. Discuss the difference between demographic and psychographic segmentation. Give examples of companies employing each. (LO4). Demographic segmentation is the segmenting of markets based on age, income, sex, race, etc. Psychographic segmentation is based on interests, activities, opinions and factors such as personality and lifestyles—particularly the latter. Clearly, there are products targeted to the sexes. Those marketed to men and women, including media as well as products themselves. We have shown in the text that the teenage market is much different than those in midlife and those in older age brackets. Higher income groups are marketed to differently than lower income groups. Think of the strategies for Jaguar, Mercedes, and Bentley versus those for VW, Kia and Hyundai. The pricing is different, the product quality is different, and certainly the IMC strategies are different. Remember that Lexus and Infinity, are distributed in different dealerships. Consider two people with the same demographic characteristics, but different lifestyles. One is a businessman, active in sports, likes to travel, remains physically fit, etc. The other is a “self-defined” computer geek who does none of the above, but spends a majority of his waking hours at the computer. The two will require different products for their lifestyles, may prefer different brand name, may shop in different locations (stores, online) etc. Sports companies, travel agencies and health clubs are the products consumed by the former, with software and computer equipment by the latter.

Additional Discussion Questions (not in text)

11. In recent years a very good example of a successful IMC strategy is GEICO’s successful market approach. What factors have ed to the success of this company? (LO1) GEICO started off with a successful segmentation and target marketing strategy. By fulfilling the unmet needs of these segments, GEICO became quite successful. Rather than resting on this concentrated strategy, however, the company continued to pursue an aggressive strategy, expanding into different segments with a variety of product offerings. If you examine GEICO’s marketing strategy now, you will see that the company pursues a highly integrated approach, targeting a variety of segments. Their advertising and promotion budget has grown dramatically, and they develop very different IMC strategies for each segment they enter. Look at the variety of advertisements and commercials GEICO employs, depending on the segment targeted. Also pay attention to the variety of media the company uses. From TV commercials to internet advertising, direct mail, promotions and sponsorships, GEICO seems to appear everywhere. The company truly has a very pervasive media strategy. GEICO has also successfully pursued a strong customer relationship strategy with their customers. They maintain a high degree of customer satisfaction, and hold on to their customers by keeping them satisfied.

Chapter 02 - The Role of IMC in the Marketing Process

12. Marketers continue to increase their marketing efforts to the Hispanic market, while at the same time evidence suggests that younger Hispanics are becoming more integrated into the mainstream. What are the implications of these acculturation issues for the future of marketing? (LO3) As shown in the text, the Hispanic market—already very substantial in some areas of the country— continues to grow in size. This alone makes it an attractive market segment. While many of the younger Hispanics become more and more a part of the overall market in respect to values, lifestyles, etc., some will do so to a lesser degree. What this means is multiple market opportunities. For those who emulate the overall market, products and services that are adopted by the “mainstream” will become more desirable to the Hispanic market. Evidence of this exists, as many of the high end name brands now have high adoption rates among Hispanics. In addition, many of the media adopted by the mainstream market will now experience higher rates of adoption among Hispanics, including those who communicate in English. At the same time, there will always be those who do not assimilate into the “mainstream”, continuing to hold on to their cultural heritage as opposed to becoming “like everyone else”. For this group, brands that are targeted to Hispanics, rather than the mainstream market, will achieve success as Hispanics maintain their identity, and use products and brands that appeal to them on this basis. Overall, the growth of the Hispanic segment, and the increases in socioeconomic status that are also occurring make the Hispanic market attractive to many marketers. Marketers will have to determine which of the sub-segments of this market they wish to target—those who will attempt to integrate into the mainstream and purchase products and brands associated with that group, or those who will maintain their own identities and use brands more associated with them. The likelihood is that marketers will attempt to do both, as both are likely to increase in attractiveness.

13. As noted, packages are now becoming communications tools, serving as advertising vehicles. At the same time, packages are changing the other marketing mix elements as well. Discuss how packages are being used to impact price and distribution strategies as well as promotional strategies. (LO2) One such example is that of Coor’s Light’s cans which change colors when the product is at the preferred drinking temperature. This is just one of many examples, of the use of packaging more effectively in the marketing mix. In the Coor’s case, the uniqueness of the package design is, in itself, a potential selling point. As the same time, it is a beneficial package element that helps insure that the product is consumed at the point at which it will have the most flavor. From a promotional standpoint, packages can be effective in attracting attention, differentiating the product, and creating a brand image. The role of the package is to communicate and establish a position for the product and/or brand. Packages are also being used to make the product more convenient. Think about how lids have changed. Plastic is becoming more popular than cans, tuna can now be carried in an easy-open pouch instead of a can. Separate tops for consuming drinks while participating in sports, walking, etc. have now become more attractive. Package sizes are used to differentiate—family size bottles, to regular size cans, to half-cans, or mini-cans make consumption more convenient. Ultimately, the different packages impact the price variable. Sticking with the drink example, the sports packaged drinks cost more than the same amount of beverage in a non-sports package. Convenience packages of potato chips, cookies, etc. used for school children’s lunches cost more than 2-13 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 02 - The Role of IMC in the Marketing Process

larger bags, etc. Typically, larger size containers cost less (on a relative basis) than do these convenience packaged items. Many companies have changed their package designs to accommodate retailers. With the enormous battle for shelf space comes a marketing opportunity or necessity. Uniquely designed packages that do not fit or take up too much room on the shelves must give way to those that do. Packages that are more durable are also being required in an attempt to eliminate or reduce breaking or spilling. Finally, from an IMC perspective, the package communicates a lot about the brand. The examples of Heinz or Arm & Hammer baking soda immediately communicate about what is inside of the package, its quality, and it’s longevity. Expensive brands rely on packaging as much as do the inexpensive ones in informing the consumer as to what to expect inside.

14. Discuss the difference between a push and a pull strategy. What kinds of firms would be more likely to employ each strategy? Give examples. (LO2) In a push strategy the communication and selling emphasis targets the channel of distribution members. Thus, programs are designed to persuade the trade to stock, merchandise, and promote manufacturers’ products. The goal of the strategy is to push the product through the channels by promoting them to the trade. In a pull strategy, the target audience is the end buyer and/or consumer. The goal is to create demand among consumers and have them demand the product from middlemen. Once retailers see the demand, they will request the product from the wholesaler or manufacturer directly. Companies may employ either a push or pull strategy. Proctor & Gamble—a perennial leader in advertising to consumers—learned years ago that it must get the products on the shelves to be sold. Thus, the company shifted much of its consumer targeted advertising to the trade to insure that it was stocked—thus, pursuing both a pull and push strategy. Others have used a pull strategy—for example, the Philadelphia Magazine ran an advertising campaign urging consumers to visit a newsstand to demand their magazine be carried. Companies pursuing a push strategy tend to rely more on their relationships with the trade, using IMC tools such as advertising, sales promotions, etc. that reach the middlemen. It is not at all uncommon for companies to incent sales employees to push their brands at the retail level. Decisions as to whether to emphasize a push or pull strategy depend on a number of factors including the company’s relation with the trade, the promotional budget and demand for the product. Companies with favorable channel relationships often use a promotional push strategy and work closely with channel members to encourage them to stock and promote their products. Firms with limited promotional budgets may not have the funds for advertising and promotion that are required for an effective pull strategy and may find it more feasible to target their efforts to the trade. Products with favorable demand resulting from unique benefits, superior advantages and/or popularity among consumers may use a pull strategy.

Chapter 02 - The Role of IMC in the Marketing Process

15. The text describes a number of different positioning strategies. Give examples of products and/or brands that utilize each of these different strategies. (LO5) The text lists a number of ways that companies can position their products. These include: a. Positioning by product attribute and benefits—in this case a company differentiates itself based on specific characteristics and/or benefits that it offers. Apple has positioned itself on its’ innovative technology and exciting products. BMW on its handling capabilities. b. Positioning by price/quality—companies like Bose, and Bang & Olefsen position themselves as very high quality brands that are worth the extra expense associated with their purchase. While not irrelevant, the companies want to communicate that price should not be the major factor considered in their purchase. Motel 6, on the other hand, positions itself as low cost, while still stressing the fact that they have not sacrificed quality in their motel rooms. c. Positioning by use or application—again using Bose as an example, the company advertises its expensive headset as the best for listening to music, and also as the best for its technological capabilities for noise reduction (for example when riding on an airplane). The company’s print campaign “Use it as a sanctuary or…. Reflects this positioning well. d. Positioning by product class—the now famous “Pork, the other white meat” is an excellent example of positioning by product class. A number of juice companies position themselves as a substitute fro eating fruit, and V* says to “drink your vegetables”.Yogurt has positioned itself as a fruit. e. Positioning by product user—Canon positions it’s cameras as being the best for the serious picture taker. The University of Phoenix positions itself as a college for working persons—not “your typical four year school.” f.

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

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

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

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

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

Learning Objectives 1. To understand how companies organize for advertising and other aspects of integrated marketing communications. 2. To evaluate the advantages and disadvantages of the various ways companies organize for advertising and promotion. 3. To understand the role of advertising agencies and the services they perform as well as the various types of agencies and media specialist organizations. 4. To examine methods for selecting, compensating, and evaluating advertising agencies. 5. To explain the role and functions of specialized marketing communications organizations. 6. To examine various perspectives on the use of integrated services and responsibilities of advertisers versus agencies.

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

Chapter and Lecture Outline I.

PARTICIPANTS IN THE INTEGRATED MARKETING COMMUNICATIONS PROCESS

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

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

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

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

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

Professor Notes:

III. ADVERTISING AGENCIES Many large companies employ the services of an external advertising agency. In 2014 there were over 15,000 U.S. and international agencies listed in, (The “Red Book” can be accessed at www.redbooks.com) ranging in size from one and two person operations to those with almost a billion dollars in worldwide income. Red Books agency database contains detailed profiles of these agencies including clients, fields of specialization as well as an advertiser database with information on nearly 21,000 U.S. and international advertisers who each spend more than $200,000 annually on advertising. Over the past two decades the advertising industry has undergone major changes as many of the large agencies have merged with or acquired other agencies to form large advertising organizations. There are now four large agency holding companies including WPP Group, Omnicom Group, Publicis Group and the Interpublic Group. These four holding companies own multiple advertising agencies, media specialist companies, public relations firms, digital agencies and other types of marketing communication organizations. Exhibit 3-5 of the text shows the holding of the world’s five largest agency companies. An updated version of this is made available each year by Advertising Age and is available on the adage.com web site. The Ad Agency’s Role—external agencies provide a variety of services to their clients, including those discussed in the previous section. Though many clients have the capabilities of performing these roles themselves, they elect to use outside agencies for the following reasons: (1) the skills offered (2) objectivity and (3) experience. A.

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

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

•

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

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

•

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

•

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

Attention should also be given to the two basic types or agency organization structures used by agencies. Under the departmental system each of the agency functions is set up as a separate department and is called upon to perform its specialty for all of the agency’s clients. Many agencies use the group system in which individuals from each department work together as teams to service a particular account. Many clients prefer the group system because agency employees become very familiar with their business and it ensures continuity in servicing the account. 2. Other Types of Agencies and Services 1. Creative boutiques—these types of agencies specialize in and provide only advertising creative services. They have creative personnel such as writers or artists on staff but do not have media, research or account planning capabilities. Many creative boutiques are formed by members of the creative departments of full-service agencies who leave the firm and take with them clients who want to retain their creative talents. 2. Media Specialist Companies—these are independent companies that specialize in media planning and buying. Many companies use independent media buying services to plan and purchase media and an advertising agency to handle their creative work. Many of the major agencies have formed independent media services companies that handle the media planning and buying for their clients. Media specialist companies have become very important since many clients are consolidating their media buying to save money and improve media efficiency. Professor Notes

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

IV.

AGENCY COMPENSATION

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

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

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

Professor Notes

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

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

The Future of Agency Compensation – Companies have continued to make significant changes in their agency compensation systems. The recent ANA survey showed that nearly half of advertisers are using some type of performance-based system versus only 13 percent a decade ago. Companies with large advertising budgets are even more likely to use incentive-based systems. Figure 3-8 shows some of the criteria used by for incentive-based compensation systems. More companies are changing their compensation systems as they move away from traditional mass media advertising and turn to a wider array of marketing communication tools. IMC Perspective 3-1 provides some interesting insights into changes that are occurring in the advertising agency business and how they are impacting agency compensation.

Professor Notes

EVALUATING AGENCIES

Given the substantial amounts of money being spent on advertising by many companies, demands for accountability are increasing. The agency evaluation process generally involves two types of assessments—financial audits and qualitative audits. The financial audit focuses on how the agency conducts its business including verification of costs and expenses, the number of personnel hours charged to an account and payments to media and outside suppliers. The qualitative audit involves the agency’s efforts in planning, developing and implementing the client’s advertising programs and the results achieved. An increasing trend among larger firms is to formalize this process. Exhibit 3-7 shows two components of the advertising agency performance evaluation system used by Whirlpool, the company that is one of the leading major appliance manufacturers. A. Gaining and Losing Clients—agencies are like their clients in the sense that they must solicit business, and often gain and lose business. The text offers a variety of reasons as to why agencies gain and lose clients, as well as some of the activities they perform in seeking new business. Current issues of Advertising Age or AdWeek will be useful in providing the instructor with examples of recent account changes and some of the reasons the clients decided to change agencies. 1. Reasons why agencies lose clients • Poor performance or service • Poor communication • Unrealistic demands by the client • Personality conflicts • Personnel changes

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

• • • • • • • •

Changes in size of the client or agency Conflicts of interest Changes in the client’s corporate and/or marketing strategy Declining sales and/or market share Conflicting compensation philosophies Changes in policies Disagreements over marketing and/or creative strategy Lack of integrated marketing capabilities

2. How agencies gain clients • • • • •

Referrals Solicitations Presentations Public relations Image and reputation

Professor Notes

VI.

SPECIALIZED SERVICES

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

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

Sales Promotion Agencies—there are many companies specializing in the provision of sales promotions such as contests, games, sweepstakes, and refund and rebate offers. Services provided by large sales promotion agencies include promotional planning, creative, research, tie-in coordination, fulfillment, premium design, and contest/sweepstakes management. Some time might also be spent discussing how promotional agencies are becoming important participants in the development of integrated marketing communications strategy for various companies.

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

Public Relations Firms —many large companies use both advertising agencies and public relations (PR) firms. Public relations firms develop and implement programs to manage an organization’s publicity, image, and affairs with consumers and other relevant publics including employers, suppliers, stockholders, government, labor and the general public. The role of PR firms is examined in more detail in Chapter 17.

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

Professor Notes

VII.

COLLATERAL SERVICES

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

INTEGRATED MARKETING COMMUNICATION SERVICES

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

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

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

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

Teaching Suggestions As noted earlier, the student is usually unfamiliar with how companies organize for advertising and promotion, and the role that various organizations play in this process. While most students are somewhat familiar with advertising agencies, they are less likely to know anything about direct response and sales promotion agencies, public relations firms and interactive agencies. You might note that there are some excellent career opportunities available in these areas. Students are often interested in working for an advertising agency. This chapter will help to familiarize them with other major participants in the IMC process and the important role they play. You might encourage students to visit the web sites of a promotion agency such as Aspen Marketing Services (www.aspenms.com ) or an interactive agency such as Razorfish (www.razorfish.com ) or Digitas, (www.digitas.com) all of which have very informative sites. A video case on Volkswagen and the PunchDub campaign created by the Deutsch LA agency, which is discussed in the chapter opener, is available on the Instructor DVDs that accompany the text and can be shown as part of your lecture.

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

Because of the rapidly changing advertising environment, it is important for the instructor to keep up to date with events that are taking place. Good sources of information on advertising are publications and their companion websites such as Advertising Age, (www.adage.com) AdWeek (www.adweek.com), and BrandWeek (www.brandweek.com). For excellent articles and sources of information on sales promotion students should be referred to Promo is now part of Chief Marketer and can be accessed online at http://www.chiefmarketer.com/promotional-marketing. Another excellent source of information on promotion is the Brand Activation Association (formerly the Promotion Marketing Association) which is the world’s leading non-profit promotion marketing trade association. The BAA has an excellent web site which can be found at www.baalink.org. Your lecture can be supplemented by articles from the sources listed above. We have also found strong student interest in identifying current ad campaigns have been created by various agencies. Most major agencies have excellent websites which contain client rosters, examples of their advertising, information about their advertising philosophy, approaches to branding and content related to other areas IMC areas.

Answers to Discussion Questions 1. The chapter opener discusses the success of Volkswagen in the U.S. market over the past five years. Evaluate the advertising the Deutsch LA agency has done for Volkswagen of America and the role it has played in helping to turn around the company in the U.S. market. How important is advertising for an automotive company such as Volkswagen? (L03,05) The Deutsch LA agency has developed a number of excellent advertising campaigns for Volkswagen and the various VW models such as the Beetle, Jetta, Passat, Touareg, Tiguan, and CC since taking over the account in 2009. Students are likely to be familiar with many of the Volkswagen commercials such as the popular “Force” spot that was one of the most popular spots on the 2011 Super Bowl and featured a little boy dressed as the Darth Vader character from the Star Wars movie. Deutsch LA has delivered outstanding creative work across all media channels for Volkswagen which has helped the company exceed its goals and achieve record sales in the U.S. market in 2012. Part of the success of Volkswagen is the new product line the company is marketing in the U.S. as well as improvements made in product quality. However, the advertising done by Deutch LA has also played an integral role in communicating the various features and benefits of the various Volkswagen vehicles and communicating how VW delivers German engineering a great value in a playful yet direct tone. Advertising and other forms of integrated marketing communications play a very important role in the marketing of automobiles. Many consumers 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 various Volkswagen models as well as to create an image that will appeal to the target market for the car. Volkswagen uses all aspects of the promotional mix to market its vehicles. Advertising on television as well as in magazines and newspapers plays a very important role in building awareness and developing and reinforcing the image of the various VW models. Direct marketing is used by sending direct mail pieces such as brochures, DVDs and promotional offers to consumers the company is targeting or those who have indicated an interest in receiving more information and/or purchasing a VW. (This latter group is referred to as “hand raisers” in the automobile industry). Automotive marketers recognize that the Internet has become an important IMC tool as consumers spend a great deal of time online researching various vehicles before even going to dealerships. They will run use advertising and other IMC tools to drive consumers to their web sites where they provide detailed information about the various models, prices financing options and local dealers and can provide an interactive experience by allowing consumers to examine their vehicles and the various purchase options such as different colors, body styles and accessories. Automobile companies are 3-10 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

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

now using a variety of social media tools which have become an increasingly important part of the digital marketing campaigns of many companies. Television commercials as well as other videos can be viewed on YouTube and consumers are encouraged to connect with the companies through their Facebook page and on Twitter. Publicity for Volkswagen and its marketing communication campaigns is generated through press releases and other public relations activities that are designed to result in feature stories in magazines and newspapers as well as on the Internet. Automotive markets such as Volkswagen sponsors motor sports as well as various sporting events such as NASCAR, golf and tennis tournaments, ski races and even certain extreme sports to reach their target audience and build brand image. Promotional efforts for vehicles are extended to dealerships where point-ofpurchase displays and materials are provided along with training, contests, and incentives for sales people. For example, for the campaign launch Volkswagen provided its dealer with a PunchDub days point-of-sale and a Brand Construction kit that contained materials need to create local advertising and to carry the advertising theme to the dealer showroom. 2. Evaluate the “PunchDub” campaign that the Deutsch LA agency developed when it took over the Volkswagen of America account. Discuss the pros and cons of the campaign and assess the way it was implemented by the agency. (L03,05) The primary goal of the “PunchDub” campaign developed by Deutsch LA was to raise awareness of the Volkswagen product line in the North American market. Volkswagen of America has very aggressive growth plan for this market as the company plans to double sales from 400,000 to 800,000 vehicles by 2018. However, one of the challenges VW faced was that consumers knew the VW brand but were not buying the company’s cars as awareness was very high (nearly 80%) but market share was low (only 2%). And while overall awareness of the Volkswagen brand name was high, consumers recognized only a few of the VW models such as the Beetle and Jetta. The “PunchDub” campaign was designed to address this problem and make consumers aware of the other vehicles in the VW product line such as the Passat, Golf, GTI, Routan, Eos Tiguan, Touareg, and the new CC sedan. The campaign was built around the classic Punch Buggy (or Slug Bug) game that many consumers played in the heyday of the original VW Beetle where the first person to see one of the iconic vehicles would yell “Punch Bug” and playfully slug his or her friend. Deutsch put a new twist on the game by encouraging consumers to punch someone when they saw any VW model which was a clever way to increase attention to, and awareness of the VW product line. It is important to note that one of the major benefits of the campaign is that it worked very well online both through social media and on the Volkswagen web site. An online version of “Punch Dub” also debuted on the popular Facebook social network site on Super Bowl Sunday which encouraged people to dole out virtual “slugs” to friends and family for a chance to win a weekly prize (6-month leases on specific VW vehicles listed online) and the grand prize of a new Volkswagen CC sedan. Players could pick any one of thirteen VW vehicles, customize their punch and choose a Facebook friend to punch. The more friends they punched the better the chances to winning prize. The game was also available on the Volkswagen of America website and an online guide to the game was also available which players could use to develop and hone their punching technique. The PunchDub campaign was also supported by heavy advertising in traditional media including the Super Bowl where the first TV spot was one of the most popular commercials to air during the game. Within a few days the commercial had received more than 1 million online views while the game had 5,000 registered users and nearly 30,000 punches were thrown. The two-month campaign ran for two months and included outdoor, radio and newspaper advertising as well as an extensive public relations campaign that generated feature articles and stories in BusinessWeek and The Wall Street Journal as well as in local newspapers and on local television stations across the country. The campaign was also extended to Volkswagen dealerships as special point-of-sale-kits were developed to promote a National Sales event called “PunchDubDays” which included special offers on various VW models.

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

The “PunchDub” campaign was implemented by using a variety of IMC tools and was a very good way to address the problem Volkswagen was facing of low awareness for many of the vehicles in its product line. The PunchDub game that was available on the VW web site provided consumers with an entertaining interactive experience and helped build awareness of the entire product line. In the second phase of the campaign Deutsch LA continued to showcase the entire VW product line but began to focus on specific attributes and features of the vehicles and how Volkswagen delivers German engineering at a great value. It is hard to find fault with the “PunchDub” campaign as it had a specific goal and the IMC strategy was well designed and executed. One limitation that might be noted is that of whether consumer would actually take the time to become engaged with the online campaign and play the “PunchDub” game. Consumers who did not do so would not learn more about the VW product line and one might argue that the IMC program would have been more effective if the monies had been spent by promoting the entire product line more directly. However, this would have been very expensive and may not have been as engaging and effective as the “PunchDub” campaign. 3. Who are the various participants in the integrated marketing communications process? discuss the roles and responsibilities of each. (L01)

Briefly

Advertisers or clients are the key participants. It is their product or service that is being offered and that must be marketed. The advertiser is responsible for all marketing aspects, and will ultimately have the final say regarding approval of the proposed integrated marketing communications program. It is the advertiser/client who ultimately must provide the budget and pay the bills as well. The advertising agency is an external organization specializing in the planning, creation, and production of the marketing communication messages. They may also provide additional services designed to facilitate the integrated marketing effort such as media planning and buying, research, strategic marketing planning, directing marketing, and digital/interactive marketing. Media organizations provide the advertiser with a channel for their communications. Media may include traditional forms such as print, broadcast, outdoor, as well as new digital media. Media organizations attempt to provide the advertiser with the proper environment for the message. Marketing communication specialist organizations provide services in specific areas of marketing communications. They include direct response agencies, sales promotion agencies, public relations firms and digital/interactive agencies. Collateral services participants are those who provide a wide range of support services including marketing research, package design firms, consultants, photographers, event sponsorship firms, and the like. Their function will vary in accordance with the needs of the integrated marketing communications program. 4. Discuss the various challenges faced by companies that use the brand management system when organizing for advertising and promotion. What are some of the things that marketers can do to address these problems and ensure that their brand managers are keeping abreast of external changes occurring in the market? (L02) Advantages of a decentralized or brand management system include the following: (1) the product or brand receives more concentrated managerial attention; (2) problems and opportunities may be responded to more quickly; (3) the product or brand has an advocate; and (4) the system offers increased flexibility. Under a decentralized system, the product manager has the primary responsibility for the planning, implementation and control of marketing programs for a specific product. S/he will also be responsible for sales projections, budgeting and profit performances. An important part of the product manager’s responsibility is to work with the advertising agency and other marketing communication organizations in developing promotional plans and programs for the brand. Product managers may have input into the advertising campaign including the creative strategy, media plan and evaluation of effectiveness.

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

There are, however, drawbacks to the decentralized approach as brand managers may often lack experience and expertise as well as an understanding of the various IMC tools and how they can be used effectively. This system has also come under attack recently by those who argue that brand managers spend too much time on internal issues such as planning and budgeting and do not devote enough time to external matters or to creativity and problem solving. As discussed in IMC Technology Perspective 3-1, critics argue that the brand management system is becoming out-dated, particularly in the new world of digital media where brand meaning is increasingly being determined by consumers rather than marketers. It has been suggested that companies do away with the formal annual planning and budgeting process which consumes much of the time of brand managers in favor of more frequently updated and spontaneous plans that can be adapted as market conditions change. Companies will also have to allocate more resources to training brand managers on the rapidly developing world of digital and social media so they can better understand the capabilities of these tools and how they can be used to communicate with consumers. 5. Discuss the pros and cons of using an in-house agency. What are some of the reasons why companies might change from using an in-house agency and hire an outside agency? (L02) Some of the reasons why firms use in-house agencies include: (1) cost savings; (2) control; and (3) increased ability to coordinate marketing and promotional activities. Negative aspects include: (1) internal employees may have less experience and inferior skills than their external counterparts; (2) they may be less objective about the product and its capabilities; and, (3) they may be less flexible with respect to what they are willing and able to do with the product and/or brands programs. Companies often use an in-house agency when they have sufficient and capable staff to conduct the advertising and promotional activities themselves; they have a very large advertising and promotional budget and wish to save the costs of fees and commissions; and/or when they believe that the ability to coordinate and control the promotional activities is more feasible with this design. As discussed in the chapter, Hyundai Motor Co. recently moved all of their advertising to an agency which is owned by the company. Target is another example of a company that does its advertising in-house. The company likes to have control over its advertising as the role its plays in developing a strong brand image and position for the retailer. They also feel they have the creative capabilities to design and implement creative and effective advertising messages. However, in some cases Target will have some of its creative work done outside by a creative specialist or boutique. Companies change from using an in-house agency and hire an outside agency for various reasons. Many marketers feel that the use of an outside agency provides greater objectivity with respect to the advertising. When an in-house agency is used, management may get too close to the advertising process and product and lose its objectivity when evaluating the ads. Outside agencies can provide a more objective perspective on the market and business that is not subject to internal biases and politics. Companies often move from in-house to outside agencies as they become larger and their advertising and other marketing communication needs become greater. Rather than continuing to expand the in-house agency, many companies will move to using an outside agency that has the various services and expertise needed by the company. It should be noted that perhaps the major reason why outside agencies are used is that they provide the client with the services of highly skilled individuals who are specialists in the advertising area. Outside agencies also offer more flexibility to an advertiser as they can always switch agencies and hire a new one if they are dissatisfied with the work being done. It is much more difficult to terminate an in-house agency and hire new personnel to replace them. 6. Discuss the reasons companies such as Under Armour or Calvin Klein might use an in-house agency rather than an external agency. Why might a company change from us9ng an in-house agency and hire an outside agency? Do you think they will continue to handle all of their advertising and IMC work in-house? Why or why not? (L02, 03)

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

Companies often use an in-house agency when they have the staff and talent 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. Under Armour and Calvin Klein are companies that prefer to keep their advertising in-house to retain control over the creative process. They feel they have the capabilities to design and implement creative and effective advertising messages as their creative director has been with the company since it was founded and has a very good grasp of the creative process and the image UA wants to communicate through its IMC program. Both companies are able to attract creative talent to work on their advertising as they are high profile companies that provides creative personnel with autonomy as well as an opportunity to develop creative advertising that is seen and respected by others in the ad industry. Thus far, both have been able to develop very effective advertising and promotion campaigns using the in-house approach. As a company such as Under Armour continues to grow, the company will have to make a decision as to whether they want to continue with the in-house approach or switch to using an outside agency. The company’s major competitors such as Nike, adidas, Reebok and other athletic shoe and apparel companies use outside agencies to handle their advertising and promotion. While Under Armour may outsource some of its creative work, it is unlikely that the company will totally abandon the in-house model that has served it so well since its founding. However, they have recently hired external agencies to handle the advertising for new products such as basketball shoes as well as their women’s apparel. 7. Discuss how technology and the emerging role of digital and social media are impacting the role of brand managers. What types of skills are needed to be a successful brand manager today? What can companies do to train brand managers so they can keep up with the changes occurring in digital and social media? (L02) As discussed in Digital and Social Media Perspective 3-1, many brand managers are not well equipped to handle the new world of digital media where brand identity is increasingly being shaped by consumers rather than marketers. Middle and older-aged brand managers who are not digital natives may be particularly challenged to understand the role of social media and the important role they play in the lives of younger consumers. The increasing use of social media such as Twitter, Facebook, YouTube, Pinterest and the myriad of blogs is changing the way brands communicate with their customers. Many brand managers spend much of their time on internal issues such as planning and budgeting and do not have ample time to devote to managing the social identity of their brands. Companies can address these problems by developing training programs for brand managers to help them better understand the role of various social media and how they can be used as part of the IMC program for the brands they manage. Many digital media companies such as Facebook, Twitter, and Google also provide online courses and tutorials that managers can take to enhance their knowledge and understanding of digital and social media. 8. What is an agency holding company? Discuss how the emergence of major holding companies is impacting the advertising industry as well as the entire field of integrated marketing communications. An agency holding company is a large organization that owns multiple advertising agencies as well as other types of marketing communication companies such as public relations, digital/interactive, direct marketing and sales promotion agencies. The four main agency holding companies are WPP, Omincom Group, Publicis Groupe, and Interpublic Group of Companies and account for nearly half of the revenue generate by advertising agencies in the United States. Holding companies emerged during the 1990s as the agency business went through a wave of consolidation which saw many midsize agencies either be acquired by or form alliances with larger agencies. A major driver behind this was the desire by clients to have agencies with international capabilities and their alignment with larger agency organizations gave them access to a network of agencies around the world. Many holding companies also made acquisitions to expand their capabilities beyond traditional advertising 3-14 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

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

into other areas of integrated marketing communications such as public relations, direct marketing, sales promotion, and digital/interactive as their clients began allocating more of their marketing communication budgets to these IMC tools. The emergence of agency holding companies has resulted in more of the advertising agency business, as well as other areas of IMC, being controlled by a few major organizations. This makes it possible for large marketers to consolidate their advertising and other IMC tools with one holding company which can provide services across a variety of areas. 9. Discuss the role of media specialist companies. Why are marketers likely to use a media specialist company to handle their media buying and planning versus the media department of an agency? (L03) Media specialist companies specialize in media planning and the buying of media, particularly radio television and magazines. The task of purchasing media has grown increasingly complex as more media options emerge. 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 their clients 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. Many large agency holding companies now own media services companies to better serve their clients. These media specialist companies often handle the media planning and buying for other companies that may use a different agency for their creative work. 10. Discuss the challenges advertising agencies face in negotiating compensation structures with their clients when the procurement department becomes involved in the process. How might an agency respond to clients who demand to see their labor costs overhead and profit margins as part of the negotiation process? (L04) As more marketers adopt an integrated marketing communication perspective and move away from traditional mass media, changes in compensation systems are taking place. These changes are taking place to encourage agencies to look beyond expensive commissionable media such as television and magazines and to make use of other IMC tools such as events, the Internet, and direct marketing. advertising in developing IMC programs. Many companies are also demanding more accountability from their agencies and are moving away from the traditional commission system and using incentive-based systems where agency compensation is tied to performance. The performance measures may include objective measures such as sales and/or market share as more subjective measures such as evaluations of the agency’s creative work. Companies feel that if agencies really want to be true partners, they will be willing to share in the sales performance of the product or service with them. Demands for accountability are also resulting in more scrutinizing of agency’s labor and other costs incurred in serving the account. Agencies are being viewed like other suppliers who are asked to continually lower their costs as clients are unwilling to compensate agencies for expenses that cannot be directly related to the performance of the advertising program. 11. Discuss the various criteria that might be used by an automobile company such as Volkswagen in evaluating its advertising agencies. Which of these criteria do you think would receive the most weight and why? (L04) The agency evaluation process usually involves two types of assessments, one which is more financial and operations focused and the other which is more creative and qualitative in nature. The financial audit focuses on how the agency conducts its business in working for the client and is designed to verify costs and expenses such as the number of personnel hours charged to and accounts, and payments to media and various other outside suppliers. The qualitative audit focuses on the

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

agency’s efforts in planning, developing and implementing the advertising and promotional program and the results achieved. Major automotive advertisers such as Volkswagen are likely to have a formal and systematic review process given the size of their advertising budgets and the important role advertising plays in the marketing of automobiles. Factors that are likely to be considered include the quality of the work done by the agency, particularly with respect to creative strategy and execution for advertising and other areas of the IMC program handled by the agency. The companies are also likely to focus on result achieved including sales and/or market share gains and losses. However, these companies recognize that it is often difficult to related outcome measures such as sales directly to advertising and other forms of promotion so they might considered other metrics such as awareness, recognition and various image related measures and how they have changed as a result of the advertising and promotion work done by the agency. 12. Discuss the reasons why advertising agencies lose accounts. Find an example of a company that changed advertising agencies and identify the factors that led them to switch to another agency. (L04) The relationship between a client and an agency is influenced by a variety of factors. An advertiser may decide to switch agencies for a number of reasons. Some of the most common reasons why clients switch agencies are discussed on pages 96-97 of the text. These include perspectives on compensation policies, the demands clients place on agencies, the level of service the agency provides, the personalities of agency and client personnel, the performance of the client’s product or service, the perceived quality of the agency work in various areas (including account planning and management, creative, media, use of non-traditional media), and changes in the competitive situation. Changes in top management of a client may also affect the agency client relationship. New management may prefer a particular agency or certain approach to advertising and promotion which can affect the client’s relationship with the agency. These reasons can apply to long-term clients as well. When marketers are having problems such as stagnant or declining sales or losses in market share they will often look to advertising. Often the problems are blamed on advertising agencies. In the competitive world of advertising, agencies are always looking for new business and major advertisers know they can attract a great deal of interest and attention when they put their accounts up for review. Students should be encouraged to find an example of a company that recently changed advertising agencies and identify the specific factors that led them to do so. Publications such as Advertising Age, AdWeek and BrandWeek often have stories about companies that change agencies and can be used to find specific examples to analyze. 13. Discuss the pros and cons for a marketer having one company handle all of its marketing communication needs versus using specialized marketing communication firms to handle the various components of the program. (L05,06) 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 the promotional elements such as advertising, direct mail, event marketing, sales promotion, interactive marketing and public relations are handled by one large agency. However, some companies prefer to use companies that specialize in specific areas of integrated marketing communications such as sales promotion, public relations, direct marketing and interactive marketing. These agencies are important because they are specialists in planning, developing and implementing these various IMC functions and can provide a great deal of expertise to these areas.

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

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

Additional Discussion Questions (not in text) 14. Why might a company choose to use a creative boutique rather than a larger, full-service agency? Find an example of a company that uses a creative boutique and discuss why the decision to use a smaller agency may be appropriate for this firm. (L03) Creative boutiques are agencies that provide only creative services and have developed in response to some companies’ desires to use only the creative talent of agency. There are a number of reasons why marketers use creative boutiques. These smaller agencies often turn out excellent creative work and do not have the bureaucracy and politics of larger agencies. Many companies also feel that by working with a smaller creative boutique they can get more attention and better access to creative talent than they would at a larger agency. Many creative boutiques are formed when creative people leave large agencies and form their own agencies. Often they take with them a client with whom they have worked closely and developed a strong relationship. Another reason why a company might use a creative boutique is that there are companies available to handle other parts of the advertising and promotional program. Independent media buying companies can be used to develop and implement the media strategy and plan while other types of companies can provide specialized services in other areas such as direct response, sales promotion, and interactive agencies as well as PR firms. Students should be encouraged to identify a company that uses a creative boutique and evaluate why they do so rather than using an outside agency. Articles often appear in publications such as Advertising Age or Adweek that discuss agencies used by various companies. Alternatively, students might identify a creative boutique and look at the client list on the agency’s web site. 15. Discuss the changing role of account representatives in advertising agencies. Discuss how the role of account representative is changing and the developments that underlie these changes. Do you think account representatives will become obsolete in the future? Why or why not? (L03) Account representatives or executives are individuals who work in an advertising agency and serve as the liaison between the agency and the client. They are responsible for understanding the client’s marketing strategy as well as its advertising and promotion needs and interpreting and explaining them to agency personnel such as the creative department. Traditionally, their positions have involved working with the client to formulate the advertising plan, coordinating the agency’s services, and representing the client’s point-of-view to those in the agency. The role of account representatives is changing as they are now required to have a broader range of skills that they can use in interacting with the client. Agencies want account representatives who are good strategic thinkers and have a broad-based marketing and business perspective that extends beyond media advertising. As other integrated marketing communications tools such as direct, digital/interactive and non-traditional media become more widely used, they are expected to have an understanding of their value and how they can be used as part of an IMC programs. Many agencies are facing increasing pressure from 3-17 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

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

their clients to keep costs under control and to justify the number of individuals assigned to work on their account. Thus, the number of account representatives assigned to work for a client is being reduced and those who handle the account are being asked to do more. It is unlikely that account representatives will become obsolete as they still play an important role in serving as the link between the agency and its clients. However, the skill set required to be an account representative is changing and the position is likely to become more demanding as marketers continue to move away from traditional media advertising and utilize a variety of IMC tools. Thus, agencies are developing training programs for their account executives to better educate them in a variety of areas and provide them with the skills needed to interact with clients who are becoming increasingly demanding of them. 16. Discuss the responsibilities and duties of an advertising or marketing communications manager in a company that uses a centralized organizational system versus a company that uses a decentralized system. (L02) The specific duties of the advertising or marketing communications manager will vary depending upon the size, organization and makeup of the firm. In a centralized system the manager may have responsibilities for all promotional functions except sales. These responsibilities may include planning and budgeting, administration and execution of the promotional program, coordination with other departments and outside agencies, and program evaluation. An advertising or marketing communication manager is usually needed even if an outside agency is used, as the agency may not perform all of the marketing tasks required. There is also still a need for someone to plan and coordinate the IMC program internally as well as to serve as the liaison between the agency and the firm. In addition, the ad manager will be responsible for evaluating the external agency’s performance. Under a decentralized system, a product or brand manager has responsibility for total management of the brand which includes planning, budgeting, sales and profit performance. The brand manager’s responsibilities will be similar to those of the advertising or marketing manager in a centralized system as s/he will work closely with the outside advertising agency and other marketing communication specialists such as promotion or interactive agencies to develop budgets, define strategies, and oversee the implementation of the marketing program.. 17. Discuss some of the reasons why traditional advertising agencies have been developing more integrated marketing communications capabilities. What changes might traditional agencies have to make to improve their IMC capabilities? (L06) Traditional advertising agencies have been developing more IMC capabilities because their clients are shifting more and more of their promotional dollars away from mass media advertising to other areas of marketing communication such as direct marketing, public relations, sales promotion, the Internet and event marketing and sponsorships. By expanding their capabilities, traditional agencies can offer a full range of IMC services and provide a total communications solution to their clients. By expanding their IMC capabilities and services, traditional agencies can also make money from other areas of their clients promotional spending such as direct marketing, interactive, sales promotion and public relations. The greatest change that traditional agencies have to make to improve their IMC capabilities is to develop or acquire expertise in these other areas. Traditionally agencies have been experts in areas related to advertising including creative and media. To expand their IMC capabilities agencies have to offer a broader range of services and develop expertise in areas such as direct marketing, event marketing, sales promotion, digital and social media, and public relations. Many agencies have been acquiring these capabilities by purchasing companies such as interactive agencies, public relations and direct marketing firms or promotional agencies. Others have been working to develop these IMC skills internally through their hiring and training processes.

Chapter 4 - Perspectives on Consumer Behavior

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

Learning Objectives 1. To understand the role that consumer behavior plays in the development and implementation of advertising and promotional programs. 2. To understand the consumer decision-making process and how it varies for different types of purchases. 3. To understand various internal psychological processes, their influence on consumer decision making, and implications for advertising and promotion. 4. To recognize various approaches to studying the consumer learning process and their implications for advertising and promotion. 5. To understand external factors such as culture, social class, group influences, and situational determinants and how they affect consumer behavior. 6. To understand alternative approaches to studying consumer behavior.

Chapter and Lecture Outline I.

AN OVERVIEW OF CONSUMER BEHAVIOR

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

Chapter 4 - Perspectives on Consumer Behavior

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

Professors Notes

II.

THE CONSUMER DECISION-MAKING PROCESS

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

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

Chapter 4 - Perspectives on Consumer Behavior

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

Information Search—the second step in the consumer decision making process is information search. Internal search involves a scan of information stored in memory to recall past experiences or knowledge regarding purchase alternatives. External search involves go to outside sources to acquire information such as personal sources, marketer controlled sources, public sources, or through personal experiences such as examining or handling a product. Perception—perception is the process by which an individual receives selects, organizes, and interprets information to create a meaningful picture of the world. There are a number of processes involved in perception which determine how marketing information will be received: • Sensation—the immediate and direct response of the senses to a stimulus such as an advertisement. • Selecting information—determining whether incoming information will be attended to and how much attention it will be given. • Interpretation—the process by incoming information is interpreted and assigned meaning. • Selective perception—a filtering or screening may occur at various stages of the perceptual process such as exposure, attention, comprehension and retention. •

Subliminal perception—refers to the ability of an individual to perceive a stimulus that is below the level of conscious awareness. The possibility that marketers could use subliminal advertising to influence consumers at a subconscious level has very strong ethical implications and can be discussed using Ethical Perspective 4-1.

Alternative Evaluation—after acquiring information during the information search stage the consumer moves to alternative evaluation. At this stage the consumer compares the various brands and services he or she has identified as being capable of solving the consumption problem and satisfying the needs or motives that initiated the decision process. The evoked set is a subset of all the brands of which the consumer is aware and actively considering in the decision process. A goal of marketers is to ensure that their brands are included in the evoked set of consumers. There are a number of important factors and processes that are important during the alternative evaluation stage:

Chapter 4 - Perspectives on Consumer Behavior

1. Evaluative criteria and consequences—evaluative criteria are the dimensions or attributes of a product or service that are used to compare different alternatives. Consequences are the specific events or outcomes that consumers experience when a product or service is purchased and/or consumed. Functional consequences are tangible and can be experienced directly by consumers. Psychosocial consequences are more intangible, subjective and personal. 2. Attitudes—attitudes refer to a summary construct that represents an individual’s overall feelings or evaluation of an object such as a brand, a company, another person, a retail store, or even an advertisement. Attitudes are one of the most heavily studied concepts in consumer behavior. Marketer’s keen interest in attitudes is based on the assumption that they are related to purchase behavior. Advertising and promotion are used to create favorable attitudes toward new products/services, reinforce or maintain existing favorable attitudes, and/or change negative attitudes. a. 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. b. Attitude change strategies—The multi-attribute model focuses on the underlying structure or basis of an attitude and provides insight into ways marketers can influence or change consumers’ attitudes such as: • increasing or changing the strength or belief rating of a brand on an important attribute • changing consumers’ perceptions of the importance or value of an attribute • adding new attributes to the attitude formation process • changing perceptions of belief ratings for a competing brand 3. Integration Processes and Decision Rules—an important aspect of the alternative evaluation stage is the way consumers integrate or combine information to evaluate alternatives and arrive at a purchase decision. Consumers may use formal integration rules which require examination and comparison of alternatives on specific attributes. These include both compensatory and non-compensatory integration strategies. Consumers may also use informal integration rules which are often referred to as heuristics. Promotional planners need to understand consumers’ integration processes and the types of decision rules they might use in a situation. Advertising messages can be constructed to be consistent with these decision rules or to suggest how consumers might go about making a decision. It is also important for marketers to recognize that some purchase decisions are the result of a constructive process that occurs at the time of purchase.

Chapter 4 - Perspectives on Consumer Behavior

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

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

Variations in Consumer Decision Making—consumers do not always engage in all five steps of the purchase decision process nor proceed in the sequence presented. There are three major variations of the consumer decision making process: 1. Routine response behavior—many purchase decisions for low-priced, frequently purchased products are based on a habitual or routine choice process consisting of little more than recognizing the problem, engaging in brief internal search and making the purchase. Marketers of products characterized by routine response behavior must get and/or maintain their brands in the consumers’ evoked set and encourage brand loyalty. Those not in the evoked set must encourage trial and brand switching. 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.

Professor’s Notes

Chapter 4 - Perspectives on Consumer Behavior

III.

THE CONSUMER LEARNING PROCESS

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

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

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

Professor’s Notes

Chapter 4 - Perspectives on Consumer Behavior

IV.

ENVIRONMENTAL INFLUENCES ON CONSUMER BEHAVIOR

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

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

Subcultures—subcultures refer to smaller groups or segments in a society that possess similar beliefs, values, norms and patterns of behavior that set them apart form the larger cultural mainstream. Subcultures may be based on age, geography, race, religion, racial, lifestyles, and ethnicity.

Social Class—social class refers to relatively homogenous divisions in a society into which people sharing similar lifestyles, values, norms, interests, and behaviors can be grouped. Social class structures in the United States are generally based on occupational status, educational attainment and source of income. Social class is important to marketers because consumers within various social strata often exhibit similar values, lifestyles and buying behaviors thus providing a natural basis for market segmentation.

Reference Groups—a reference group is a group whose perspective or values are being used by an individual as the basis for his/her judgments, opinions and actions. Marketers utilize reference group influences in developing advertisements by associating, or sometimes disassociating, products, services or certain behaviors with certain types of groups.

Family Influences—many purchased decisions are made by families rather than by individuals. Marketers must understand the various roles in the family decision making process such as initiator, information provider, influencer, decision maker, purchaser and user or consumer. They must also determine who in the family is responsible for the various roles in 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).

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

Professor’s Notes

Chapter 4 - Perspectives on Consumer Behavior

ALTERNATIVE APPROACHES TO CONSUMER BEHAVIOR

In the past decade or so, a growing number of consumer researchers have examined this process from a different perspective, often referred to as alternative, interpretive, postmodern, or post positivist. Regardless of the name, alternative ways of attempting to understand consumer behavior assume a crossdisciplinary approach. Those who conduct research from this perspective believe that consumers’ decision-making processes do not occur in isolation. Rather, they view consumer decision making as influenced by cultural, linguistic, and historical factors. In examining the significance of communications, they have adopted three perspectives: socio-cultural, structural, and semiotic. Many consumer researchers believe that dross-disciplinary research is better suited for the study of consumers because it takes into account their complexity and multidimensionality. The studies of economic, neurosciences, and cultural anthropology have also had an impact on our understanding of consumer behaviors. New methodologies have led to new insights into consumer’s decision making processes. When considered with psychological research, these alternative approaches help us better understand the impact of communications. Professors Notes

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

Answers to Discussion Questions 1.

Hispanics are one of the fastest-growing market segments in the United States. Yet it would be a mistake for marketers to generalize that all Hispanics are the same. Discuss how there may be multiple subsets of Hispanics and the marketing implications of this fact. (L05) In the U.S. there are many types of Hispanics. Of the top 10 groups, Mexicans (64.9%) are clearly the largest segment, followed by Puerto Ricans, Cubans and then Central and South American types. While all of these groups are referred to as Hispanics, in truth they all have their own idiosyncrasies. Thus, the marketer who believes s/he is targeting the Hispanic market may be missing or overseeing subtleties within this segment that may lead to missed marketing opportunities or marketing mistakes. 4-8

Chapter 4 - Perspectives on Consumer Behavior

For instance, U.S. Hispanics of Mexican origin have the lowest median age, at 25 years, while Hispanics of Cuban origin have the highest median age, at 40 years. Colombians are the most likely to have a college degree (32%) while Salvadorans are the least likely (7%). Ecuadorians have the highest annual median household income ($50,000) while Dominicans have the lowest ($34,000). Half of Hondurans do not have health insurance—the highest share among Hispanic origin groups. By contrast, just 15% of Puerto Ricans do not have health insurance. (Seth Motel and Eileen Patten, The 10 Largest Hispanic Origin Groups: Characteristics, Rankings, Top Counties, Pew Research, 2012). The successful marketer must make sure that s/he understands the differences between these groups and does not stereotyping them all into one segment because they are under the Hispanic title.

2. The chapter discusses a variety of research methodologies to examine consumers’ behaviors. Discuss some of these, focusing on the advantages and disadvantages of each. (LO1) A variety of research methodologies have been employed to understand consumer behaviors. As noted in the chapter, these can be grouped as lab and field methods. Lab methods provide for control but lack generalizability, while field methods sacrifice control to be able to generalize. Depending on the objective of the research study, the researcher will focus more attention on one of these methods, but may often include a variety of types of research. For example, lab methods like brain wave research, EEG, eye tracking, etc. will provide the researcher with a good understanding of the impact specific stimuli may have on the consumer. Focus groups, in-depth interviewing and other similar types of lab methods will provide insights that may not have been previously considered, as well as details and factors that are discovered as a result of these methods of collecting information. Survey research, on the other hand, will provide more detail into the number of persons who may feel a particular way, hold a specific attitude, etc. While the researcher sacrifices some control, s/he gains more quantitative estimates as to how many consumers feel a certain way. Observational field techniques can also provide more naturalistic settings in which to collect data outside of a lab, without providing numerical estimates, but rather providing a more realistic perspective. These research methodologies will be explained more in chapter 18 of this text.

3. What are some of the problems inherent with the use of psychoanalytic theory to understand consumer behaviors? Are there any positive benefits to taking this approach to studying consumer behavior? (LO3) Most of the problems regarding research based on psychoanalytic theory are based on issues relating reliability and validity. Because of the research methodologies employed, some psychologists are skeptical of the findings, and argue that without further proof, they cannot be relied upon. Indeed, conducting research on the subconscious has its weaknesses. On the other hand, psychoanalytic techniques have been employed for a long time for purposes of helping us gain more insights into how people think, and for more sensitive issues than consumer behavior. Perhaps the major criticism of psychoanalytic theory as it relates to consumer behavior is that it tries to explain too much. More 4-9 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 4 - Perspectives on Consumer Behavior

recent applications of the theory have provided valuable insights—rather than conclusions—as to how consumers think and feel, and as a result, more marketers are comfortable with the results provided. In fact, psychoanalytic theory has provided consumer researchers with a number of methodological tools that have been found to be quite useful in helping gain insights into the consumer decision process. For example, focus groups emanated from psychoanalytic theory, as has in-depth probing. Projective techniques—frequently employed by marketing researchers—have also been of value. Ego defenses such as denial and sublimation have proven to provide useful insights into consumer behaviors. The fact is that no one theory can account for consumer behaviors. Each has its weaknesses, and each offers its own contribution. Psychoanalytic theory is no different.

Behavioral targeting has been attacked by many as an invasion of privacy. Describe what behavioral targeting is and the pros and cons of this ethical argument. (LO4) One can hardly pick up the newspapers these days without seeing an article regarding privacy matters, whether it involves the government or private companies and organizations collecting data on our personal lives. Marketers then use this data to provide better products and services that better meet our needs (or so they say!). Ethical Perspective 4.1 addresses some of these issues. Of particular concern to many due to the frequency of it’s use is the practice of behavioral targeting. As we explained in Ethical Perspective 4.1, behavioral targeting uses information collected on an individual’s web-browsing behavior such as searches made, pages visited, products purchased, and so on to more specifically target ads, suggest products to buy, books to read, friends to contact, and more. Companies will suggest items you might like based on your previous purchases. Proponents of behavioral targeting offer a number of advantages to this form of data gathering. They say that it allows them to (1) know their customers better, offering them products and services that they want; (2) anticipate customers’ future needs as well as those of potential new customers; (3) be more efficient and effective in their marketing by reducing wasted time and effort on non-interested customers while better meeting the needs of potential ones; and (4) offering a new way to do research on why customers buy. Overall, proponents say, behavioral targeting is a win–win for both customers and advertisers. Opponents, on the other hand, disagree. Their primary concern is with the privacy issues involved. Of most concern is the use of the information being extracted for data mining purposes—very often without the knowledge or permission of the customer. Others feel that marketers should not be able to gather information unless granted permission, as those data have value and using them should require compensation. For many others, they just don’t want anyone having that much insight into what they do, read, or buy or where they go when on the Internet. Some experts argue that the marketers’ claims of cost efficiencies are exaggerated or untrue, and that while targeting may work for some products it is much less effective for others. They seem to imply that those collecting this information may have other motives in mind

Chapter 4 - Perspectives on Consumer Behavior

5. Marketers recognize that subcultures have an influence on consumer behaviors. Give examples of how various subcultures may impact one’s buying decision. (LO5)

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

6. Consumers experience different forms of problem recognition. Explain each type of problem recognition and give an example of a purchase of this type. (LO2) As noted in the text, problem recognition occurs when the consumers’ actual and ideal states are different. There are a variety of reasons this may occur: Out of stock—perhaps the simplest form of problem recognition occurs when one is out of a needed product—for example, being out of salt or sugar; Dissatisfaction—the product or service no longer meets consumer’s expectations. For example, the product or service provider doesn’t perform to the degree wanted, prices increase, leading to lesser satisfaction, etc. New needs or wants—sometimes changes in one’s lifestyle—finding a new job, having a baby, etc. may lead to the creation of new needs or wants (buying a new suit, diapers, etc.) Related products/purchases - purchasing a new computer will require purchasing additional items. For example, software, a laptop carrying bag, etc. Companies have become quite adept at crossselling additional add-on purchases. Marketer induced problem recognition- By changing styles or models, adding upgrades, etc., marketers can make one feel like they need to make a purchase. Apple is quite good at doing this as they keep modifying their products to make one want the “latest and greatest.”

Chapter 4 - Perspectives on Consumer Behavior

New products- The introduction of a new product—for example, a new technology—will often lead to problem recognition. Products that do things better, faster or less expensively often lead to demand by consumers.

7. The chapter discusses the role of neuroscience in understanding consumer behavior. Discuss what is meant by neuroscience and provide examples of how this field of study may be helpful to consumer behavior.(LO3) Using technologies originally developed for the medical sciences, marketers are now studying physiological responses to advertising. By scanning the brain and observing chemical activity or changes in the magnetic fields of the brain, these researchers respond to ads or even make purchase decisions. These methodologies have been used to view consumers’ responses to brand names, advertisements, and even spokespersons. In addition, the studies show promise for determining store layouts, and assessing consumers’ opinions of innovations.. Given that these responses are involuntary responses, it is argued that the responses are more credible and essentially uncontrollable. Thus while one might respond to a survey with a socially desirable response, or one that reflects a testing effect, involuntary responses are not subject to these biases. 8. How might one’s social class influence their consumer behaviors? Give examples of products and/or services that might be influenced by social class standing. (LO5) Different social classes have distinct purchasing behaviors. Besides the fact that income (as part of the social class index) allows for the purchase of different products and services, social classes develop different buying characteristics as a result of social interactions. Studies have shown that lower social classes tend to take family vacations by automobile, often visiting their friends and or families and staying with them rather than in a hotel. The kinds of products/services purchased also differs, with luxury items (obviously) being purchased more by upper classes, as is eating out, the brands bought, etc. The area where homes are purchased, the and colleges and universities attended are often different. Even the sports in which social classes view and or participate may differ, with upper classes preferring golf and tennis, while those in lower classes preferring bowling and pro football.

There has been controversy over the existence of subliminal advertising for quite some time. Explain why. Why do you think this topic continues to hold so much interest? (LO3) Subliminal advertising is an intriguing concept. The fact that someone could manipulate us without our even knowing it is almost out of a science fiction movie. At the same time, many of us have felt at one time or another that we have seen or heard subliminal messages, and believe that they exist. The fact is, the topic is an interesting one, and everyone seems to have their own examples. Also adding to the interest is the fact that no one can definitively prove that subliminal advertising does not exist. While numerous studies have proven that the persuasiveness of subliminal ads is weak or nonexistent, there continue to be studies that pop up indicating that there may be some ipact on recall and/or recognition. Until one can show that there are absolutely no effects, this topic will continue to remain around.

Chapter 4 - Perspectives on Consumer Behavior

One thing to recall is that, by definition, subliminal is below the conscious threshold. When Wilson Bryan Key first discussed the concept, he made the point that while some may pick up on the message, others may not. It is this fact, in itself that continues to fuel the controversy.

10. Explain the process of selective perception, and the various ways in which consumers may filter information. What is the relevance of this for consumer behavior?(LO3) Psychologists know that consumers filter information. Information that is not relevant, or that may cause inconsistencies may be screened and information that supports one’s previous learning and attitudes may be done so as well. Selective perception may occur through perceptual defenses for perceptual vigilance. In perceptual defenses, the individual defends against information that may lead to inconsistencies by engaging in a number of processes including (1). Selective exposure—not exposing oneself to the information, (2) selective attention—being exposed, but not paying attention, (3) selective comprehension—essentially, distorting the information to maintain a state of consistency, and (4) selective retention—selectively remembering some information and not others. Perceptual vigilance operates just the other way. The consumer will engage in the same processes explained above, but rather than screening out such information, they allow this consistent information to become part of their cognitive structure, as it supports their previous experiences. Studies in consumer behavior have shown that consumers use selective perception to screen out ads and commercials that my cause inconsistencies. For example, the purchaser of a new Ford may screen out ads for a Chevrolet that might also have been under consideration, remember the fact that the gas mileage was higher for the Ford, or not allow themselves to be exposed to the Chevy advertising. Interestingly, there are also some studies that show that consumers having made a purchase, will seek out information that might cause inconsistencies. In such cases, the consumer does so to counter argue with the information, leading to a higher level of consistency.

Additional Discussion Questions (not in text) 11. Why is understanding consumer behavior of such importance to marketers? Give examples of how marketers apply their understanding of consumer behavior to their marketing strategies. (LO1) When marketers moved from a sales orientation to a marketing orientation, it became necessary to have a more in-depth understanding of the consumer. Rather that developing products and then trying to push them onto consumers, marketers’ shifted their focus more to understanding consumers’ needs and wants and developing products and services to satisfy them. As the field of consumer behavior has expanded, marketer’s have increased their efforts by including different forms of psychology (social, physiological, etc.) into their studies as well as sociology, cultural anthropology and geography, among others. Simply put, the more we can understand consumers, the better we can successfully develop products and services to better meet their needs and wants.

Chapter 4 - Perspectives on Consumer Behavior

An excellent example of this lies in the fact that many of today’s consumers are “money rich and time poor.” That means that they have disposable income, but less time as a result of their busy lifestyles, changing family structures, etc. By understanding this, marketers have been able to better develop products and services that meet the new needs of consumers, and a profit to them. (LO5) 12. Recently there has been a great deal of attention paid to environmental issues resulting in a number of companies embarking on “green” campaigns. Discuss some of the reasons as to why companies are developing such campaigns. Do you think these campaigns will change consumers’ attitudes toward the environment and/or these companies? (LO5) It seems these days that everyone is trying to convince the consumer that they are green. From the oil companies to beverage companies, green is in. There is even a green cable TV network devoted to showing interested parties how to be green. Of course a large part of the green movement comes from the realization that the world must begin to take care of the environment. Global warning is no longer a potential, it is reality. This, of course, will cause many consumers to consider their actions and their options. For many, green has become a cause, not just a convenience. More people now recycle. More think about the impact their consuming behaviors have on the market (see the bottled water example in the chapter), and many more try to conserve. Given the choice between a product that is good or bad for the environment, many more are taking this into consideration in their purchase decisions. Companies have joined the green crusade as well—some seeing it as a marketing opportunity, others a necessity, and still others because they are genuinely concerned. Companies now realize it is not good to be perceived as unfriendly to the environment, while others see an opportunity to position themselves as such to gain a competitive edge. The degree to which they are actually “green” varies as well. Clearly, the appearance of being green will have an impact on consumers’ attitudes. For those who want the companies to be environmentally conscious, such actions will reinforce their positive attitudes toward these companies. At the same time, not being concerned will reflect negatively on those companies. While having green attitudes does not always translate into buying green, one can only expect that it will certainly have an impact, particularly given a choice.

13. Explain the differences between functional and psychosocial consequences. Give examples of advertising that focus on both types. (LO3) Functional consequences can be thought of as those that will occur when something fails or does not perform properly. For example,, if one purchases a product that does not work well (a computer printer that breaks frequently) the negative outcomes are easily noticeable, and lead to problems well beyond negative thoughts. For example, Zerex anti-freeze has long used advertisements and commercials that depict autos not starting, overheating, etc. when their product is not used. Psychosocial consequences, while not necessarily harmful in a physical sense, create mental attitudes and or feelings. For example, colognes and perfumes create a sense of attractiveness, and security from smelling bad. I may choose the wrong shirt to wear, and while it does not lead to functional consequences (unless it is cold out!) if I don’t look good in it, or it doesn’t match, it may lead to an emotional impact or consequence.

Chapter 4 - Perspectives on Consumer Behavior

Perfumes and colognes are good examples of products that appeal to psychosocial consequences. Functional attributes may be stress through tires (longer lasting, no blowouts), computer products (speed and reliability), etc. Some products may use both (cars, Michelin tires demonstrating reliability, improved gas mileage, and safety, etc.)

14. The text discusses the use of cultural anthropology to understand consumer behaviors. Why necessary for marketers to use alternative approaches to consumer behavior? (LO6)

Once marketers recognized the necessity of understanding consumers’ behaviors and the fact that not all decisions are based on rational economic bases, they turned to psychology to gain insights. The early days of research in consumer behavior, therefore, was dominated by psychological research. As consumer behavior matured, those in the discipline recognized the fact that external factors such as social class, family, cultural and subcultural factors also influenced the purchase decision process. Research from different areas of study such as sociology and anthropology provided valuable insights. The ground breaking research of a French medical anthropologist, G. Clotaire Rapaille, who employed a research methodology known as archetype research to assist Chrysler (in the design of the PT Cruiser) and other clients demonstrated the contribution value and applicability of these other areas of research. Cultural anthropology, which involves the observation of people in their natural environments, has also been proven to be useful for understanding consumer behaviors (see the AXE example in the text). While much of the research conducted in psychology requires a controlled environment for conducting experiments and/or observing consumer behaviors, ethnography—a methodology employed by cultural anthropologists—watches the behaviors of individuals and groups as they “act normal” in their day to day environments. As a result, some of the testing effects and criticisms of artificial environments are eliminated. Further, researchers know that situational and environmental factors may play an important role on consumer decision making, and this area of research attempts to take into account these factors. As consumer behavior studies continue to advance, new disciplines, theories and methodologies will offer valuable insights into the reasons why consumers purchase, how they do so, and the impact of their purchases. Cultural anthropology is just one more contributor to this process.

15. Discuss both sides of the argument (pro or con) for using neuro-science in consumer research.(LO6) The use of neuro-science –a brain scan imaging technique that maps physiological reactions within the mind—has had the majority of its applications in the medical field. Now, marketers have discovered that there are applications in consumer behavior as well. By mapping viewers’ physiological reactions to commercials and brands, scientists can help marketers better understand consumers’ behaviors and assist them in the development of more effective marketing strategies. For marketers, the use of neuro-science allows them to more effectively design ads, recognize the impact that brands have on consumers. Advertisers claim that this will allow them to create more effective advertising, break through the clutter of bland commercials, and ultimately have a positive effect on their businesses as well as benefiting consumers by giving them what they want—not what advertisers think they want. Boring and tedious advertising, for example, will be reduced or eliminated, based on more effective research than the traditional methods previously employed.

Chapter 4 - Perspectives on Consumer Behavior

Traditional methods, marketers argue, are obsolete and do not directly benefit the advertiser or the consumer. Just like everything else, they say, “you can’t stop progress”. Opponents of the use of neuro-sciences have a different perspective. Calling the technique “Orwellian”, they contend that probing our minds is an unfair invasion of privacy. While some argue that the technique does not work, and that the results are being blown out of proportion, others are concerned that they work too well. If so, there is a potential that advertising could become too effective, and that consumers could be manipulated –a similar argument to those provided by opponents of subliminal advertising usage. At particular risk they say, are unsuspecting children, though increased consumption of alcohol, cigarettes and gambling may also results. They see the research as contributing to the social ills of societies, through the manipulation of effective marketing strategies.

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

Chapter 05 - The Communication Process

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

Learning Objectives 1. To understand the basic elements of the communications process and the role of communications in IMC. 2. To examine various models of the communication process. 3. To examine the important role of word-of mouth influence and viral marketing. 4. To analyze the response process of receivers of marketing communications including alternative response hierarchies and their implications for promotional planning and strategy. 5. To understand how the consumer decision process is influenced by social media. 6. To examine the nature of consumers’ cognitive processing of marketing communications.

Chapter and Lecture Outline I.

INTRODUCTION AND THE NATURE OF COMMUNICATIONS

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

Chapter 05 - The Communication Process

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

II.

A BASIC MODEL OF COMMUNICATION

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

Source/Encoding—the sender or source of a communication is the person or organization that has information to share with another person or group. It should be noted that the source 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: • 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. The text discusses “buzz marketing” whereby companies work to generate favorable word-of-mouth communications for their company and/or brands. It is important to note that word-of-mouth (WOM) can be a very powerful form of communication and has been used by markets for many years. However, many companies such as Procter & Gamble have developed more organized programs (such as Vocalpoint) to generate buzz for their brands, as is discussed in the chapter. • Marketers have become much more sophisticated, organized and systematic in the ways they go about encouraging speak favorably about their company, brand, organization or issue and to recommend it to their social network. Viral marketing refers to the act of propagating marketing-relevant messages through the help and cooperation of individual consumers.

Chapter 05 - The Communication Process

•

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

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

Noise—throughout the communications process the message is subject to noise which refers to factors that can distort or interfere with adequate reception or comprehension. Noise can occur during the encoding, transmission, or decoding of a message. Noise can also occur because of a lack of common ground or understanding between the sender and receiver.

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

Professor Notes

Chapter 05 - The Communication Process

III.

ANALYZING THE RECEIVER

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

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

Professor Notes

IV.

THE RESPONSE PROCESS

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

Traditional Response Hierarchy Models—Figure 5-3 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

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• •

The Innovation-Adoption Model Awareness→ interest→ evaluation→ trial→ adoption The Information-Processing Model Presentation→ attention→ comprehension→ yielding→ retention→ behavior

Implications of the traditional hierarchy models—The hierarchy models are useful to promotional planners from several perspectives. They delineate the series of steps or stages potential purchasers often must be taken through to move them from a state of no or little awareness to the point where they are ready to purchase. The hierarchy models can also be useful as “intermediate” measures of communication effectiveness. Knowing where potential buyers are with respect to the various stages of the hierarchy helps the marketers know the specific communication task that must be performed. The text discusses how marketers of high-tech products are developing profiles of digital adopters who are among the first to use various digital products and services. Evaluating traditional response hierarchy models—All four of these models view the response process as consisting of movement through a sequence of stages and assume a similar ordering whereby cognitive development precedes affective reaction which in turn precedes behavior. While this is a logical progression that may be accurate in many situations, the response sequence may not always operate this way. Thus, attention needs to be given to alternative orderings of the response hierarchy. Alternative Response Hierarchy Models—Research and theorizing over the past two decades has led to a questioning of the cognitive → affective → conative sequence of the response process and has resulted in the development of alternative orderings of these stages. Michael Ray’s “three-orders” model of information processing, which is shown in Figure 5-5 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 behavior and learn or process information that supports their attitudes and behavior. The dissonance or attributional hierarchy consists of a “do → feel → learn” sequence. This hierarchy may occur when consumers are trying to reduce postpurchase dissonance or anxiety that results from doubt or concern over a purchase. This dissonance reduction process involves “selective learning” whereby the receiver seeks information that supports the choice made and avoids information that does not bolster the wisdom of the decision. 3. Low-involvement hierarchy—The low involvement hierarchy is thought to characterize situations of low consumer involvement in the purchase process. The response hierarchy under low involvement consists of a “learn → do → feel” sequence and the receiver is viewed as engaging in “passive learning” and “random information catching” rather than active information seeking.

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Professor Notes

IMPLICATIONS OF THE ALTERNATIVE RESPONSE MODELS

The various response models offer different perspectives on the way consumers respond to advertising and other forms of marketing communication. From an IMC planning perspective, it is important that marketers examine the communication situation for their product or service and determine which type of response process is most likely to occur. The concept of involvement has received a great deal of attention from consumer behavior and advertising researchers as it is viewed as a variable that can help explain the way consumers process information and make purchase decisions. Several advertising planning models or “grids” have been developed that consider involvement as well as several other factors. These models can be of value to managers as they develop strategies for advertising and other elements of their IMC programs. The FCB Planning Model is probably the best known of these. VI.

THE SOCIAL CONSUMER DECISION JOURNEY

The various response models discussed in the text have dominated much of the theorizing, research and planning regarding how consumer respond to advertising and other IMC tools. However the environment in which consumers evaluate brands and make purchase decisions has changed dramatically with the growth of digital and social media as well as the pervasiveness of personal computers, smartphones, tablets and other digital devices which can be used to access and retrieve information as well as share it with others. A major study by the Advertising Research Foundation (ARF) examined how digital and social media are used in the purchase decision process and how consumer turn to them to hop manage this process. One of the conclusions of this study was that consumers are “always on” as they are constantly considering and evaluating the various providers of products and services. Another important conclusion from this study, as well as research conducted by the McKinsey & Company’s Global Digital Marketing Strategy practice group, is that consumers do not make purchase decisions in the linear manner depicted by the various traditional hierarchy of effects and purchase funnel models. Researchers at McKinsey have proposed the “consumer decision journey model as a framework for understanding how consumer interact with companies and brands during the purchase decision process. The Social Consumer Decision Journey model, which is shown in Figure 5-6, has four basic stages: consider, evaluate, buy, and enjoy-advocate-bond. This framework recognizes that consumers connect with large numbers of brands through digital and social media channels which are a unique component of the consumer decision journey as they are the only form of marketing that can touch and influence consumers at each and every stage. Marketers often allocate much of their IMC budget to influencing consumers at the consider and buy stages. However, consideration should also be given to influencing them during the evaluate and enjoy-advocate-bond stages as the most important incentive to buy may be another person’s advocacy or recommendation. It is important for marketers to focus on the portion of their IMC budget allocated to paid or “working” media as well as owned media that a brand controls (websites, Facebook and Twitter pages) and earned media generated through various forms of social media. Professor Notes

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VII.

COGNITIVE PROCESSING OF COMMUNICATIONS

For many years the hierarchical response models were primary focus of approaches to studying receivers’ responses to marketing communications. However, the inability of these approaches to explain what might be causing or determining these reactions to the message has led to an interest in understanding the nature of cognitive processing of advertising and other persuasive communications. Cognitive processing concerns how external information (such as an advertising message) is transformed into meanings or patterns of thought and how these meanings are combined to form judgments. Several approaches and models have been developed to examine the nature of consumers’ cognitive processing of advertising messages. A.

The Cognitive Response Approach—A commonly used method for examining consumers cognitive processing of advertising messages is through the assessment of their cognitive responses or thoughts that occur to them while reading, viewing, and/or hearing the communication. The focus of this approach, which is commonly used by academic researchers as well as practitioners, is to determine the types of thought evoked by an advertising message and how these responses relate to traditional “outcome” measures such as attitude toward the ad, brand attitudes and purchase intention. The model shown in Figure 5-7 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 represents the receivers’ feelings of favorability or unfavorability toward the ad. A→ ad is an important construct as the consumers’ affective reactions to a message are an important determinant of advertising effectiveness. IMC Perspective 5-1 discusses the results of an interesting study that compared differences between men and women for visual processing of print ads using sexual imagery. In this study the respondents were asked to move a computer mouse over the ad to show the part of at which they were looking. The results of the study found that men tended to focus on the sexual imagery components of the ad while women tended to avoid focusing on these parts of the ads. The study also found that men’s brand recall was lower for sexual versus nonsexual ads which suggests that sexual imagery may consume much of the attention that would otherwise be spent on productrelated components of the ad as well as copy points.

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 Exhibit 5-8 of the text. According to the ELM, there are two basic processes or routes to persuasion, which are based on motivation and ability to process the message. Under the central route to persuasion the receiver is viewed as a very active and involved participant in the communications process whose ability and motivation to attend, comprehend and evaluate a message are very high. Under the peripheral route to persuasion the receiver is viewed as lacking motivation or ability to process information and is not likely to engage in detailed cognitive processing. The receiver may use “peripheral cues” such as focusing on the message source or executional elements of the ad rather than message content. The Peak

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antifreeze ad featuring female race car driver Danica Patrick is a good example of a message that contains several peripheral cues such as an attractive celebrity and appealing visual imagery that is consistent with the brand positioning. Professor Notes

V. SUMMARIZING THE RESPONSE PROCESS AND THE EFFECTS OF ADVERTISING 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. Attention should be given to how advertising and other forms of promotion may affect these variables in various product market situations. While a number of issues regarding hierarchy of effects models have been noted, they are still of value to advertising practice and research as they provide insight into whether advertising strategies need to focus on impacting cognition, affect and/or behavior. It has also been noted that consideration needs to be given to how all of the various IMC tools, not just advertising, influence the response hierarchy. The chapter concludes with a discussion over the debate over the value of hierarchical response models of advertising effects. While a number of issues and concerns over the use of hierarchy of effects models have been noted, many feel that they are still of value to advertising practice and research. They provide insight into whether advertising strategies need to focus on impacting cognition, affect, and/or behavior. It is important to note that marketing communications programs include more than just media advertising and consideration needs to be given to how other components of the IMC program such as sales promotion activities, publicity, online, and direct marketing activities, and event sponsorships can move consumer through the response hierarchy.

Professor Notes

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Teaching Suggestions This chapter is designed to introduce the student to the fundamentals of communication and is the first of two chapters devoted to this topic. The opening vignette to the chapter discusses the social media-based “Fiesta Movement” program used by Ford to introduce the new vehicle to the U.S market and is a very good example of how marketers are finding new and innovative ways to communicate with their target audiences. In 2013 Ford used a new version of this successful marketing program called the “Fiesta Movement: A Social Remix” campaign to help generate buzz for the redesigned 2014 model of the Fiesta. A video case on the Fiesta Movement campaign is available on the Instructor DVDs that accompany the text. This is the most theoretical chapter in the text. However, we feel this material is very important as it presents the basic elements of communication and provides a detailed examination of the process by which consumers respond to marketing communications. The material also provides the student with a foundation that is important for subsequent chapters of the text. For example the discussion of controllable elements of the communications process in Chapter 6 (source, message and channel factors) builds on this chapter. The material in Chapter 7 regarding the setting of advertising objectives in terms of communication goals is based on the response hierarchy models discussed in this chapter. We feel it is very important to stress to the student that communication is the common goal of all promotional mix elements. They must have a solid foundation in this area if they are to evaluate other areas of advertising and promotion such as creative strategy, media strategy and alternatives and effectiveness measurement. We have found that it is helpful to emphasize to students that decisions regarding the controllable elements of the communication program, such as selecting a source, developing a message strategy and appeal, and selecting advertising media, cannot be made unless the promotional planner has some insight into how members of the target audience will respond to these factors. Students need to have some understanding of the traditional hierarchical models including their implications and limitations. It is also important to point out the limitations of the traditional cognitive →affective → conative sequence assumed by these models and to cover the alternative response hierarchies. After reviewing the alternative models of the response process, it should be apparent to the student that the traditional standard learning hierarchy may not be appropriate in many communication situations. From a promotional planning perspective, it is important that the marketer be able to examine the communications situation and determine what type of response hierarchy is most likely to occur. Of particular importance is the low-involvement hierarchy as a great deal of attention has been given to the involvement issue. It is important to show how the concept of alternative response hierarchies, involvement and rational versus emotional processing can be combined for advertising strategy purposes. The article by Vakratsas and Ambler “How Advertising Works: What Do We Really Know?” (Journal of Marketing, January 1999) provides an excellent summary of response hierarchy models. This article might be assigned to a graduate level class or be useful in preparing a lecture on the response process. Interesting articles regarding the hierarchy of effects might also be reviewed. These include an article by William M. Weilbacher, “Point of View: Does Advertising Cause a “Hierarchy of Effects” (Journal of Advertising Research, November/December 2001, pp. 19-26) and a reply by Thomas E. Barry, “In Defense of the Hierarchy of Effects: A Rejoinder to Weilbacher” (Journal of Advertising Research, (May/June 2002, pp. 44-47). Note that the discussion of the Social Consumer Decision Journey is new to this edition and can be used to discuss how social media influences the consumer decision process. Instructors may find it helpful to read the article by Todd Powers et. al that summarizes the results from the ARF study (“Digital and Social Media in the Purchase Decision Process,” Journal of Advertising Research, December 2012, pp. 470-489) as well as the article by David Court and his associates (“The Consumer Decision Journey” McKinsey Quarterly, June 2009).

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Answers To Discussion Questions 1. The chapter opener discussed the Fiesta Movement social media campaign used by Ford to launch its new Fiesta subcompact car in the U.S. market. Discuss the pros and cons of this program and assess the amount of risk Ford took in allowing the agents to use social media to communicate with their friends about the car. (L01,02) The Fiesta Movement social media campaign used for the launch of the Fiesta was a very innovative program and was designed to build interest and buzz about the new car well before it even arrived in the U.S. market. There are many positive aspects of this program including the way it utilized social media to build awareness and interest in the new Fiesta. Ford and its agency, Team Detroit, selected the 100 Fiesta agents based on their social vibrancy and the number of social network followers or friends they had along with their entrepreneurial spirit and creative vision. By doing so they were able to recruit social media trendsetters who are very active across a number of platforms and would upload videos, pictures and other content showing themselves engaged with the new Fiesta on various sites such as YouTube, Facebook, Twitter and Flickr. Chapter 2 of the Fiesta Movement had a goal of showing more features of the new care and providing a much deeper local connection. Both phases of the Fiesta Movement generated a tremendous amount of impressions across various social media platforms and build a high level of awareness for the vehicle before the actual launch campaign. Ford estimated that the Fiesta Movement campaign cost about $10 million and resulted in 65 percent of the target audience being aware of the vehicle which is extremely high. Generating a similar awareness level through traditional media would have cost nearly 10 times as much. It is hard to find fault with the Fiesta Movement campaign since it was so successful. As noted in the chapter opener, Ford sold 23,000 cars in the first six months of the program in 2010 and nearly 70,000 Fiestas in 2011, making it the most popular subcompact car in America. However, students should recognize that Ford was taking a risk since no restrictions were put on the agents and what they could say or communicate about the car. However, Ford was very confident in the quality of the Fiesta and also knew that the agents were excited about being part of the program and were not very likely to post negative stories or images about the Fiesta. While one might argue that the monies spent on the Fiesta Movement could have been used for more traditional media advertising, it is unlikely that these ads would have been received as well as the videos posted by the Fiesta agents nor would they have had the impact. The Fiesta Movement laid the foundation for a very successful product launch and helped position Ford as a more innovative brand in the eyes of many younger consumers, which is important to the long term success of the company. 2. Do you think it was a good strategy for Ford to use the Fiesta Movement again in 2013 as part of its IMC program for the redesigned Fiesta? Why or why not? (L01, 02) This is a very interesting question to pose to students as one might questions whether Ford can replicate the success of the original Fiesta Movement with its second iteration of the social media based campaign. One can argue that consumers will view the Social Remix program as just another attempt by a marketer to influence them and question the credibility and authenticity of the Fiesta agents. Innovative marketing programs such as the Fiesta Movement often can only be used effectively one time as they lose their novelty and credibility when marketers try to repeat them. However, there are reasons why the second Fiesta Movement program might be successful. First of all, it was used to help launch the redesigned and overhauled 2014 Fiesta so there was a legitimate reason for Ford to want to draw attention to the updated version of the popular vehicle. Also, Ford

was the first automaker to truly introduce vehicles through social media and was not just trying to replicate the original Fiesta Movement campaign, but rather take it to an entirely

Chapter 05 - The Communication Process

new level by utilizing user generated content for all of the TV, print and digital advertising used for the 2014 Fiesta launch. Ford once again gave the agents a new Fiesta, then stepped back and let them do what they do best: Entertain their followers. As a result, the voice of the new Fiesta came straight from the people as it was Ford’s first completely user-generated campaign. It should be noted that Fiesta sales in the U.S. for 2013 set a record as the company sold over 70,000 units of the subcompact vehicle. While some of the record sales might be attributed to the fact that Ford redesigned the vehicle, it does appear that the Fiesta Movement: A Social Remix program was a success. The social media campaign was once again effective as it helped generate buzz and interest in the Fiesta and young millennials to put it into their consideration set when shopping for a new car. 3. Global Perspective 5-1 discuss the problems marketers encounter when developing advertising messages in different languages and for different cultures. Discuss some of the ways marketers can deal with this problem and avoid mistranslations. (L01) Communication is a major barrier confronting marketers who market their products in foreign countries as they often encounter problems in areas such as language as well as the interpretation of visual signs and symbols. Global Perspective 5-1 provides some examples of communication problems companies have encountered in marketing their products abroad. To avoid these problems firms hire companies that specialize in translation and other aspects of communication for foreign markets. They may also use a technique called back translation where a translated ad is retranslated into the original language by a different interpreter to catch errors and ensure the message will be interpreted properly by consumers in foreign markets. Marketers can also pretest their marketing communications and conduct marketing research to ensure that brand names, advertising slogans, signs, symbols and other forms of marketing communications are not misinterpreted by consumers in foreign countries. It is also very important for marketers to be very sensitive to the way their marketing messages might be interpreted by various ethnic groups or consumers in different countries and take steps to avoid the use of any images or language that might be offensive to them. 4. What is meant by encoding? Discuss how encoding differ for radio versus television commercials as well as for print. (L02) Encoding refers to the process by which the sender of a communication puts thoughts, ideas, or information into a symbolic form using words, symbols, pictures and the like. The encoding of a television commercial involves the use of visual images, sound, motion, color, and words, which provide advertisers with the opportunity to develop very creative messages. The encoding of a radio commercial is limited to the use of sound, which usually comes in the form of words read by an announcer and/or music. However, some astute advertisers may use a process called image transfer whereby the images from a TV commercial are planted in a radio spot by using similar, or even the same, audio portion. The idea is that when consumers hear the radio message, they will make the connection to the TV commercial thus reinforcing the video images. This process is discussed in Chapter 11. Encoding of a print ad can is done using visual images such as pictures as well as written information in the form of advertising copy. Many print ads for fashion brands such as clothing and cosmetics as well as luxury brand contain very few words and rely primarily upon the visual image to deliver their message. However, ads for products such as automobiles or consumer electronics may use a larger amount of copy to explain the product as well as its features and benefits. Because message recipients control the processing rate for print messages, it is possible to communicate more information to them since they can take as long as they need or want to read the copy portion of the ad.

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5. Explain the concept of viral marketing and how it relates to word-of-mouth communication. Find an example of a company that used viral marketing successfully and one that encountered problems when using this technique. Discuss how marketers are using various techniques to generate word-ofmouth discussion and buzz for their brands. Discuss the pros and cons of these techniques. (L02) Viral marketing refers to the act of propagating marketing relevant messages through the help and cooperation of individual consumers. It is sometimes referred to as buzz marketing whereby marketers try to make their brands and/or marketing messages part of popular culture and consumers themselves are lured into disseminating information through word-of-mouth. In many cases marketers may even hire individual opinion leaders and trend setters, such as DJs, waiters and waitresses, bartenders and other influential people to talk about their companies and/or brands and create excitement and interest in them. Many of the buzz marketing techniques used by marketers have now gone viral as marketers are using social media such as Facebook, Twitter and YouTube to encourage consumers to share messages about their brands with friends and associates. There are several reasons why marketers are using buzz marketing techniques. First of all they recognize that consumers are becoming very skeptical of media advertising and it becoming more difficult to penetrate this skepticism and capture their attention with overt advertising messages. By using buzz marketing techniques, consumers are often not even aware of the persuasive intent behind the messages. Word-of-mouth information also tends to be more reliable and trustworthy than information or recommendations received through more formal marketing channels which help make buzz marketing very effective. Buzz marketing may also be more cost effective as it does not require expensive media buys or the creation of advertising messages. However, consumers are becoming somewhat skeptical of these techniques if they recognize that companies are behind them and they are artificially trying to generate buzz to promote their brands. A very interesting article on the use of buzz marketing and efforts to quantify it (“Psst! How Do You Measure Buzz?”) can be found in the October 24, 2005 issue of Adweek. Students should be encouraged find examples of companies that have used viral marketing successfully as well as those that have encountered problems in using it. Viral marketing can backfire, particularly when consumers recognize marketers are trying to generate buzz for their brands and view the effort as contrived or manipulative. 6. Do you think that a company that recruits consumers to participate in an online brand community such as Procter & Gamble’s Voocalpoint programs should encourage participants to disclose their association with the organization when discussing a product with others? Why or why not? (L02) There may be ethical issues associated with the use of buzz marketing as consumers often are not aware that the individuals from who they are receiving information or recommendations regarding a brand are actually working for the marketer. Critics argue that stealth techniques, whereby consumers are not aware that the information is coming from a marketer, are often part of buzz marketing. This raises an interesting ethical issue as to whether consumers have a right to know that the information they are receiving is part of a persuasive campaign being conducted by a company. The Word of Mouth Marketing Association (WOMMA) argues that an individual spreading a product message on behalf of a company should have to disclose his or her affiliation and has issued a mandate calling for full disclosure. The organization has called upon companies such as Procter & Gamble and others who are leaders in the industry to set the right standard. Critics have also argued that without such disclosure, there is a danger of the commercialization of human relations. However, some marketers argue that it should up to the individual to decide what they want to tell their friends and they should not be telling consumers what to say. Some experts feel that the growing popularity of buzz marketing may ultimately lead to its downfall. As the technique becomes used more, consumers may recognize it and view this as yet another way marketers are trying to manipulate them and thus may be turned off by it.

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7. Discuss the characteristics of early digital adopters and the role they play in the introduction of a new high-technology product. Find an example of an ad or blog for a new high-tech product that is targeting early adopter and analyze its effort to do so. (L04) Early digital adopters play a very important role in the diffusion process for a new product. Innovators account for the first two to three percent of those who try a new product while early adopters represent the next 13 to 15 percent. Key characteristics of early digital adopters are that they are usually become aware of new products before other consumers and are very knowledgeable about them. They also have a higher propensity for ownership of technology products and own a variety of cross-platform devices such as gaming consoles, computers, and smartphones. They also are heavy users of social media and use blogs to share their knowledge and opinions about new technology with others. They are also well-respected by other potential adopters who look to them for information and advice. Thus, it is important for marketers to identify early adopters and make them aware of their new products as many consumers will pay close attention to what they say and do. However, while early adopters have traditionally consisted of younger and highly educated consumers, many older baby boomer consumers (over the age of 50) have also become early adopters of consumer electronic products such as digital cameras, mobile phones, and even video game systems. Students should be encouraged to find an example of a new consumer electronics product that is targeting early adopters and to analyze the type of advertising being used for it. A very good source of information for new consumer electronics products is a publication such as Wired or magazines such as PC World, or Macworld. However, ads for new consumer electronic products targeting those working in business can also be found in publications such as Fast Company, BusinessWeek, Forbes, or Fortune as well as in The Wall Street Journal. Students might also visit websites that have blogs discussing high tech products such as TechCrunch.com or cnet.com. 8. Digital and Social Media Perspective 5-1 discusses the age bias that exists in advertising and digital agencies against older people who may not be as digitally savvy as the younger generation. Do you think it is acceptable for agencies to favor younger people in the hiring process? How might an older person address the age bias problem? (L01, 03) As noted in Digital and Social Media Perspective 5-1, there are a number of reasons why agencies are focusing their hiring on younger workers. One reason is that they are cheaper to hire as the weak economy has made it difficult for young people to find jobs and they are often willing to work for less, particularly, in advertising and digital agencies as they view these jobs as a way to break into the industry. However, digital agencies often prefer young people because they are digital natives who have grown up with the Internet and social media and have thoroughly immersed themselves in the digital world. They are much more in touch with the various digital platforms that have become very important to marketers as they strive to engage consumers and require less time and effort to train. Older employees may argue that they understand digital media as they have taken it upon themselves to learn about social media and other digital platforms. However, they often do not have the innate understanding of digital and social media as the young people who use them on a regular basis. The ageism problem in advertising has come about for other reasons. Marketers are very interested in younger consumers as this age group spends more on a variety of products including automobiles, electronics, appliances and other items are more willing to switch brands and try new products and services. The 18-49 demographic market is highly coveted for this reason. Also, by targeting younger people with their advertising messages and media buys, marketers can also reach older consumers who aspire to be young. However, the opposite is rarely the case as younger consumers do not want to be old before their time. Students should be asked to take a position as to whether young professionals can create advertisements that connect with older consumers. Since most students taking this course will be in their late teens or early 20s, it should be interesting to hear their perspective as to whether their generation understands the over 50 crowd. It is often said that older 5-13 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 05 - The Communication Process

people don’t understand or relate to Generations X or Y. This question turns the tables and asks whether the younger generation has the empathy and understanding needed to develop effective advertising for older consumers. The young creative staff in an agency is likely to want to create ads that are reflective of their own life phase. They will want to create ads that are hip, cools, impressive to their peers and award winning. This is more fulfilling than created ads for older consumers with whom they have little in common. Older people looking to work in advertising and digital agencies as well as other areas of marketing must determine what digital skills they are lacking and take steps to address the deficiency. There are a number of online courses and tutorials that are available from major companies such as Facebook, Google and Twitter that can be taken to improve one’s knowledge and understanding of these platforms. Middle aged and older employees might also emphasize the experience and expertise they offer to advertising and digital agencies that goes beyond digital media. Skills such as managing other employees, leadership, project management, planning and budgeting are still very important to agencies and can be a way for them to market themselves. However, the reality is that the digital and advertising agencies are likely to favor young people and this is unlikely to change until the new generation of workers becomes older themselves. 9. Discuss how the implications of the social consumer decision journey framework might differ for a marketer of a high involvement product such as a tablet computer versus a company marketing a lowinvolvement product such as a soft-drink or paper towels? (L05) For a company selling a high-involvement product such as a tablet computer, the consumer is likely to go through a standard learning or learn → feel → do response hierarchy. The ARF study found that the purchase journey of consumers varies by product or service category as high risk/involvement products have longer cycles than lower-risk/involvement products. Offline advertising may still be very important in driving consideration, evaluation and brand selection throughout the consumer decision journey Advertisements for high involvement products are usually very detailed and informative and provide the consumer with a great deal of information that can be used for decisionmaking purposes. Informational displays at point-of-purchase or presentations by salespersons in the store can also be valuable and effective sources of information. Marketers of high involvement products may also want to encourage consumers to visit their web sites where more detailed information about the product can be presented and consumers can select information that is of particular relevance or interest to them. They may also be likely to visit product review sites where they can compare brands and see how others evaluate them. Marketers might encourage consumers to visit these sites and post favorable reviews of their products or share their experiences with others through social media such as Twitter or Facebook. For a company selling a low-involvement product such as a soft drink or paper towel, the consumer is likely to go through a learn→do →feel response hierarchy whereby some minimal level of awareness or passive learning may precede purchase and attitudes are formed after using the product. As discussed in Digital and Social Media Perspective 5-2, many packaged goods products are lowrisk/reward types of products that are characterized by shorter purchase cycles and lower levels of involvement in the decision-making process. Thus, marketers may spend a larger amount of their IMC budget on traditional media such as TV and print to build and maintain brand awareness as well as on consumer and trade promotions that provide an extra incentive to buy. An advertiser of a low involvement product must recognize that consumers are less likely to give attention to actual message content and may focus more on non-message elements such as music, characters, slogans or jingles. Advertisers may want to use catchy slogans or jingles that will stick in consumers’ minds and become salient when they are in the actual purchase situation. The use of short messages and heavy repetition schedules will also be important. Sales promotion techniques such as sampling and coupons may also 5-14 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 05 - The Communication Process

be used to encourage first time trial. Point-of-purchase displays and advertising might also be used to encourage trial of the brand. If the product performs well the consumer should form a favorable attitude the probability of repurchasing it will increase. However, marketers may be able to use digital media a way to extend the reach and frequency of their off-line advertising and as a way to deliver promotional offers to consumers. 10. IMC Perspective 5-1 discusses the results of a survey showing how men and women differ in their visual processing of sexual imagery in print ads. On the basis of these findings, what suggestions would you make to a marketer of hard liquor who is considering using a revealing photo of an attractive model in a print ad for the company’s product? Would your answer differ for the marketer of a personal computer who was considering doing so? (L06) The study discussed in this vignette was conducted by the advertising research company MediaAnalyzer Software & Research and compared differences between men and women in visual processing of print ads using sexual versus nonsexual imagery. In this study the respondents were asked to move a computer mouse over the ad to show the part of at which they were looking. The results of the study found that men tended to focus on the sexual imagery components of the ad while women tended to avoid focusing on these parts of the ads. The study also found that men’s brand recall was lower for sexual versus nonsexual ads which suggests that sexual imagery may consume much of the attention that would otherwise be spent on product-related components of the ad as well as copy points. The study also found that men said they liked the sexual ads more, liked the products advertised in them more and would be more likely to buy those products while women rated the sexual ads lower on all three criteria. The use of an attractive model in a print ad for a hard liquor brand may be effective in attracting attention to the advertisement itself but brand/product recall may be lower which means that the marketer may be taking somewhat of a risk. However, for males in particular, overall liking of the product may be higher which would be a reason to use the attractive model. Liquor advertising generally relies on image appeals and does not communicate detailed product information, so the use of an attractive model may not create a problem. However, for a personal computer, the use of an attractive model may be more risky. High involvement products such as computers often contain more detailed information such as features, benefits, and performance claims. The advertiser may risk distracting message recipients from this information by using an attractive model, even though she might draw more attention to the ad. 11. 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. (L06) 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.

Chapter 05 - The Communication Process

Additional Discussion Questions (not in text) 12. Discuss the various elements of the communications process. Find an example of an advertising campaign being used by a company and analyze this campaign in terms of these elements of the communications process. (L01) The various elements of the communications process include the sender or source, the message, the channel, the receiver, noise and feedback. The sender or source of a communication is the person or organization that has information to share with another person or group. The source may be an individual such as a salesperson or spokesperson who appears in a company’s advertisements or a nonpersonal entity such as a company or organization itself. The message is the information or meaning the source hopes to convey and may be verbal or nonverbal, oral, written or symbolic. The channel is the method by which the communication travels from the source or sender to the receiver. At the broadest level there are two types of channels, personal and nonpersonal. Personal channels generally involve direct interpersonal contact with the receiver while nonpersonal channels carry a message without interpersonal contact between the sender and receiver. Nonpersonal channels are generally referred to as the mass media. The receiver is the person(s) with whom the sender shares thoughts or information. Generally receivers are the customers in the target market or audience who read, hear, and/or see the marketer’s message. Noise refers to extraneous factors in the communications process that can distort or interfere with the communication of a message. Errors or problems in that occur in the encoding of the message, distortions in the transmission of the message, and distractions at the point of reception are possible sources of noise. Feedback refers to the part of the receiver’s response that is communicated back to the sender and may take a variety of forms such as response hierarchy measures including awareness, knowledge, attitudes, purchase intentions, preferences and behavior. The form of feedback of ultimate interest to marketers is, of course, sales. Students should be encouraged to find an example of a current advertising campaign and to analyze it with respect to various elements of the communications process. They might evaluate the source being used as a spokesperson in the campaign, the type of message being used, the various channels or media where the ads appear, the target audience for the campaign, and the type of feedback that might be used to monitor the effectiveness of the campaign. 13. Those responsible for most of the advertising and promotion decisions for consumer products are brand managers (client side) and account executives (agency side). These individuals are usually well paid, well-educated marketing professionals living in urban areas. Consider the typical consumer for a brand such as Budweiser beer or Mennen after-shave. What problems could these differences present in developing an IMC program for these brands? How might these problems be overcome? (L01) The brand managers and account executives are likely to be very different from the heavy users of brands such as Budweiser or Mennen after-shave. The marketing and advertising executives will, as noted, be highly educated with a college degree and perhaps a graduate degree such as an MBA while the users of these brands are more likely to be blue-collar types who have a high school education and perhaps some college. The marketing and advertising executives will probably have higher paying jobs and have different life styles, values, and interests than the consumers who are heavy users of these brands. These differences may make it difficult for the marketing and advertising personnel to develop advertising and promotional messages that appeal to these consumers and communicate effectively with them. These problems can be overcome by conducting marketing research on the users of these brands to gain insight and understanding into factors such as their lifestyles, values, interests, opinions and the like. Advertising and promotional messages can also be pretested to ensure that the re understood by these consumers and interpreted in the manner intended.

Chapter 05 - The Communication Process

14. Discuss how one of the consumer response models presented in Figure 5-3 could be used by a company such could be used by a company such as Apple in planning for the introduction of a new product such as the iPad. (L04) The innovation-adoption model would be very applicable to a company such as Apple in introducing the iPad which is the company’s tablet PC. As Apple planned its IMC program to introduce this new product the company first had to create awareness among potential adopters, then make them interested in the new product and get them to evaluate it, encourage trial and hopefully achieve adoption whereby customers would purchase the iPad. The innovation-adoption model provides a framework that a company can use in planning the IMC program for a new product. The introduction of the iPad generated a tremendous amount of publicity as the new device was featured in cover stories in magazines such as Time, Newsweek and many other publications and also received a great deal of attention on national and local television news programs. Media advertising was also used to create awareness and interest and interest in the iPad and to promote its various features. Advertising can also be helpful in driving consumers to the web site for the iPad where they have access to more detailed information and can learn more about the product. Demonstration programs at events or in retail stores, including the growing number of Apple stores, can also be used to communicate more detailed information about the iPad and encourage trial. At the trial stage consumer can experience the Ipad by performing various tasks with it, using some of the apps, and evaluating its performance. If the outcomes the trial experience are favorable, it is likely the consumer will purchase the product 15. Find an example of a print ad or a television commercial and evaluate it using the cognitive response model shown in Figure 5-7. Identify the specific types of cognitive responses that the ad might elicit from consumers and discuss why these might occur. (L06) Students should be encouraged to find a print ad or commercial and evaluate it using the cognitive response model shown in Figure 5-7. Many television commercials can be found on YouTube and/or on web sites for various companies and/or brands. They might show the ad to their friends or fellow students and have them write down what thoughts they were having as they looked at the ad. They might then try to analyze these cognitive responses by categorizing them as product/message related thoughts (counterarguments or support arguments), ad execution related thoughts, or source-oriented thoughts (bolsters or derogations). You might have a few students show the examples of ads they have chosen and present their analysis of the cognitive responses given in reaction to these ads. They might also discuss why these responses were generated. For example, source bolsters might be given to a trustworthy or likeable spokesperson while source derogations might occur if the source is not liked or is unattractive. Message related thoughts might be generated if there is a lot of information 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.

Chapter 6 - Source, Message, and Channel Factors

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

Learning Objectives 1. To study the major variables in the communications system and how they influence consumers’ processing of promotional messages. 2. To examine considerations involved in the selecting a source or communicator of a promotional message. 3. To examine different types of message structures and appeals that can be used to develop a promotional message. 4. To consider how the channel or medium used to deliver a promotional message influences the communication process.

Chapter and Lecture Outline I.

INTRODUCTION AND PROMOTIONAL PLANNING THROUGH THE PERSUASION MATRIX

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

Chapter 6 - Source, Message, and Channel Factors

Professor Notes

II.

SOURCE FACTORS

The source of a marketing communication can be viewed as a multifaceted concept 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, which is shown in Figure 6-2. This scheme recognizes three basic categories of source attributes with each involving a different process by which the source influences attitudinal or behavioral change in the message recipient. A.

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

Chapter 6 - Source, Message, and Channel Factors

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

Source Attractiveness—a commonly used source characteristic in advertising and personal selling is that of attractiveness. Attractiveness also has several sub-components including similarity, familiarity and likability. The process through which attractiveness leads to persuasion is identification whereby the receiver seeks some type of relationship with the source by adopting a similar position. Examples are provided of the application of source attractiveness in the selection of sales representatives as well as in advertising through the use of celebrities and decorative models. 1. Applying similarity—marketers recognize that people are more likely to be influenced by a message coming from someone with whom they feel a sense of similarity. Similarity is used in various ways in marketing communications: selecting salespeople, using former athletes to promote beer, and in slice-of-life commercials. 2. Issues in using celebrities—advertisers have long recognized the value of using celebrities such as television and movie stars, athletes, musicians or other popular figures to endorse their products and services. Celebrities are used because they have “stopping power” and draw attention to advertising messages. Another reason is the expectation that the respect, popularity, and/or admiration the celebrity enjoys will influence consumers’ feelings and, of course, their purchase behavior toward the brand the celebrity is endorsing. However, a number of factors must be considered in using celebrities as a spokesperson or endorser such as: a. Overshadowing the product—while a celebrity may draw attention to an ad, consumers may focus on the celebrity rather than the product or service and the advertising message. b. Overexposure—consumers generally recognize that celebrities endorse a product or service because they are paid to do so. When a celebrity endorses a number of products s/he may become over exposed and lose credibility. c. Target audiences’ receptivity —attention 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. Figure 6-3 shows an interesting chart regarding the various endorser traits that are important to older and younger adults.

Chapter 6 - Source, Message, and Channel Factors

d. Risk to the advertiser—marketers must consider whether there is any risk involved in having their company or products associated with a celebrity. Several well-known entertainers and athletes who were being used as advertising spokespersons have been involved in activities that were potentially embarrassing to the companies whose products they were endorsing such as pro basketball star Kobe Bryant (Sprite, Nike, McDonald’s) and more recently golfer Tiger Woods and Lance Armstrong (whose problems are discussed in the chapter opener), NFL quarterback Michael Vick and swimmer Michael Phelps. Supermodel Kate Moss was dropped as an endorser by several companies after pictures were published in a British Tabloid showing her using cocaine. However, Moss a number of fashion brands are once again using Moss in their ads. Bryant is also playing a more prominent role in Nike ads and also now has endorsements with several other companies and brands including Sony, Turkish Airlines, and Vitaminwater. The latter is very interesting since the brand is now owned by Coca-Cola which terminated had dropped him as an endorser for its Sprite soft drink brand. e. Matching product, target market and celebrity—one of the most important considerations in the use of celebrities is to make sure they are properly matched with the image of the product and the characteristics of the target market. Perceived expertise of celebrities relative to the product they are endorsing has been shown to be an important factor that determines their effectiveness. f. Return on investment—perhaps the most important factor a company must consider regarding the use of a celebrity endorser is the ROI from using them. Marketers use celebrities to increase awareness of, and attention, to their company and/or brands as well as their advertising. However, all of these factors must result in higher sales in order for to get a positive ROI from an endorsement deal. 3. Understanding the meaning of celebrity endorsers—advertisers should use celebrities who are connected in some way to the product or services they are endorsing. This means that marketers must understand the image and meaning celebrities project to consumers. A very insightful perspective on celebrity endorsement based on meaning transfer has been developed by McCracken. His model, which is shown in Figure 6-4 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. Kelly Ripa, who is the host of the popular daytime show Live with Kelly and Michael is discussed in the text regarding her role as an endorser for Electrolux. Another good example is actress Zooey Deschanel, star of the TV sitcom New Girl, who has been a spokesperson for companies/brands such as Apple and Pantene shampoo. The text also discusses how marketers and ad agencies use research data such as Q scores and other factors in choosing celebrity endorsers.

Chapter 6 - Source, Message, and Channel Factors

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

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

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

Message Structure—an important consideration in the development of a promotional message is the manner or framework used for structuring or communicating the information. An important aspect of message strategy is knowing the best way to communicate message points or elements. A number of message structure considerations are discussed in the text including: 1. Order of presentation—should important message points or arguments be placed at the beginning of the message, in the middle or at the end? A primacy effect suggests that the information placed at the beginning of the message is most effective while a recency effect suggests that the arguments at the end are most effective. 2. Conclusion drawing—should a message draw an explicit conclusion for the audience or allow them to form their own conclusions? Research has shown that, in general, messages with explicit conclusions are more easily understood and effective. However, some studies show that the effectiveness of conclusion drawing may depend on the target audience, the type of issue or topic and nature of the situation.

Chapter 6 - Source, Message, and Channel Factors

3. Message sidedness—should a marketing communication use a one-sided message whereby only positive attributes or benefits of a product or service are mentioned or a two-sided message where both strong and weak points or attributes are presented. The text discusses how Domino’s Pizza effectively used a two-sided message whereby the company acknowledged problems with the taste and quality of its product as part of its “Pizza Turnaround” strategy. 4. Refutation—this is a special type of two-sided message whereby both sides of an issue are presented and arguments are offered to refute the opposing viewpoint or negative information (see the Mexican Hass Avocado ad in Exhibit 6-14). 5. Verbal versus visual messages—both the verbal and nonverbal or visual portions of an advertisement influence the way an advertising message is processed. Verbal or copy aspects of the message are important in conveying rational or factual messages while nonverbal or visual elements of an ad are important for developing emotional and image based associations. B.

Message Appeals—another important aspect of message strategy concerns the manner or style used to communicate the promotional message. One of the most important creative strategy decisions involves the choice of an appropriate appeal. Some promotional messages uses rational appeals and are designed to communicate information regarding a product or service and appeal to the logical aspects of the consumer decision-making process. Other messages appeal to feelings in attempt to evoke some type of emotional reaction. Three types of appeals are discussed in the text: 1. Comparative Advertising—comparative advertising refers to the practice of either directly or indirectly naming one or more competitors in an ad and usually making a comparison on one or more specific product or service attributes. This form of advertising became a legitimate and popular practice after the Federal Trade Commission began advocating its use in 1972 and the networks lifted their ban on comparative advertising. A number of factors must be considered in using comparative advertising such as consumers’ response to the ad, perceptions of credibility, characteristics of the target audience and the company’s position in the market. Comparative messages are often used by new brands to position themselves against established brands or by smaller market share brands to compare themselves against market leaders. Market leaders, on the other hand, are often hesitant to use comparison ads as they feel they have little to gain by showing competitor’s products in their ads. The Miller Brewing Company, which is now part of Miller/Coors, used comparative messages for Miller Lite which helped the brand gain market share against Bud Light. Several other major marketers such as Apple, Samsung and Ford have been using comparative advertising as well.

Chapter 6 - Source, Message, and Channel Factors

2. Fear appeals—are used to create anxiety in the audience and arouse individuals to take action. Fear can stress negative consequences that may occur if behavior is not altered such as ads that warn people not to smoke 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). Fear appeals can have facilitating effects by attracting attention and interest to a message and motivating the receiver to act to resolve the problem presented in the ad. However, high levels of fear can have inhibiting effects whereby the receiver may emotionally block out the message by tuning it out, selectively perceiving it or counterarguing against it. The nonmonotonic relationship between fear and persuasion is shown in Figure 6-5 and should be discussed. Attention is also given to an alternative approach to the curvilinear explanation of fear—the protection motivation model. 3. Humor appeals—are among the most popular and best remembered of all advertising messages. Advertisers use humor for a number of reasons including attracting and holding consumers’ attention, putting them in a favorable mood, creating affect that may transfer to the product or service being advertised, and reduce counterarguing by serving as a distractor. Problems with humorous appeals include the possibility of drawing attention to the ad but at the expense of message content. Effective humor is also difficult to create and execute. Many advertisers prefer to use hard-sell rational appeals rather than spending their ad budgets to entertain consumers. Top advertising executives’ opinions of the pros and cons of humor are summarized in Figure 6-6 and should be discussed. Another important issue deserving inter consideration is whether humorous commercials wearout and lose their effectiveness more quickly than commercials that use a serious appeal. The wearout problem is discussed in IMC Perspective 6-3. Professor Notes

IV.

CHANNEL FACTORS

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

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

Chapter 6 - Source, Message, and Channel Factors

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

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

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

Professor Notes

Chapter 6 - Source, Message, and Channel Factors

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

Answers To Discussion Questions 1. The chapter opener discusses the series of problems Nike has had with some of its endorsers because of controversies that have arisen in their personal lives. Discuss how the problems surrounding these endorsers might impact the image and reputation of Nike. How long do you think Nike should stand by endorsers when they run into personal problems? (L02) As discussed in the chapter opener, a number of the endorsers used by Nike have had major personal issues that impacted their image and credibility including Kobe Bryant, Tiger Woods, Michael Vick, Lance Armstrong and Oscar Pistorius. For some of these endorsers such as Bryant and Vick, Nike had created shoes that carried the name of the athlete (such as the Air Zoom Vick V football shoe) and had to cancel the release of these products which created a problem for the company. Of course Lance Armstrong and Tiger Woods were also very high profile endorsers and the problems they encountered were very embarrassing to the company. It can be argued that the Lance Armstrong situation was particularly problematic as Nike had supported him during his successful battle against testicular cancer and during the period when he vehemently denied that he was using performance enhancing drugs (PEDs). Moreover, Nike was a major donor and supporter of the Live Strong Foundation that Armstrong founded to provide support for people affected by cancer. When the decision was made by the company to terminate its contract with Armstrong, Nike strongly suggested that he was hiding information from the company and misled them for more than a decade. Obviously Nike had little choice but to terminate its relationship with Armstrong as he was stripped of his seven

Chapter 6 - Source, Message, and Channel Factors

Tour de France titles and barred from life from competing or having an official role with any sport that follows the Word Anti-Doping Code. Over the past decade Tiger Woods was arguably one of the most effective endorsers ever used by marketers in terms of the return on investment they have received from his services as an advertising spokesperson. He was and endorser not only for Nike but for a number of other companies/brands including, General Motors (Buick), Accenture, Gillette and Gatorade. There are a number of factors that accounted for Woods’ success as an endorser. First of all, he is highly recognizable and is known to consumers around the world as golf is a global sport and golfers get a large amount of “face time” during golf tournaments. Moreover, Woods was one of the world’s top athletes as he has dominated professional golf for more than 15 years. He had won more 79 PGA tournaments as of 2014 including 14 majors (the Masters, U.S. Open, British Open, and PGA). In addition to his incredible performance as a professional golfer, Woods had other important traits of successful endorsers including likeability, believability and popularity as well as physical attractiveness. Woods played his collegiate golf at Stanford and is very articulate and handles himself extremely well with the media. And while golfers are not always considered athletes in the same way as football, baseball or basketball players, Woods is very well respected for his athletic ability as he is very strong and has the physique of a top athlete. It is also important to note that Woods is very good in television commercials as he is well spoken and quite comfortable on camera. All of these characteristics combined to make Woods a very effective advertising spokesperson. Most of Tiger Wood’ value as an endorser quickly declined following the car accident outside his home and the revelations of his extramarital affairs. Woods transgression made a mess of his personal life as his wife filed for divorce and he did not win a golf tournament in 2010 as his golf game deteriorated. While several companies including Accenture and PepsiCo dropped Woods as an endorser, he still has endorsement deals with a number of high profile companies/brands including Nike, Tag Heur, and others. Nike also retained Kobe Bryant as an endorser when he was charged with sexual assault in 2003 although he was not used very much for about five years. Although the charges against Bryant were dropped as part of an out of court settlement, it took him many years to recover his status as a viable endorser. He won the NBA’s most valuable player award in 2008 and led the Los Angeles Lakers to world championships in 2009 and 2010 while avoiding any additional off the court controversy. It is likely that Nike stood by Woods and Bryant because their controversies occurred away from the golf course and basketball court and were not directly linked to their performance. However, Armstrong’s use of PEDs called into question his success and performance and led Nike to issue a statement that the company does not condone the use of illegal performance enhancing drugs in any manner. Thus the company had little choice but to terminate its relationship with Armstrong. Nike has a history of standing by athletes that have had problems in their personal lives and generally does not let the court of public opinion determine whether they will drop an athlete as an endorser. This is one reason why the company is able to attract a number of athletes as endorsers even though other companies may offer to pay them more. It is also important to note that Woods has played a critical role in helping the company enter as well as compete in the golf equipment market. Thus, it is unlikely that they will drop him as an endorser as the company stands to benefit from its relationship with him, particularly since he has been wining golf tournaments again. It is also important to note that Nike has a large number of athletes under endorsement contracts including the superstars in most sports. Thus, the likelihood that a controversy might arise with one of their endorsers is much higher than for most other athletic apparel, shoe and/or equipment companies. 2. Discuss how marketers can use the persuasion matrix shown in Figure 6-1 to plan their integrated marketing communication programs. Choose a TV commercial or print ad and use the persuasion matrix to evaluate how it might influence consumers’ response processes. (L01)

Chapter 6 - Source, Message, and Channel Factors

The persuasion matrix helps promotional planners see how each controllable element in the communications process (source, message, channel, and receiver) interacts with the consumers’ response process. Marketers must consider how decisions regarding these controllable elements of communication will impact the various stages in the response process. For example, the use of a highly attractive model may attract attention to the ad but have a negative impact on comprehension if the information presented by the model is not processed. This assignment gives the student an excellent opportunity to analyze an advertisement in terms of various communication components and how they interact with the steps of the response process. The students’ analysis of the ad they choose should address factors such as the type of source used, the message structure or appeal, the media vehicle where the ad was seen (e.g., the magazine or newspaper or specific television program) and the target audience they think it was directed towards. They can then analyze these individual variables in terms of their impact on the various steps of the response process as shown in the persuasion matrix (Figure 6-1) such as message presentation, attention, comprehension, yielding, retention and behavior. 3. Discuss the three primary source attributes noted by Herbert Kelman and the different processes by which they can influence attitude and/or behavior change. Find an example of an advertisement or other type of promotional message that utilizes each attribute. (L02) The three primary source attributes noted by Kelman are credibility, attractiveness and power. Credibility influences attitudes and/or behavior through a process known as internalization whereby the receiver adopts the opinion of the credible communication because s/he he feels it is accurate and integrates it into his or her belief system. The two basic components of source credibility are expertise and trustworthiness. Expertise refers to the extent to which the source is perceived as having knowledge, skill or experience relevant to the communication topic. Many ads use expert sources such as doctors and dentists to endorse products. Athletes also are examples of expert sources when they are endorsing a product or service related to their sport. For example, racecar drivers often endorse automotive products while golfers and tennis players endorse equipment related to their respective sports. Trustworthiness refers to the honesty, integrity and believability of the source and the extent to which he or she can be trusted to give an unbiased opinion or present objective information on the issue. Expertise is used in many ways in marketing communications. Trustworthiness is also very important and advertisers usually attempt to find spokespersons with a trustworthy image and who are not endorsing too many products. Advertisers can also use techniques such as hidden-cameras or unsolicited testimonial as a way of increasing the receivers’ perceptions of trustworthiness of the source. Students should be asked to bring in an example of advertisements that use an expert source and one who is used based on his/her level of trustworthiness. The source characteristic of attractiveness operates through the process of identification whereby the receiver is motivated to seek some type of relationship with the source and thus adopts similar beliefs, attitudes, preferences or even behavior. The components of source attractiveness include similarity, familiarity and liking. Similarity is based on the sharing of interests, lifestyles, opinions, needs, goals and the like. Similarity is used in advertising by choosing spokespersons or individuals to appear in the ads who are similar on these dimensions to receivers in the target audience. The use of slice-oflife executional appeals are also a way of attempting to create empathy between the person in the commercial and the viewer. Another very common way of using attractiveness in advertising is through the use of celebrities from the sports and entertainment fields. In addition to their ability to attract attention to an ad, another reason for using celebrities is the liking consumers may have for them and the assumption that the respect, popularity, and/or admiration the celebrity enjoys will favorably influence consumers’ attitudes and, hopefully, their purchase behavior. Student should have no trouble finding examples of ads that use the source characteristic of attractiveness such as those featuring celebrities including entertainers, actor/actresses, and athletes

Chapter 6 - Source, Message, and Channel Factors

Power is a source characteristic when the source can actually administer rewards and punishments to the receiver and operates through a process known as compliance whereby the receiver accepts the persuasive influence of the source and acquiesces to his or her position in hopes of obtaining some type of reward or avoiding punishment. As a result of this power, the source may be able to induce another person to respond to the request or the position s/he is advocating. Power is a source characteristic that is difficult to apply in a nonpersonal influence situation such as advertising since a communicator in an ad generally cannot apply any sanctions to the receiver or determine whether compliance actually occurs. Thus, students may find it difficult to find an example of advertising that relies on power as a source characteristic. 4. The recent study by Ace Metrix found Papa John’s John Schnatter and Boston Beer Company’s Jim Koch to be the most effective CEO endorsers. Find an example of an advertising message in which each appears and analyze it. Why do you think Schnatter and Koch are such effective endorsers? (L02) There are several reasons why CEOs such as Schnatter and Koch are as an advertising spokesperson. First of all they have very pleasant personalities and come across as authentic and genuine in the commercials for their companies. CEOs who are dull, boring, or fail to positively differentiate a company or brand are not very effective as consumers are looking for the CEO to be interesting, relevant, and truly understand consumer desires. The success of both Schnatter and Koch may also be due to the way they are used in the advertising for their companies. Both companies have adopted the CEO as “front man” strategy and use their CEOs in most of their ads rather than just using them occasionally which helps make the public more familiar with them. Consumers also may like the execution of the ads in which these corporate leaders appear. For example, Boston Beer runs commercials for its Samuel Adams brand that feature Jim Koch’s commentary and tour of the beer brewing process which resonates well with viewers. Schnatter has been appearing alongside of NFL star quarterback Peyton Manning who comes across very well in commercials which may add to his popularity as an endorser. Some companies feel that the use of a corporate leader as an advertising spokesperson is a way of expressing the company’s commitment to the customer with respect to areas such as quality and customer service. The use of an owner or CEO of a company is seen as a way of giving a company a favorable image or identify among consumers. In some cases, a corporate leader may be very well known and respected and his or her popularity and/or favorable reputation may help enhance the image of the company. There are a number of potential problems associated with the use of a corporate leader as an advertising spokesperson. Many business leaders are not very good in front of a camera and do not make effective advertising spokespeople. They may not exude credibility or possess the type of image needed to be a good spokesperson for their company. Thus, the company may be spending money on advertising that is ineffective or may even be perceived very negatively by consumers. Another problem with using a business leader as a spokesperson is that the image of the company may be tied too closely to that person and may create problems if this individual leaves the company or encounters some negative publicity. 5. NBA star Kobe Bryant has been able to rebuild his image after charged with sexual assault a number of years ago. Do you agree with the decision by companies and brands such as Turkish Airlines and Vitaminwater to use Bryant as an endorser? Why or why not? (L02) As discussed in the chapter, companies are always taking a risk when they hire a high profile athlete or celebrity as an endorser and/or spokesperson. The companies that had hired Kobe Bryant as an endorser were shocked when sexual assault charges were brought against him as he had always had an excellent reputation as a player and family man. Bryant admitted to a sexual encounter with his 19 year-old accuser but claimed it was consensual. The charges against Bryant were dropped when the woman decided she did not want to go through the agony of what would have been a very highly

Chapter 6 - Source, Message, and Channel Factors

publicized trial. While the charges were dropped, the various companies who were using Bryant had to make a decision regarding whether to continue to use him as a spokesperson. Several companies such as Coca-Cola, McDonald’s, Spalding and Nutella let his contract expire and did not rehire him. These marketers really had little choice but to stop using him as they are very high profile companies/brands which would run a risk of damaging their image if they continued to use Bryant, particularly since their target markets include children and their parents. Nike had signed Bryant to a $45 million endorsement deal just days before the charges were made and did not terminate their contract with him. However, Nike did more or less hide Bryant for nearly three years before using him again. In late 2005 Nike began running print ads featuring Bryant and in early 2006 launched their first Kobe shoe, the Zoom Kobe I. Over the past few years Nike has increased its use of Bryant and in April 2008 extended his endorsement deal as sales of his shoe line have remained strong. Nike also made Bryant the face of its basketball shoe for the 2008 Olympics, the Hyperdunk. Initially, many marketing experts predicted that it was unlikely Bryant would ever become a major endorser again. In 2006 study by Marketing Evaluations, Inc. Bryant achieved an extremely low likeability score, ranking in the bottom firth of all celebrities. The results of this study indicated that the general public was not very fond of Bryant, despite his superstar status in the world of professional basketball. However, over the past two years he has regained some of his popularity, at least among pro basketball fans. Bryant won the NBA’s Most Valuable Player award in 2008. In May 2008 Vitaminwater signed Bryant to and endorsement deal which is interesting considering that the brand’s parent company, Glaceau, was purchased by Coca-Cola in 2007. Bryant also signed an endorsement deal with Sony to be on the cover of its basketball video game. Thus, it appears that Bryant has been able to overcome the negative publicity that resulted from the sexual assault charges and regain some of his endorsement status. Bryant re-emergence as an endorser is in due to several factors. First, he was never convicted of a crime as the charges against him were dropped and a civil suit was settled out of courts. Second, while Bryant is viewed as somewhat arrogant, he is also very articulate and has had no other off-court incidents which would detract from his image. Finally, he has been one of the best basketball players in the NBA and has performed very well as he led the Los Angeles Lakers to World Championships in 2009 and 2010. It appears that pro sports fans, as well as some of the general public, have been willing to give Bryant the benefit of the doubt and once again embrace him as a player as well as an advertising spokesperson. The decision by Turkish Airlines to sign Kobe Bryant to an endorsement deal reflects the fact that basketball has become a global sport and Bryant is an international superstar. The airline has been using Bryant globally but that the focus of the campaign has been on the U.S. market and on the Far East and the Middle East where he is very popular. As part of the deal Bryant participates in a number of public relations events for Turkish Airlines and special gatherings with his fans around the world to promote the airline. 6. Find a celebrity who is currently appearing in an ad for a particular company or brand and use McCracken’s meaning transfer model (shown in Figure 6-4) to analyze the use of this individual as a spokesperson. (L02) McCracken’s meaning transfer model provides a very interesting perspective on celebrity endorsements. According to this model, a celebrity’s effectiveness as an endorser depends on the culturally acquired meaning s/he brings to the endorsement process. Celebrities acquire these meanings from the roles they assume in their careers as entertainers, athletes, politicians and other areas. They then bring these meanings into the advertisements in which they appear and transfer them to the product or service they are endorsing. Students should be asked to find a celebrity who is currently endorsing a product, service or company and analyze his or her endorsement effectiveness in terms of McCracken’s model. They should discuss how the celebrity acquired his or her meaning and whether it transfers well to the company or brand they are endorsing. For example, actor Paul Hogan was a spokesperson for the Subaru Outback SUV when it was introduced to the U.S. market in 6-13 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 6 - Source, Message, and Channel Factors

the late ‘90s . Hogan acquired his cultural meaning primarily from the role he played in the Crocodile Dundee movies as a rugged, tough guy from the Australian Outback (Stage 1 of the model). He was an excellent choice as a spokesperson for the Outback as Subaru wanted to position the new vehicle as a vehicle that combines rough-terrain driving capability with the ride and comfort of a passenger car and the use of Hogan helps create this image. Subaru’s use of Hogan provides a clever play off of the Outback name as well as an opportunity to transfer Hogan’s tough and rugged image to the vehicle (Stage 2 of the model). Consumers may choose the Outback since they may be looking for these attributes when they purchase a new car, particularly if they internalize the image of the vehicle as durable and rugged (Stage 3 of the model). Students should be encouraged to choose a celebrity who is a popular endorser and analyze the use of this person as an advertising spokesperson by using the meaning transfer model. 7. Evaluate Domino’s decision to run an advertising campaign acknowledging the problems with the taste of its pizza as a way to promote its new recipe. Do you think this strategy was an effective way to promote its reformulated product? (L03) Domino’s decision to use advertising acknowledging the problems with the taste of its pizza is an example of the use of a two-sided advertising message whereby a marketer presents both positive and negative information about a product or service. Most marketers use a one-sided message mentioning only positive attributes or benefits associated with a product/service or a particular issue whereas a two-sided message presents both favorable and unfavorable information and arguments. The advantages of using a two-sided versus one-sided advertising message are that it may enhance perceptions of an advertiser’s credibility. 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. Many marketers feel it is too risky to say anything negative about their own company or brands. One-sided messages are most effective when the target audience already holds a favorable position toward the topic and will not hear opposing arguments. They may also work better with less educated audiences. For those individuals with an opposing viewpoint or a better-educated audience, a two-sided message may be seen as less biased and more credible and thus more effective. Domino’s use of a two-sided message appears to have been a very effective strategy. The company knew there were problems with the quality and taste of its pizza which was why they were reformulating the product. Rather than just announcing that it had changed its pizza, Domino’s and its agency felt that it could get more attention and be perceived as more honest and sincere by acknowledging the problems. The company did take somewhat of a risk as consumers could focus only on the negative part of the message rather than hearing how they were improving the taste of their pizza. This was not the case, however, as the Pizza Turnaround campaign worked very well and led to increased sales. Studies conducted on the two-sided messages showed that consumer reactions were very positive. The two-sided messages also generated a great deal of positive publicity as Dominos was praised for conceding the shortcomings of its product and taking steps to improve the taste. 8. Visit the website for the Montana Meh Project (www.montanamethproject.org) and choose three ads that use various levels of fear in the message. Discuss why each ad may or may not be effective. (L03) The Montana Meth project web site contains may example of print and television commercials that utilize fear appeals. The level of fear used in these ads varies and student should be able to find examples of ads with low, medium and high levels of fear that can be analyzed for this assignment. Fear can affect persuasion in both a positive and negative manner. A message with a low level of fear can have facilitating effects if it attracts the attention and interest of the consumer and motivates them

Chapter 6 - Source, Message, and Channel Factors

to consider how they might try to resolve the threat. This suggests that a mild fear appeal may be effective in changing attitudes and behavior of as it may get them to think about the negative consequences involved and think about how they might avoid them. Fear appeals can also have a negative or inhibiting effect and a message that uses too much fear may cause people to tune it out, perceive it selectively, counterargue against it or discount the likelihood of the negative consequences happening to them. One potential problem with anti-messages targeted at young people is that they tend to perceive themselves as invulnerable and thus they may discount any negative outcomes shown in the message as unlikely to occur to them. A number of factors should be taken into consideration in developing a fear appeal message. Young people are a market segment that may require special consideration when using a fear appeal message. This audience may be likely to discount fear appeal messages that are too strong or seen as too unrealistic. The credibility of the source used in the message may be very important and consideration 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 nonusers of a product than users. Thus it may be more effective to target fear appeals at those peers who are not using drugs and encourage them to take responsibility for their friends who might do so. An example of this is the designated driver program and responsible drinking campaigns used by liquor and beer companies. 9. Discuss the factors that lead to commercial wearout giving attention to some of the reasons markets often run the same ad repeatedly. What are some strategies for delaying or even avoiding wearout? (L04) Commercial wearout refers to the tendency of a message to lose its effectiveness when it is seen repeatedly. Wearout may occur because consumers no longer pay attention to a commercial after seeing it several times. It can also occur because consumers often become bored, irritated or even annoyed after seeing the same ad multiple times. While wearout is a potential problem for any type of commercial, some advertising experts argue that some types of commercials wear out faster than others. For example, humorous ads may wear out faster because once the consumer sees a funny spot a few times and gets the joke, the ad becomes boring. Arguments can be made, however, as to why humorous ads will not wearout any faster than other types of commercials and may even wearout more slowly. Many humorous 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 humorous ads wearout any faster than other types of commercials. The rate of wearout probably depends on the individual commercial and consumers’ reactions to it. Ways marketers can avoid or delay wearout is by creating commercials that do not easily irritate or annoy consumers or have more complex messages that have to be seen multiple times to understand (assuming of course the viewer will do so). Another way is to develop “pool-outs” or multiple executions around a creative theme that can be rotated rather than airing the same spot all the time. Geico is an example of a company that does this quite well. 10. What is meant by a qualitative media effect? Select a magazine and discuss the nature of the media environment in that publication. (L04) A qualitative media effect refers to the positive or negative influence a media vehicle has on an advertising message as a function of its quality, image, prestige and the reception environment it creates. Media vehicles such as magazines and television programs have qualitative effects since the environment they create may have an impact on readers’ or viewers’ mood states and the way they might process and respond to an advertisement. Students should be encouraged to choose a specific magazine and analyze the media environment created by that publication. A publication such as Cosmo or Vogue will be very different from Good Housekeeping or McCall’s in terms of layout, articles, photographs, and the various products and services that are advertised. Students should be

Chapter 6 - Source, Message, and Channel Factors

asked to describe these differences and how they might influence the way readers might respond differently to ads in these publications.

Additional Discussion Questions (not in text) 11. Discuss the ethics of celebrities endorsing products in foreign countries but not in the United States to protect their image. Do you think celebrities hurt their reputations by doing endorsements and/or appearing in ads? Why or why not? (L02) As discussed in Global Perspective 6-1, many American celebrities who do not appear in ads in the U.S. make huge sums of money endorsing products and serving as advertising spokespeople in foreign countries such as Japan. These celebrities will not endorse products in the U.S. because they think that it is “selling out” and may be damaging to their image. However, by appearing in ads only in foreign countries they avoid tarnishing their image at home. They take the perspective that they aren’t really selling out if nobody knows what they’re up to. There really isn’t anything unethical about celebrities endorsing products in foreign countries. However one could argue that it is unethical for celebrities to act as though they are above endorsing products when they are indeed doing so abroad. The fact that many celebrities have nondisclosure clauses in their contracts, specifying that the ads they do cannot be shown—or sometimes even discussed—outside of the country for which they are intended suggests that they are taking steps to mislead the public in the U.S. about their commercial endeavors. It has become very difficult for celebrities keep their endorsements in foreign countries a secret and to keep people back home from seeing these commercials. For example, the ABC News Show Primetime aired a segment in January 2003, called “Celebrity Foreign” that discussed celebrities endorsing products in Japan but not the U.S. Many of these commercials are now being shown on Web sites originating in Japan as well as Canada and the U.S. as well. For example, Japanese commercials featuring popular U.S. celebrities can now be found on YouTube. Thus, the public is becoming much more aware of how celebrities endorse products and appear in commercials in foreign countries. The question as to whether celebrities hurt their reputations by doing endorsements is an interesting one. Some celebrities do not endorse products or appear in ads because this is viewed as a cash-in, cash-out capitalistic maneuver. Endorsing products is not viewed as a creative endeavor because the celebrity is not acting in these commercials, they are endorsing. Obviously the general public knows that celebrities are paid large sums of money to endorse products and this may undermine their image and credibility. However, celebrities may also be concerned with the impact endorsements have on their image in the entertainment community as well. An actor or actress who appears in commercials may lose some of their credibility and may end up damaging their artistic appeal. This may be particularly critical to those who appear in movies. For example, Cher temporarily damaged her credibility as a serious actress by appearing in too many infomercials. On the other hand one might argue that cashing in on celebrity status is pretty much expected and does not tarnish the image of those who do so. Perhaps the key issue is not whether celebrities endorse products or companies but rather how frequently they do so. Celebrities who endorse too many products may indeed become perceived more as spokespersons than quality actors or actresses. 12. Most marketers choose an advertising spokesperson or source with high credibility. Discuss some reasons why it may be unnecessary, or even detrimental, to use a source who is high in credibility. (L02) 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 6-16 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 6 - Source, Message, and Channel Factors

initial attitude is favorable. The reason for this is that when a low credibility source is used the message recipients are encouraged to review personal thoughts that are supportive of their favorable position rather than attributing their feelings to the highly credible communicator. Studies have also shown that high and low-credibility sources are equally effective when they are arguing for a position opposing their own best interest. Another reason why a low-credibility source may be as effective as a high-credibility source is 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. 13. NFL quarterbacks Peyton Manning and Tom Brady are both very popular endorsers. Compare Manning and Brady as advertising spokesmen. Why might a company chose to use one versus the other as an endorser? (L02) Peyton Manning of the Denver Broncos and Tom Brady of the New England Patriots are two of the top quarterbacks in the National Football League. Both have been very successful as players having each led their team to Super Bowl victories and winning Most Valuable Player awards in the big game as well as for the season. However, Manning, Brady and Favre bring very different images to the endorsement arena and the way they are used by marketers differs as well. Manning has more of a traditional, hard core football player image and is often portrayed as the football player turned everyman in commercials for companies/brands such as Papa John’s, Sony HDTV, DirecTV and MasterCard. Manning played college football at Tennessee and comes from a football family as his father (Archie) was a quarterback for the New Orleans Saints and his brother Eli is the star quarterback for the New York Giants. He has a very good-guy next door type of personality and image and advertisers often his outgoing personality and playful sense of humor when casting him in commercials. Tom Brady brings a very different image and personality to the endorsement game. Brady is very popular as an endorser as, like Manning, he is an outstanding player and has led his team to three Super Bowl victories. Brady is also popular because of his model-like good looks and his alluring image that extends off of the field. His girlfriends included actresses and he is married to Brazilian supermodel Gisele Bundchen. Brady has been on the cover of men’s fashion magazine Gentlemen’s Quarterly (GQ) and in 2007 he topped Esquire magazine’s “Best Dressed Men in the World” list, beating out rapper Jay-Z. He is more quiet and reserved than Manning and has limited his number of endorsement deals to only a few brands including UGGs, Stetson cologne, Movado watches and Glaceau Smartwater. The decision as to which of the star quarterbacks to use will depend on the specific company or brand as Manning would probably be the better choice if trying to reach the more hard core sports fan and communicate a sports-themed message. Brady would be the better choice for a company trying to create a more unique image and capitalize on his good looks, sex appeal and alluring image 14. Discuss the pros and cons of using a comparative advertising message. Why do you think more highprofile companies/brands such as Apple, Ford, Subway and Miller Lite are choosing to use comparative ads? (L03) 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 6-17 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 6 - Source, Message, and Channel Factors

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. There are a number of reasons why companies such as Apple, Ford, and Subway are choosing to use comparative ads. Apple recognized that many personal computer users were experiencing problems with Microsoft’s new Vista operating system that was used in Windows-based PCs prior to the launch of Windows 7. The comparative ads used by Apple (“I’m a Mac, I’m a PC) portrayed the Mac character as cool, laid-back and creative while PC was shown as more of a formal, uptight and nerdy character. The ads were a very clever way to draw attention to the advantages of the Mac and encourage consumers to consider switching to an Apple computer. Ford’s “Swap My Ride” campaign was based on a similarly named MTV reality show and was had consumers drive Fords for a week instead of the cars they had just purchased. The integrated campaign presented these consumers raw and supposedly unbiased reactions to the Ford vehicles. The campaign was successful in getting consumers to move Ford vehicles such as the Fusion, Focus, Mustang and Explorer into their consideration set and to get them to visit Ford dealerships and test drive the vehicles. In the case of Subway, the company has been able to use comparative ads to show how its sandwiches are superior to other types of fast food in terms of calories, fat and other nutritional factors. Thus, comparative advertising has been an effective way for Subway to encourage consumers to consider purchasing one of its sandwiches rather than fast food offered by hamburger chains such as McDonald’s or Burger King. The Miller Lite comparative campaign was successful as it was a very effective way to compare the two brands on the amount of carbohydrates, which had become a very important attribute to many beer drinkers as a result of the interest in low carb diets. Miller Lite had only half the amount of carbs as Bud Light and a direct, hard-hitting comparative message was an effective way to communicate this difference. Anheuser-Busch’s decision to counter with its own comparative ads was surprising to many as market leaders often do not respond against challengers who attack them in comparative ads. However, AB felt that there they might gain a competitive edge by running ads noting that Miller Brewing, which was purchased by South African Breweries PLC in 2002, was owned by a foreign company. Since heavy beer drinkers are often nationalistic, AB felt that ads with a patriotic theme might resonate well with them and take away some of Miller’s market momentum. 15. What is meant by a primacy versus recency effect? When might an advertiser want to try and achieve each type of effect? (L03) Primacy and recency effects deal with the order of argument placement in a persuasive message. Research on learning and memory generally indicates that items presented at the beginning or end of a message are remembered better than those presented in the middle. Presenting the strongest arguments at the beginning of the message assumes a primacy effect whereby information presented first is most effective. Putting the strongest points at the end of the message assumes a recency effect, whereby the last arguments presented are most effective. The decision to place strong arguments at the beginning or end of a message often depends on several factors including the initial position of the target audience and the length of the message. If the audience is opposed to the advertiser’s position, it may be best to put the strongest arguments first to reduce the level of counterarguing. It may also be best to put strong arguments first if the audience has a low level of interest in the topic. However, if the audience is predisposed toward the communicator’s position or is highly interested in the product or issue, strong arguments can be saved for the end of the message.

Chapter 6 - Source, Message, and Channel Factors

The order of presentation can be critical when a long, detailed message with many arguments is being presented. This may be the case for ads for high involvement products where a great deal of ad copy is used or for sales presentations. However, for short messages such as a 15 second commercial, the order of presentation may be less critical. Order of presentation is also of interest in placement of spot during a commercial break. Most advertisers prefer to have their commercials appear at the beginning or end of a pod rather than in the middle.

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

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

Learning Objectives 1. To recognize the importance and value of setting specific objectives for advertising and promotion. 2. To understand the role of objectives in the IMC planning process and the relationship of promotional objectives to marketing objectives. 3. To know the differences between sales and communication objectives and issues regarding the use of each 4. To recognize some problems marketers encounter in setting objectives for their IMC programs. 5. To understand the process of budgeting for IMC. 6. To know various methods of budget setting.

Chapter and Lecture Outline

INTRODUCTION

This chapter begins by presenting a very interesting discussion of advertisers’ use of consumer purchase funnels. The use of these funnels serves as an interesting topic for discussion, as marketers have increasingly used them to guide their strategies. The impact of digital and social media on the consumer decision process is also explored. The chapter then moves into a discussion of the value of setting objectives. It is important to communicate to the student that while setting good objectives can be complex and difficult, it is important for this to be done properly as specific goals and objectives are the foundation upon which all promotional decisions are made. Despite the importance of setting specific advertising and promotional objectives, many companies fail to do so or set them in a manner that is inappropriate or inadequate for guiding the development of the promotional program and measuring its effectiveness. Part of the problem stems from the fact that many marketers are uncertain as to what advertising and promotion can or should do and/or prefer to use sales as an objective. 7-1 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

II.

THE VALUE OF OBJECTIVES

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

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

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

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

Professor Notes

III.

DETERMINING PROMOTIONAL OBJECTIVES

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

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

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

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

IV.

SALES VERSUS COMMUNICATION OBJECTIVES

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

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

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

B. 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 5 as a basis for setting advertising objectives. The underlying logic of these models is that as consumers pass through successive stages of the response hierarchy they move closer to purchase, and advertising’s purpose is to help move them through. •

•

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

Professor Notes

DAGMAR—AN APPROACH TO SETTING OBJECTIVES

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

Characteristics of Objectives—a major contribution of DAGMAR was Colley’s specification of what constitutes a good objective. Four requirements or characteristics of good objectives were noted: 1. Concrete 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.

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

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

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

•

Problems with attitude-behavior relationship—some criticize DAGMAR since it implies that movement through the hierarchy will lead to changes in attitudes and subsequent behavior. Problems with the assumption that attitudes are related to behavior are well documented. However, refinements in the measurement of attitudes and purchase intentions can reduce the significance of this problem. Sales objectives—proponents of sales objectives argue that communication objectives advocated by DAGMAR are a “cop-out” and a way of ignoring the basic goal of advertising which is to generate sales. They argue that since a communication objective is of interest only if it can be shown to be related to sales, why not simply use sales as the objective? Practicality and costs—DAGMAR is criticized for being difficult to implement and practical only for big companies with large marketing and advertising research budgets who can afford to establish quantitative benchmarks and measure communication results. Inhibits creativity—DAGMAR is also criticized on the grounds that it can inhibit creativity by imposing too much influence or structure on creatives. The creative department may become too concerned with “passing the numbers test” rather than developing great ideas that result in unique and effective advertising. Many advertising people have blamed the lack of great creative ideas and campaigns in the U.S. in recent years on an over quantification of advertising objectives.

Professor Notes

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

VI.

PROBLEMS IN SETTING OBJECTIVES

Most advertisers and their agencies fail to follow the basic principles and guidelines set forth in DAGMAR. They often fail to set specific objectives for their campaigns and/or do not have the proper evidence to determine the success of their promotional programs. Several interesting studies dealing with this problem are discussed in the text including the classic study by Stewart H. Britt and a more recent investigation by Steven Hartley and Charles Patti which looked at the problems of business-to-business advertisers in setting objectives. A.

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

Setting Objectives for the IMC Program—Most of the attention in the promotional area has focused on advertising since it is often the lead element in the promotional mix and other promotional mix elements such as sales promotion, direct marketing, and publicity are used to support and complement the advertising program. Advertising-based views of marketing communications planning, such as DAGMAR, have dominated the field for many years. However, as more companies adopt IMC they are considering how the various promotional mix tools can be used to communicate with their customers. Advocates of IMC have called for new approaches to promotional planning and IMC. For example, Professor Don Schultz of Northwestern University advocates the use of an outside in planning process to IMC that starts with the customer and builds backwards to the brand rather than inside-out planning. Professor Tom Duncan argues that IMC should use zero-based communications planning which involves determining what tasks need to be done and which marketing communications functions should be used and to what extent. This approach focuses on the task to be accomplished and searches for the best ideas and ways of accomplishing it. Duncan suggests that an effective IMC program leads with the marketing communication function that most effectively addresses the company’s problem or opportunity. It should be noted that the criteria discussed in determining advertising objectives are relevant to other promotional mix elements as well. A more thorough discussion of objectives for promotional mix elements such as sales promotion, publicity/public relations and personal selling is provided in the chapters where these topics are covered.

Professor’s Notes

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

VII.

ESTABLISHING AND ALLOCATING THE PROMOTIONAL BUDGET

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

Establishing the Budget 1. Theoretical issues in budget setting—most of the models used to establish advertising budgets can be categorized as taking an advertising or sales response perspective. In this section we discuss some of these. a. Marginal analysis—Figure 7-8 in the text illustrates the concept of marginal analysis. As the figure indicates, as advertising/promotional efforts increase, sales and gross margins will also increase to a point and then level off. In using marginal analysis, the firm would continue to spend promotional dollars so long as the marginal revenues created by these expenditures exceeded the incremental costs. When the dollar expenditures exceed the returns, the budget should be scaled back. In other words, the optimal budget would be at that point where marginal revenues are equal to marginal costs, or where mr = mc. While this economic model seems logical intuitively, in fact, there are two major weaknesses that limit its applicability: (1) The assumption that sales are a direct measure of advertising and promotions efforts, and (2) the assumption that sales are determined solely by advertising and promotions. b. Sales response models—two budgeting models based on sales response are discussed in the text. The first of these—the concave-downward function—is based on the microeconomic theory of the law of diminishing returns. Essentially, the model states that as the amount of advertising expenditures increases, its incremental value decreases. The basic argument is that those most likely to buy the product are likely to do so as a result of the earliest exposures. Additional exposures are not likely to increase the probability of their purchasing, nor is it likely to have an effect on those who are undecided or unlikely to buy. Thus, the effects of advertising would rapidly diminish. The second model—the S-shaped response function—takes a very different approach. In this model, it is argued that initial outlays of promotional dollars will have very little impact on sales. As indicated in figure 7-9, in Range B an impact will begin to be noticed, carrying through to Range C, where additional expenditures have again very little impact. This S-shaped curve suggests that there are incremental values to be accrued from additional dollar outlays, but only to a point. For example, it would be argued that a certain level of expenditures is necessary to make an impact. However, after a certain point (beginning of Range C) these dollars are unlikely to be of value. In other words, no matter how much I spend, if you don’t want the product, advertising isn’t going to make you buy. As with marginal analysis, the marketer would want to establish the budget at the point where s/he gets the optimal value for the outlay.

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

c. Additional factors considered in budget setting—In addition to considering the theoretical aspects of budget setting, a number of other factors must be taken into consideration including: situational factors; customer factors; the competitive environment; etc. Figures 7-10 and 7-11 can be used to demonstrate this point quite effectively and are useful to provide a perspective of what advertisers and their agencies consider the most important factors to consider in setting the budget. Professor Notes

Budgeting Approaches—This section discusses the variety of approaches that marketers use in establishing their budgets. These approaches can be classified as either top-down or build-up approaches. (Figure 7-12) 1. Top-down approaches—in these methods of budgeting, the budget is established at the “top” by management, and is passed down to the managers. Top down approaches generally include the following: a. the affordable method—In this approach, the firm determines what level of advertising and promotions expenditures they feel that they can afford, and set this amount as the ad budget. b. arbitrary allocation—when budgets are set through arbitrary allocation, there is no real rhyme or reason for the amount established. Sad as this may seem, the truth is that for many firms this is the method employed. c. percentage of sales—perhaps the most commonly employed method of setting budgets in large firms is the percentage of sales method. As noted in the text, there are a number of variations on this method, as some firms use a flat percentage of sales figure, while others may assign a percentage of the product cost to advertising with the budget based on the number of units sold (see Figure 7-13). In addition, another variation stems from which year is considered the base year for sales. One approach uses past sales histories, while the second—a percentage of projected future sales—uses projected sales figures. Many firms employ both methods, with a projection used for planning, and the final budget adjusted according to actual sales. Figure 7-14 provides advertising to sales ratios for some of the 200 largest ad spending industries in the U.S. to provide an example. d. competitive parity—in this method, budgets are set by matching the percentage advertising/sales ratios of competitors. Schonfeld and Associates publishes the percentage of sales figures by product type, and this method would be easily demonstrated in the classroom. Figure 7-14 can be used to show some percentage of sales figures, and the instructor can explain that in using a competitive parity method, companies competing in the same industries would have equal or nearly equal ratios. e. return on Investment (ROI)—One of the most discussed topics in recent years is that of how to determine ROI. The basis of this approach is that advertising expenditures should be considered as an investment, returning sales as a result. Unfortunately, for many of the reasons cited in the text, the ability to demonstrate this relationship is very difficult.

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

2. Build-up approaches—a more effective method of budgeting is that offered by build-up approaches. In build-up approaches, specific objectives are established, and budgets are determined based on the costs required to attain these goals. Three such approaches are discussed in the text. a. objective and task method—Figure 7-18 demonstrates the steps required in using the objective and task approach. As can be seen, the process involves establishing objectives, determining the specific tasks associated with attaining these objectives, and determining the costs associated with these tasks. Monitoring and re-evaluation of these steps is critical to the success of this method. b. payout planning—By projecting the revenues that a product is expected to return over a period of two to three years, the marketer can develop a payout plan. Based on this expected rate of return, the marketer can assist in the determination of the advertising expenditures necessary. An example of a payout plan is presented in Figure 7-20. c. quantitative models—As noted in the text, quantitative models have not met with the success that might have been expected of them. Most of these models have employed the use of multiple regression analysis using sales as the dependent variable, which may account for much of the problem. Figure 7-21 provides the results of a study by Low and Mohr regarding the advertising budget setting process. As can be seen, the nature of the decision process and a variety of factors have been shown to come into play in this decision. Allocating the Budget—a number of factors influence marketers in their determinations as to how the budgets will be allocated. Recent years have seen a shifting of advertising dollars to other media including the Internet and nontraditional media. Figures 7-22 provides an example of media expenditures. A variety of factors must be considered in determining how advertising and promotional dollars will be allocated. 1. Client/agency policies—corporate politics, policies, etc. may all impact the allocation of advertising and promotions dollars. As noted, agencies and advertisers may both have their preferences as to how monies will be spent. 2. Market size—the size of the market will often determine how much monies need to be allocated therein. For example, smaller markets may charge less for media time, may be more easily covered, etc. than larger ones. 3. Market potential—certainly the potential of the market must be considered. The previously discussed concept of target marketing would dictate that market potential should be considered in the budget allocation decision. 4. Market share goals—the market share goals established by the firm—that is, increasing or maintaining share—will impact the allocation decision. A study by John Jones concluded that (1) new brands generally receive higher than average advertising support; (2) older, more mature brands are often “milked”—that is, advertising expenditures are reduced; and (3) there is an advertising economy of scale operating. In another study, James Schroer suggests that to have a growing market share marketers should: • segment markets • determine competitor’s cost positions • resist the lure of short term profits • consider niching strategies

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

5. Economies of scale—some practitioners believe that there are economies of scale that accrue to marketers holding large market shares, which allows them to spend less money due to their past successes. As noted in the text, there is little or no evidence to support this theory, and some studies show that an opposite effect may occur. 6. Organizational characteristics—After reviewing the literature, Low and Mohr conclude that a number of organizational factors influence the budget allocation decision. These factors include: (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. Professor’s Notes

Teaching Suggestions

We feel that from an integrated marketing communications planning perspective, this is one of the most important chapters in the text. It is very important for students to understand the importance of setting good objectives to guide the planning and development of an advertising campaign as well as for providing a benchmark or standard against which performance can be measured and evaluated. This chapter builds on material in previous chapters, particularly Chapters 2 and 5, as it stresses the difference between marketing and sales versus communication objectives and the role of advertising in influencing sales. The DAGMAR model relies heavily on the response hierarchy models discussed in Chapter 5. Students should recognize that the specific communication objectives that are appropriate will vary depending on the buying situation. The DAGMAR model is discussed in detail as a viable approach to setting advertising objectives. A very valuable aspect of Colley’s work on DAGMAR is the specification of characteristics of good objectives which are discussed in the text. While most companies are not going to meet all of the criteria set forth in DAGMAR, it is important that students recognize the characteristics of good objectives. Another important issue to address in discussing this material is the difference between sales versus communication objectives. We discuss the basic characteristics of each, when they are appropriate and problems with using sales and communication objectives. The instructor may want to find some examples of campaigns which have won awards and/or have been very effective from a communications perspective but not in terms of sales. The discussion can focus on the role of advertising and whether there are other problems or factors which may be inhibiting sales. A very good and interesting example which might be used here is to demonstrate that an advertising campaign can impact sales is presented in the discussion on the Subaru Outback.

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

Some instructors may wish to divide the lecture into two sessions. The first can be devoted to discussing the objective setting process and the second on budgeting. In the budgeting session we usually start the lecture with the theoretical perspective, explaining the two advertising/sales response models discussed in the text. A discussion and evaluation of each of the budgeting methods usually follows. (For example Figure 7-13 can be very useful in demonstrating the percentage of sales method. It could also be noted that many companies use this as a guide in setting their budgets to remain at competitive parity). The budget allocation decision is illustrated very well by showing Competitive Media Reporting examples of monies and percentages of budgets assigned to the media this service tracks. It is important for the instructor to demonstrate some of the strengths and weaknesses associated with both the theoretical models and the budgeting methods themselves. The major problem with the former is the fact that sales are used as the dependent variable. Students need to know that while it is sales (or some other behavior) that is ultimately sought, it is often very difficult to demonstrate directly the advertising/sales relationship—which to a large degree explains why regression-based models have also had limited success. The chapter’s discussion of ROI demonstrates both the importance and frustration involved in attempting to make this determination. Likewise, the budgeting methods discussed are also fraught with weaknesses the student must be aware of. An effective way of demonstrating this for the bottom-up methods is to ask students to prepare a fictional budget for a product. They will very quickly realize the problems associated with trying to determine payouts and assigning costs to the tasks required to attain specific objectives.

Answers To Discussion Questions

1. Companies like P&G and Kraft Foods have found success by increasing their IMC budgets while other companies reduce theirs during a recession. Explain why they have likely achieved this success. (LO7) Companies like P&G and Kraft are successful for a reason. That reason is making sound marketing decisions. Many companies treat advertising and promotions as an expense rather than an investment, with the first budgets to get cut when sales begin to decline are those of marketing. While common, this is not likely to be an effective strategy. Companies like P&G and Kraft have determined this, and typically do not make cuts. If one recognizes that advertising as an investment rather than in expense, it would make more sense to increase expenditures during a downturn. In fact, that is what advertising is supposed to do—help sell the product. Reducing the budget is likely to lead to even further sales declines, given the reduction in support. It seems illogical to think that sales are going down, so lets cut our marketing efforts, but that is what most companies do. In addition, if competitors reduce their budgets, those who continue to allocate, or increase allocations, will experience a greater share of voice, as there will now be less advertising clutter in the marketplace. Kraft and P&G’s ads will be even more likely to be seen. Many successful companies actually increase their advertising expenditures in hard times for these very reasons. 7-11 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

2. Some marketers feel that the hierarchy of effects models may no longer reflect the characteristics of the consumer decision-making process. Discuss the pros and cons of these arguments. (LO4) A study published in the McKinsey Quarterlypro claimed the purchase funnel dead, arguing that consumers no longer make decisions in a linear fashion and have changed the way they go about making purchase decisions. The report states that decision making has become more complex and dynamic, and the stages have become interdependent and consumers are influenced at any time during the process. Likewise, Sue Unerman, chief strategy officer at MediaCom, claims that the purchasing funnel is not dead but pregnant. She contends that the traditional model must be adapted to account for new media. Unerman notes that the traditional funnel shape is being replaced by one that shows the traditional narrowing at the consideration stage but then bulges when the known and trusted brands are joined by new ones found on Internet searches, blogs, Facebook, and other new media. Yet another nonbeliever in consumer funnels is Joseph Jaffe, president of Crayon, who thinks funnels need to be flipped. According to Jaffe, the traditional funnel is outmoded, as marketers spend too much money trying to funnel the consumer universe (many of whom don’t care about the product or service) down to a handful. He says monies should be spent on this handful to get more out of them, resulting in a more efficient, effective, and profitable strategy. By focusing on establishing a strong relationship with customers after the sale, companies can take advantage of the new viral world as consumers interact with and influence many other consumers, each of whom may make multiple transactions. Not everyone is convinced that employing a funnel is no longer a viable strategy. In a study designed to determine if the purchase funnel still works, the Television Bureau of Advertising (TVB) was more interested in how media impacts consumers in the decision-making process. Yankelovich (a research company) and TVB examined how 3,002 consumers employed traditional and new media at each step in the process. The results indicated that media had an influence on 80 percent of the consumers at the awareness phase, declining to 53 percent at the transaction stage, and that the impact varied depending upon the product category, but the funnel approach still made sense. The Advertising Research Foundation (ARF) found data to support both sides of the argument, again concluding it varies by product category.

3. Some economists believe that the impact of advertising on sales follows an S-shaped curve, while others argue for a concave-downward curve. Discuss the differences in these perspectives. Is it possible for both to be correct? (LO6) As can be seen in the text, these two response curves examine the effect of advertising on sales from a very different perspective. Perhaps the major point of divergence is when advertising begins to have an impact. Both the S-shaped and concave downward curves are based on economic theory. In the former, the model proposes that the effect of the advertising on sales will proceed through three ranges. In the first range there is very little impact of ad expenditures on sales, then in Range B the impact rises rapidly, indicating that the advertising is having an impact, with sales revenues exceeding advertising expenditures. Eventually, the curve flattens out (Range C), as incremental raises in advertising have little impact on sales.

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

The S-shaped response curve would seem best suited to low involvement products. Additional ad expenditures might eventually create awareness and interest among more consumers and even encourage consumers to try a product after repeated exposures. Studies have shown that it often takes a number of exposures to an ad to have an impact on the receiver. The concave downward function implies that the impact of the advertising will have an almost immediate impact or none at all. This impact levels off very quickly, however, with subsequent outlays having no additional effect on incremental sales. For higher involvement products, like an automobile, the concave downward function may be the better argument. For example, if you have just made an auto purchase, it is highly unlikely that any additional advertising outlays are going to get you to purchase another. The decision has been made. Likewise, if one is in the market for a high-involvement purchase, an incentive (rebate, financing, etc.) may be enough to result in the final commitment to purchase. While the two curves are similar in that they are both based on economic theory, and examine the relationship between advertising outlays and incremental sales, they are also very different. In the S-shaped response model, there is more of a cumulative effect of advertising, as more exposures may lead to more sales, and repetition may have more of an impact. In the concave downward model, the impact of the ad would appear to be more immediate, and additional expenditures may have less impact.

4. Explain why it is so difficult to directly measure the impact of advertising on sales. What factors may inhibit this determination? (LO3) Perhaps one of the most common questions to which marketers seek an answer (and are asked by stockholders, accountants and others) is whether the money being spent on advertising are leading to sales, and is being spent wisely. Thus, there has always been an attempt to relate advertising to sale, primarily be economists, without any concrete conclusions forthcoming. The problem with establishing this relationship is that a number of other factors affect sales, including environmental effects, other marketing variables, etc. For example, if one has good advertising and draws customers to the stores, but the store is out of inventory, it is possible to get a good assessment of the advertising? Or, what if the product is of poor quality? The advertising may have drawn people to the product, but once they tried it they refused to buy it again? What if the advertisement leads to my wanting a Rolls Royce? If the price is too high, was it the fault of the advertising that I did not buy? Sometimes advertising can be effective at creating sales but at a later date. In advertising, this is referred to as the “lag” effect. What if I see the ad now, but don’t buy until later? Is it possible to measure the impact of the advertising directly on the sales? Many factors impact the advertising-sales relationship, making it difficult to isolate the impact of only the advertising. While marketers have made great strides in this regard, unless there is testing in a controlled environment, the exact relationship will not be known.

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

5. Explain some of the reasons marketers are shifting their budget allocations from traditional to digital and social media. What are some of the advantages and disadvantages with this reallocation? (LO5) The world is becoming—or already has become—a digital world. Almost everyone is on the Internet, and the majority of the population in the U.S. and first world countries are involved with social media. Children are learning in school on iPads. High schoolers can only get assignments and grades online ins some schools and digital toys have become the new babysitters replacing television. With the coming of the digital age is the demise of many traditional media. Younger people rarely read a newspaper, and if they do, it is probably online. Programming is watched on mobile devices almost as much as TV. General news magazines are struggling to survive—Newsweek hasn’t. Mobile is the fastest growing medium, and is not only enjoyed, but relied upon, by the younger generation. The result of all of this is that many marketers have shifted their advertising allocations to digital media, at the expense of traditional media. But traditional media are not dead yet. Numerous studies have indicated that at the top of the funnel (awareness and interest), television is still the main source of information for consumers. Magazine ads have also been shown to drive search, as have newspapers (to a lesser degree). While digital media have taken over at the later stages of the response hierarchies, they are not as effective as some traditional media at earlier stages. More than one company, for example P&G and GM have moved advertising dollars from traditional media to digital, only to move them back again. While both had discontinued ads on the Super Bowl, they have both come back, recognizing the reach from this event as well as the ability for these media to generate interest. In a successful IMC program there is a need for a mix of traditional and new media. In a sense, that is what IMC is all about.

6. Why is it important for marketers to set specific objectives for advertising and promotion? What criteria must these objectives meet to be valid? (LO1). Objectives are necessary to effectively plan and evaluate the communications program. Think about it as taking a trip. The roadmap serves as the plan, and specific objectives are set in regard to where you want to be and when. Your progress is measured by the attainment of these objectives. It is important for marketers to set objectives for proper coordination of the promotional program elements. What is the message going to achieve? How will various media like advertising, public relations, and the Internet be used? How much money is to be spent in each medium? Secondly, as noted, the communications are part of the strategic map as to what is to be accomplished, and when. Without these communications, there is no plan. Finally, communications objectives serve as a basis for evaluation of the success or failure of the program. Too many marketers fail to measure the effectiveness of their programs because they do not know what to measure. Once they understand the value of communications programs, they will be more effective in determining the proper metrics for this purpose. 7-14 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

To serve as valid objectives, specific criteria must be met. These include (1) they must be concrete and measurable, (2) they must include and define a specific target audience, (3) they must establish a benchmark and specify the degree of change sought, and (4) they must be time specific. In addition, objectives must be realistic and attainable. By adhering to these criteria, the objectives will be useful in developing the overall IMC plan.

7. What are some of the problems associated with setting communications objectives? How can marketers overcome these problems? Cite examples. (LO4) As noted in the chapter, setting objectives are not always as easy as it may seem. A number of problems may arise. Perhaps the most common of these is the failure to set specific objectives. Companies too often set objectives that state what it is that they hope to accomplish, but are not specific enough so as to provide an adequate basis for measurement. For example, objectives may state that the organization wishes to improve it’s image, without quantifying by how much. In other instances the objective may state that the company wants to improve relationships with its customers. A question that must be asked is by how much, and by when. Objectives are also not matched to outcomes through evaluation. Specifically, companies need to specify the objectives, and the metrics that will be used to determine if these objectives have been obtained. For example, how will we determine if we have improved our image and our customer relationships? What are the specific tasks that will be necessary to achieve these goals, and how will we measure if they were successful? Objectives are often established that are not realistic and/or attainable. One example of this is when companies set sales goals as the objective for the IMC program. The communications element is only one of the factors that will lead to sales gains (price, distribution and product factors are the others.) In most cases, attributing the gains and/or losses to the promotional element is unrealistic. In other instances, the objectives may ask too much. For example, with a limited budget, only so much can be accomplished. Reaching too high may be asking too much of the program and it may be deemed as unsuccessful or less successful than it really is. By setting specific, concrete and measurable objectives based on a consumer funnel, many of these problems can be avoided.

8. What are the values associated with setting objectives for IMC? How can marketers improve their communications programs by establishing specific objectives? (LO1) The values provided by objectives include improved communications, as well as planning and decision making, and the ability to measure and evaluate results. The first step in the planning process is to review what happened as a result of the previous year’s program. This information can then be used to evaluate the overall success of the program, as well as the specific strategies and tactics put into place. One of the reasons for planning is to improve the company’s overall goals, the other is to determine what worked and what did not. Planners need to know if one program element is working or not— for example, if there was a promotion, did it draw customers in to the store? If ads were placed on television, did it lead to higher awareness, etc. Those strategies and tactics that worked will be used again. Those that did not can be eliminated or improved upon. 7-15 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

Think about it as taking golf lessons. Besides the goal of lowering your handicap, you also want to know what you are doing well so that you can continue to do so. But you also want to know what you are doing wrong, so as not to continue to do it in the future. The same holds true for developing IMC programs.

9. What are the two key issues that marketers must face in regard to budgeting? Explain the differences and give examples of each. (LO5) In making budget decisions, the marketer must decide at what level to set the budget, and then how to allocate it. In setting the budget, the decision must be made as to how much is going to be spent. For smaller companies, and/or nonprofits this may be a very small amount. But for large companies, like P & G, Verizon, and GM, it may mean millions or even billions of dollars. The size of the budget is a critical decision, as so much depends on the amount set. As noted in the chapter, there are a number of methods commonly employed for this purpose—most of them being top down in nature. Once the budget has been set, the question now becomes how to spend it. This is where setting communications objectives becomes so critical. Communications objectives set the basis for the budget allocation. For example, if the goal is awareness or other top of the funnel objectives, the likelihood is that a media strategy involving advertising may be most appropriate. However, as one moves down through the funnel, the media employed will change, and the amount of monies allocated to these media will change as well. Where TV may be used at the top of the funnel, print and/or the Internet may receive more of the allocation as one moves down toward the bottom. One of the major advantages of an IMC approach is that it leads to a more effective, and efficient utilization of media. By following this approach, the allocation process is more effective as well. 10. Explain the S-shaped response curve and the concave downward curve as they relate to budget setting. What are the differences in these two curves? Give examples of how each might be more appropriate for different products. (LO6) 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 wt which sales will level off and additional expenditures will again have little or no impact. The concave-downward model follows the economic model of the law of diminishing returns. That is, as the amount of advertising increases, its incremental value decreases. thus, the effects of advertising would almost immediately begin to decrease. As can be seen, the models differ substantially in respect to the impact of advertising expenditures In the former model, the impact of advertising will not even begin to be felt until a certain level of expenditures has been reached. Those who believe that advertising spending has a cumulative effect would adhere to this mode. In the concave downward model, the impact takes place

almost immediately, with incremental expenditures having less and less value. 7-16 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

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 highinvolvement 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.

Additional Discussions Questions (not in text) 11. As noted in the chapter, there is an increased emphasis on the determination of ROI. Discuss some of the reasons leading to this increase in attention. Why is it so difficult to measure ROI? (LO7) For years marketers have wondered about the impact of their promotional expenditures. While some media, like direct marketing and sales promotion, could demonstrate some of the impact of their investments, others –particularly advertising—had a much more difficult time doing so. Many advertisers recognized the difficulties associated with measuring effectiveness, and as a result, made little or no attempts to do so. However, as the media landscape changed, particularly with the growth of direct marketing and the Internet, the importance of being able to determine which media would provide the greatest ROI increased significantly. As direct marketers were able to show the returns through measures such as cost per order, etc. the pressure on demonstrating the returns of other media naturally increased. When companies invest millions of dollars in their IMC programs, the need for accountability seems obvious. Unfortunately, the measure that most marketers want to see is the impact on sales. Thus, for the most part, when companies attempt to measure ROI, they attempt to look at the impact of various media expenditures on sales (or other marketing objectives). Because there are other factors beyond advertising and promotions that impact sales, it is often difficult to isolate the ROI of the communications programs specifically. For example, what if the IMC program is very effective, but the consumer doesn’t like the product? What if the price is too high? What if the product is not available when the consumer goes to make a purchase? Using sales as the criterion for determining ROI, could lead to the conclusion that the communications program didn’t work, when in fact it did. Certainly sales is the critical element that marketers want to see. However, achieving one’s communications objectives will likely lead to increases in sales (all other factors such as price, product and distribution being in place). Thus, marketers need to understand that they must measure communications objectives and not just drop to the bottom line (sales, marketing objectives) to determine IMC effectiveness. By measuring communications objectives, the marketer may be able to isolate the contributions of the IMC program, as well as determine what other factors might be impacting. 7-17 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

12. Chapter 7 differentiates between communications objectives and sales objectives. Explain the difference. What are examples of communications objectives? From where are these objectives derived? (LO3) As noted in the text, marketing objectives are stated in the marketing plan and refer to what is to be accomplished by the overall marketing program. These objectives are derived from the marketing situation analysis, and typically relate to sales, market share, and similar goals. Communications objectives are specifically related to what the organization will attempt to achieve with the promotional program. While these objectives are designed to assist in the achievement of the overall marketing objectives, they are not the same (though some companies may treat them as such). Communications objectives, while designed to help achieve overall marketing objectives, are those sought in the development of the communications program. Awareness, knowledge, interest, and attitude change are just a few examples of communications objectives. As with marketing objectives, communications objectives must meet the same criteria of effective objectives, e.g. measurability, attainability, and the like. Communications objectives are often derived from response hierarchy models (see Chapters 5 and 7). As noted in the text these models may vary somewhat depending upon their original intent (to determine advertising effects, adoption, etc.), but they still meet the criteria for sound objectives, and focus on the necessity for the communications program to move potential consumers through a series of steps toward the ultimate goal. These hierarchies are supported by years of studies demonstrating their validity. As such, they serve as excellent measures of communications impact. 13. The AAAA contends that advertisers should not cut their budgets during a time of recession. Explain why advertisers usually do make cuts in marketing communications budgets during a recession. Is this likely to be an effective or ineffective strategy? Explain why. (LO5) It seems logical to some that when sales start to decline, such as in a period of recession, that advertising expenditures should be cut. To others, like the AAAA, this is exactly the wrong thing to do. The primary reason for cutting advertising expenditures during a recession is because many advertisers consider advertising an expense rather than an investment. When there are less revenues coming in, they feel that they have less to spend on advertising. In fact, one of the criticisms of the percentage of sales method is exactly this point. As sales drop, the % stays the same, but the total amount serving as the base for that expenditure is lower. Thus, advertising expenditures drop. In fact, many companies have been successful by increasing or maintaining advertising expenditures during downturns in the business cycle. Minute Maid, and Toyota are two such examples. The logic behind their thinking is that if other advertisers cut their budgets, or pull out of the market completely with their advertising, there is an opportunity to gain a competitive advantage. With less advertisers, there is less clutter, and a greater share of voice. For those with the Minute Maid and Toyota thinking, advertising is an investment in the brand. Opportunities arise when competitors think of it as an expense. These companies recognize that when there is a recession, and when sales are off, that is the time to increase expenditures in advertising to assist the brand.

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

14. The chapter discusses the results of a study conducted by Yoo and Mandhachitara that shows that advertising spending and effects may differ in different competitive environments. Explain each of the four scenarios presented in Figure 7-16 and give examples of brands in each of these cells. (LO5) The study focuses on the fact that advertising by competitors may not always be to the detriment of one’s brand. In fact, there may be cumulative gains to both competitors when both advertise. Figure 7-1 provides some examples. Advertiser’s Advantage—In this case, one’s brand is stronger than that of the competition. Given the competitive advantage, the brand should focus on advertising versus other promotional tools. The reason for this is that advertising serves as a reminder as well as an introduction to the brand. Given the brand’s strength, incentives—some of which may be costly—are not required. Rather, keeping the brand in front of the consumer, and maintaining a brand image may be most important. An example may be the Apple iPod versus other MP3 players. Apple is clearly the dominant brand, and should focus on communicating its brand image and benefits. There is no need to offer discounts. Symbiotic competition—Brands competing in a growing market that complement each other should still focus on advertising according to Figure 7-16. The adoption of satellite radio by auto manufacturers offers consumers an attractive option to enhance their driving experience, and a competitive advantage to competitors not offering such an option. For both the automobile and the satellite radio company (i.e., BMW and Sirius), continued advertising of the brand is likely to benefit both. Zero-Sum Competition—In a mature market, one of the ways to gain market share is by taking it from the competition. Thus, increases in advertising may lead to gaining share, and may have to be matched to ward off the competition by others. Consider the competition between Energizer and Duracell, while the market for batteries is growing very slowly or may even be flat, both companies will continue to advertise in attempts to gain share and defend against the other as well. Competitor’s Advantage—In a market situation in which a company’s brand is inferior to the competition, head to head advertising may not be the best strategy. By gaining a niche position, and focusing on promotional tools as opposed to advertising, some share may be gained. Using batteries as an example, again, consider the smaller share brands such as Panasonic, EverReady, etc. Head to head advertising battles are not likely to be effective. On the other hand, offering coupons, sweepstakes, etc. may entice the consumer to try the brand, and sales may increase. 15. Different companies believe that various media are more important than others for their marketing purposes. Discuss the various perspectives taken by these companies, and explain why everyone may not agree on the same level of importance for media. (LO6) As chapter 7 demonstrates, there are a number of factors that influence the media strategy. Communications objectives, corporate policies, politics, and the size of the budget are just a few of these. Because of the difficulty in determining a precise ROI for media, the decision is often subjective, and may not always achieve consensus. Jaguar prefers a method of tracking prospects that respond to their advertising, then providing the contact information to dealers for follow up through direct marketing, etc. Jaguar believes that this method leads to a better determination of media efficiencies.

Chapter 07 - Establishing Objectives and Budgeting for the Promotional Program

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

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

Chapter 8 - Creative Strategy: Planning and Development

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

Learning Objectives 1. To discuss what is meant by advertising creativity and examine the role of creative strategy in advertising. 2. To consider the process that guides the creation of advertising messages and the research inputs into the stages of the creative process. 3. To examine creative strategy development and the role of various client and agency personnel involved in it. 4. To examine various approaches used for determining major selling ideas that form the basis of an advertising campaign.

Chapter and Lecture Outline I.

INTRODUCTION

One of the most important components of an integrated marketing communications program is the advertising message. It will be obvious to students that there are a myriad of ways to convey an advertising message. However, underlying all of these messages is a creative strategy that involves determining what the advertising message will say or communicate and creative tactics dealing with how the message strategy will be implemented or executed. The focus of this chapter is on the development of creative strategy while tactical issues are covered in Chapter 9. Attention is given to the creative strategy development process and various approaches to developing the big idea that will be used as the central theme of the advertising campaign and translated into messages. The opening vignette to the chapter discusses how the Lambesis agency developed the “Iconic Passion” campaign for the Tacori jewlry line that includes very creative print and television ads as well as a short film called Par Chance. The campaign has been very successful as it has led to double digit sales increases and has helped make Tacori one of the hottest brands of fashion jewelry.

Chapter 8 - Creative Strategy: Planning and Development

II.

THE IMPORTANCE OF CREATIVITY IN ADVERTISING

The creative side of advertising is one of its most interesting aspects. The creative strategy used to communicate an advertising message is an integral part of the promotional process and is often critical to the success or failure of the campaign. Numerous examples or cases can be cited of how a good creative strategy was an important factor in determining the success of a product or service or reversing the fortunes of a struggling brand. Of course there are also many situations where companies struggle to find a creative formula that works effectively. These companies change their creative strategy frequently in hopes of finding a campaign theme or tagline that strikes a responsive chord with consumers. Attention must also be given to the issue of creative versus effective advertising as many ads may be critically acclaimed from a creative perspective but fail to help the sales of the brand. Digital and Social Media Perspective 8-1 discusses how the Wieden & Kennedy agency has developed very creative advertising campaigns for Old Spice body wash including the popular “The Man Your Man Could Smell Like’ spot that won the Grand Prix award as the best commercial in the world at the 2010 Cannes Lions International Advertising Festival. W+K has used social media such as Facebook, YouTube and Twitter to take the campaign viral and leverage the popularity of the Old Spice commercials and other videos created as part of it. III.

ADVERTISING CREATIVITY

It is important to examine the concept of creativity, how it applies to advertising, and the challenge marketers face in developing creative and effective advertising. A.

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

Different Perspectives of Advertising Creativity—perspectives of what constitutes creativity in advertising vary. At one extreme are the “suits” or “rationalists” who argue that advertising is creative only if it sells the product or service. At the other end of the continuum are the “poets” who judge creativity in terms of its artistic or aesthetic value and argue that creative advertising must be novel, original and unique. The answer as to what constitutes creative in advertising is probably somewhere between these two extreme positions. We are concerned with advertising creativity, which refers to “the ability to generate fresh, unique and appropriate ideas that can be used as solutions to communications problems.” This perspective recognizes that creative advertising ideas are those that are novel, original and appropriate. To be appropriate a creative idea must be relevant or have some importance to the target audience. The “Universal Advertising Standards” (Figure 8-1) used by the former D’Arcy Masius Benton & Bowles agency in assessing the creativity of the advertising created by the agency should be reviewed as they provide an excellent check list for evaluating creative work.

Determinants of Creativity – It is generally agreed upon that there are two central determinants of creativity which are divergence and relevance. Divergence refers to the extent to which an ad contains elements that are novel different or unusual. Some of the ways divergence can be achieved in advertising include the following:

Chapter 8 - Creative Strategy: Planning and Development

1. Originality: Ads that contain elements that are rare, surprising, or move away from the obvious and commonplace. 2. Flexibility: Ads that contain different ideas or switch from one perspective to another. 3. Elaboration: Ads that contain unexpected details or finish and extend basic ideas so they become more intricate, complicated or sophisticated. 4. Synthesis: Ads that combine, connect, or blend normally unrelated objects or ideas. 5. Artistic value: Ads that contain artistic verbal impressions or attractive shapes and colors Relevance reflects the degree to which the various elements or the ad are meaningful, useful, or valuable to the consumer and can be achieved in two ways. Ad-to-consumer relevance refers to situations where the ad contains execution elements that are meaningful to consumers. For example, advertisers may use celebrities which whom consumers identify, music that they like or visual images and other execution techniques that capture their interest and attention. Brand-to-consumer relevance refers to situations where the advertised brand of a product or service is of personal interest to consumers. Relevance or appropriateness can also be viewed in terms of the degree to which an advertisement provides information or an image that is pertinent to the brand. The ski-mask commercial for the Volkswagen Beetle convertible which is discussed on p. 270 provides a very good example of creative advertising that relies on the divergence criterion of originality. Professor Notes

IV.

PLANNING CREATIVE STRATEGY

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

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

Chapter 8 - Creative Strategy: Planning and Development

Taking Creative Risks—many creative people in agencies argue that they often follow proven approaches or formulas when creating ads because they are safe and less likely to fail. They note that their clients are very often risk averse and feel uncomfortable with advertising that is too different. It is important to note that companies who have very creative advertising are more willing to assume some risk. However, many managers are more comfortable with advertising that is straightforward in communicating with customers and gives them a reason to buy. Examples of agencies known for taking creative risks, such as Wieden+Kennedy, TBWA/Chiat/Day, and Crispin Porter + Bogusky might be noted. There is a very interesting discussion of the perpetual debate over creative versus hard-sell advertising on p. 274.

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

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

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

Chapter 8 - Creative Strategy: Planning and Development

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

Verification/Revision—the purpose of the verification/revision stage of the creative process is to evaluate ideas that come from the illumination stage, reject any that may be inappropriate, and refine those that remain and help give them final expression. Some of the techniques used at this stage include: • • • •

Directed focus groups Message communication studies Portfolio tests Pretesting of ads in storyboard or animatic form

Professor Notes

VI.

CREATIVE STRATEGY DEVELOPMENT

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

Chapter 8 - Creative Strategy: Planning and Development

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

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

The Search for the Major Selling Idea—an important part of creative strategy development is determining the central theme that will become the major selling idea or big idea for the ad campaign. Big ideas are important in business-to-business advertising as well as advertising targeting consumers. IMC Perspective 8-2 discusses how Siemens developed very effective B-toB advertising with its “Answers” campaign. There are several different approaches that can be used for developing major selling ideas and as the basis of creative strategy. Some of the best known and most discussed approaches include: 1. The unique selling proposition—this concept was popularized by the famous copywriter Rosser Reeve’s in his book 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—the famous ad man Leo Burnett, founder of the Leo Burnett agency in Chicago, believed that advertising should be based on a foundation of consumer benefits with an emphasis on the dramatic element in expressing these benefits. This type of advertising bases the creative strategy on presenting the message in a warm and realistic way. 4. Positioning—the basic idea is that advertising is used to establish or “position” the product or service in a particular place in the consumer’s mind. Various approaches to positioning a brand were discussed in Chapter 2 and might be reviewed again here. Many of the top brands in various product or service categories have retained their leadership position because they have established and maintained a strong position or identity in the minds of consumers. IMC Perspective 8-3 discusses changed its positioning and approach to advertising, as well as

Chapter 8 - Creative Strategy: Planning and Development

other parts of its IMC program, to better connect with women through its “What’s Beautiful?” campaign. These approaches to determining the major selling ideas discussed above are very popular and are often used as the basis of the creative strategy for advertising campaigns. These creative approaches represent specific “creative styles” that have become associated with some of the most successful advertising creative minds and their agencies. However, it should be pointed out that many other creative approaches and styles are available and are often used in advertising. Some of the creative styles associated with more contemporary advertising visionaries such as Lee Clow of TBWA/Chiat/Day and Rich Silverstein of Goodby Silverstein & Partners are worth noting. The challenge to the creative team is to find a major selling idea and use it as a guide to the development of an effective creative strategy.

Teaching Suggestions For many students the most interesting aspect of advertising and promotion is the creative side. Most students really do not have an appreciation for what is involved in the development of an advertising campaign. They may think that the development of a campaign and individual messages involves only the agency creative department. It is important to stress the fact that the development of a campaign involves numerous individuals from both the other departments of the agency as well as on the client side. Many students will not end up being directly involved in the design and creation of advertisements. However, creative strategy is often critical to the success of the firm’s integrated marketing communications efforts. Thus, it is important that everyone involved with the marketing and promotional program have some understanding of the creative process that underlies the development of advertising messages, as well as the creative options available to the advertiser. Some interesting discussion can be generated over the issues of what constitutes creative advertising. Students might be asked to debate the different perspectives of advertising creativity. One side can take the “its only creative if it sells” position versus the “aesthetic, novelty/uniqueness” perspective. Some interesting discussions can also be generated over the issue of creative risk taking and just how much latitude the client should give the agency when it comes to creating the advertising message. For a very interesting discussion on the debate over different perspectives on creativity we suggest that you read the article on “Creative Differences” by Anthony Vagnoni which appeared in Advertising Age on November 17, 1997. You may also want to update students on the advertising that wins the Lions awards at the Cannes International Advertising Film Festival each year. Advertising Age and AdWeek have articles covering the Lions awards toward the end of June each year. You can also direct your students to the Festival’s official website at www.canneslions.com. Student might be encouraged to research advertising that has won creative awards from other organizations. For example, the Association of Magazine Media honor outstanding magazine advertising each year with the Kelly Awards. Information about these awards can be found at www.kellyawards.org. Effie Worldwide sponsors the Effie Awards which are given to marketing communication campaigns based on their proven success for a company or brand. Information about the Effie Awards can be found at www.effie.org. It is also important to discuss how research is used as an input to the creative process of advertising. Some time might be spent discussing the value of both qualitative and quantitative research techniques and how they can be used to provide the creative department information that gives them more insight into the consumer. It is also interesting to spend some time discussing advertising campaign themes currently being used by various advertisers. This discussion can focus on the creative strategy being used by the advertiser, the image or position they are trying to establish for the company or brand and what type of analysis or background research might have been used in developing the campaign. It is

Chapter 8 - Creative Strategy: Planning and Development

important to stress that advertising campaigns are often the result of extensive planning and research that is provided to the creative team by marketing planners and researchers on both the clients and/or agency side. The text also has a brief discussion of account planning which is becoming an important function in many advertising agencies. If you would like further information on account planning, we recommend the book Truth, Lies & Advertising by Jon Steele who was the Vice Chairman and Director of Account Planning for Goodby, Silverstein & Partners in San Francisco. This book provides an excellent discussion of the account planning and how the Goodby, Silverstein & Partners agency has used the process in the development of many successful advertising campaigns for clients such as Polaroid, Norwegian Cruise Lines and the “got milk?” campaign for the California Fluid Milk Processors Advisory Board. A discussion of a Model of Marketing Information flow developed by John Sutherland, Lisa Duke, and Avery Abernethy is presented in this chapter and warrants discussion. This model shows the flow of marketing information regarding customers, the product or service, and the market from clients to agency creative staff and the major interfaces and decision points where gatekeepers can impede the flow of information to agency creatives. Their research has found that agency personnel often lack the information needed to effectively design and execute creative strategies. Some time might be spent discussing this model and ways of improving the flow of important information to agency creatives. A new video case on Under Armour has been produced for this edition and includes a discussion of the company’s branding strategy as well as the creative campaigns that have been used to help them enter the basketball shoe market and also target the female market. Two Under Armour marketing executives discuss the challenges of marketing to women and the strategy behind the “What’s Beautiful” campaign used to connect with women which is discussed in IMC Perspective 8-3.

Answers to Discussion Questions 1. Evaluate the “Iconic Passion” branding platform and IMC campaign that the Lambesis agency created for Tacori. Why do you think this campaign has been so successful in creating a brand identity for Tacori and increasing sales of its jewelry products? (L01,03) When the Lambesis agency began working with Tacori, the brand had very little awareness and, like many other jewelry lines, did not have a distinct brand image. The development of the “Iconic Passion” campaign was based on extensive consumer research on how couples become engaged and the insights were used in developing the creative strategy. Many of the print and TV ads created for the campaign are designed to capture the exquisite artisanship which includes handcrafted elegance with a clean and modern style. The ads often juxtapose Tacori jewelry with objects signifying passion such as Cupid’s arrow which symbolize romance, ornate ebony and bone chess pieces which are a metaphor for the passion of conquest, apples with a bite out of them to capture the essence of temptation, and a tilted martini glass (Exhibit 8-14) which serves a toast to glamour and sophistication. The ads have been very effective in making bold statements that comunicate the glamour and elegance of the Tacori brand while positioning it as attainable luxury. Lambesis executes the “Iconic Passion” theme very well through digital media. The Par Chance short film plays off of the idea that love at first sight can happen at any moment by featuring a light-hearted story about a chance meeting between two strangers who must reconnect with each other by using a series of sexy and romantic clues. Many beautiful Tacori jewelry pieces are highlighted during the three minute webisode. The excellent advertising and IMC work done by Lambesis has increased the level of brand awareness for Tacori and helped position it as an aspirational, yet attainable brand with an image of romance and passion.

Chapter 8 - Creative Strategy: Planning and Development

2. Digital and Social Media Perspective 8-1 discusses how the Wieden + Kennedy agency has created an effective advertising campaign for Old Spice Hair and Body Wash with popular ads such as the “The man your man could smell like” commercial. Analyze this commercial from an advertising creativity perspective and discuss some of the reasons it has gone viral and generated nearly 45 million views on YouTube. Do you think this campaign is an effective way to sell a product such as body wash? Why or why not? (L01) “The man your man could smell like commercial” for Old Spice body wash is an example of an extremely creative commercial and won the Grand Prix for film award at the Cannes Lions International Advertising Festival. Old Spice advertising targeted men for several years with humorous creative built around the “Smell Like a Man, Man” tagline However this commercial was an ad that men and women can enjoy together. It is a humorous and entertaining spot featuring a very muscular and handsome young man (former professional football player Isaiah Mustafa) who uses a variety of unusual situations to demonstrate to women how much better their lives could be with a man who switches to Old Spice from a “lady-scented” body wash. The commercial has a number of elements that make it creative such as originality. The ad definitely contains elements that are surprising and move away from the obvious and commonplace. It shows Mustafa in various scenes such as stepping out of a shower with a towel around his waist brandishing a bottle of Old Spice body wash then goes on to show him on a boat wielding an oyster filled with “tickets to that thing you like” and then changing to a handful of diamonds. The commercial ends with the camera pulling back revealing the shirtless Mustafa on horseback as he delivers the signature line from the spot: “I’m on a Horse.” This commercial definitely struck a responsive chord with consumers as it became a viral sensation and was viewed more than 45 million times on YouTube by the end of 2013. Wieden & Kennedy developed a clever way to extend the life of this commercial by giving consumers the opportunity to submit questions to the “Old Spice Guy’ via twitter and Facebook and have him answer them in short video clips online. They received several thousand questions and comments from consumers and W&K’s digital marketing team shot nearly 200 clips Within a week, web views of the new videos eclipsed the original TV commercial and searches for Old Spice on Google soared by nearly 2,000 percent making it one of the most successful viral video campaigns ever done. The second part of the question asks whether this commercial is an effective way to sell Old Spice Body wash. The commercial broke through all previous viral-records and became a part of popular culture. According to an article published in Advertising Age on July 26, 2010, the commercial helped increase sales of Old Spice body wash, although it was not clear how much of the jump in sales occurred because of category growth and sales promotion efforts for the brand such as couponing. The article concludes that the ad was effective in helping reverse a decline in market share for the brands in the very competitive body wash market which includes, Gillette, Nivea Men, Dove Men and Axe. The article can be found at http://adage.com/article?article_id=145096. 3. The chapter discusses how the DDB agency was recently fired by Anheuser-Busch InBev even though the agency had created a number of award-winning advertisements for brands such as Budweiser and Bud Light. Evaluate the decision by AB InBevto dismiss DDB and hire a new agency given the excellent creative work it did for these brands through the years. (L01) DDB had been the agency for Anheuser Busch’s two major brands, Budweiser and Bud Light for 30 years before AB InBev terminated the relationship in 2011. The decision by AB InBev to switch agencies came as somewhat of a surprise given the excellent creative work DDB had done for the two agencies over the past three decades. In 1981 the agency helped launch Bud Light , which is now the leading brand of beer in the U.S. market, and developed a number of award winning campaigns such for the brand such as the “Real Men of Genius” radio campaign and ads featuring the Spuds McKenzie mascot dog. DDB also created the popular “Whassup?” campaign for Budweiser as well

Chapter 8 - Creative Strategy: Planning and Development

as numerous commercials featuring the iconic Clydesdales. Commercials for Budweiser and Bud Light, developed by DDB were among the most popular on the Super Bowl each year as Anheuser Busch has been the major advertiser on the big game. One of the reasons AB InBev may have switched agencies is that while Bud Light and Budweiser are the two leading brands of beer in the U.S., both brands have struggled to increase their sales during the economic downturn that began in 2009. Thus, AB InBev decided it was time to change its creative direction for both brands. The company had begun using other agencies for Budweiser in countries such as Brazil even though DDB was the global agency of record and had an office in the country. AB InBev also began asking other agencies to submit creative ideas of its U.S. advertising for the brands which was a sign of a strained relationship with DDB. As discussed in Chapter 3, marketers often will consider changing agencies when sales are struggling and they feel that a fresh creative approach is needed. AB InBev had relegated DDB to the sidelines several years ago and decided to use a campaign developed by the agency Anomaly as its main creative campaign called “Grab Some Buds.” In early 2012 DDB was replaced by the two agencies on the Bud Light account, McGarry Bowen and the independent agency Translation. However, McGarry Bowen lasted only eight months before begin terminated with more of the creative work going to Translation. 4. Advertising creativity is viewed as the ability to generate unique and appropriate solutions to communication problems. This definition suggests that a creative ad is one that is novel but also relevant or appropriate. Find an example of an advertisement (either a print ad or TV commercial) that is novel but not necessarily relevant to the product or services Discuss why the client would have approved this ad. (L01) For an ad or campaign to be considered creative it should meet the criteria of being both a unique and appropriate solution to a communication problem. Creative specialists have the responsibility of developing advertising messages that capture the attention of, and hopefully, persuade, the target audience to consider a brand. While many ads are entertaining, they do little to contribute to the brand. Students should be asked find a print ad or commercial that is novel or unique but does not contain a relevant message that might encourage consumers to consider purchasing the product or service. Many of the ads that appear in magazines or TV shows targeting young people fit into this category as the focus of the advertisement is on being different or unique and breaking through all of the advertising clutter. However, these ads often communicate very little about the product or service or give consumers little, if any, reason to purchase the brand. Creative personnel are often able to convince the client that something novel or unique needs to be done to get the attention of consumers and break through the clutter. Many marketing mangers defer to the judgment and expertise of agency creative personnel and allow these ads to be run. 5. Discuss the various factors that account for the way divergence can be achieved in advertising creativity. Find an example of an advertisement that reflects these various characteristics and explain how it does so. (L01) Divergence is viewed as one of the two key determinants of creativity (along with relevance) and refers to the extent to which an ad contains elements that are novel, different, or unusual. Robert Smith and Xiaojang Yang have identified five factors that could account for the ways divergence can be achieved in advertising which they describe as follows. These include: • Originality: Ads that contain elements that are rare, surprising, or move away from the obvious and commonplace. • Flexibility: Ads that contain different ideas or switch from one perspective to another. • Elaboration: Ads that contain unexpected details or finish and extend basic ideas so they become more intricate, complicated or sophisticated. • Synthesis: Ads that combine, connect, or blend normally unrelated objects or ideas.

Chapter 8 - Creative Strategy: Planning and Development

•

Artistic value: Ads that contain artistic verbal impressions or attractive shapes and colors

Students should be asked to find examples of ads that reflect one of more of these characteristics and explain how it does so. They should be able to find examples of print ads that are high in artistic value or TV commercials that reflect characteristics such as originality or flexibility. 6. What is meant by ethnographic research? Discuss how this type of qualitative research might be used by and advertising agency during the preparation, illumination, and incubation stages of the creative process. Find an example of an advertising campaign that has used ethnographic research as input to the creative process. (L02, 03) Ethnographic research involves studying consumers by observing or interacting with them in their natural environment such as in their homes, at work, or at play. This type of research can be very valuable as input to the creative process as it provides insight into the behavior patterns, purchase motives and idiosyncrasies of consumers that are gained by observing or interacting with them. For example, researchers at Procter & Gamble used ethnographic research whereby they observed consumers in their homes during the early morning hours when they were preparing and enjoying a cup of coffee. Insight was gained into the importance of the ritual of having a cup of coffee by observing how consumers enjoy the experience. The popular campaign for Folgers coffee that utilizes the tagline “The best part of waking up is Folgers in your cup” evolved from ethnographic research done by P&G researchers. P&G sold Folgers to the J.M. Smucker Co. in 2008, which still uses the tagline in advertising for the brand. Students should be encouraged to find other examples of advertising campaigns that have used ethnographic research as input to the creative process. Sources of information for this assignment might include Advertising Age, AdWeek or the Effie Awards case studies. 7. Many advertising creative personnel are opposed to focus groups research as they argue that they may inhibit the creative process. Discuss the problems, as well as the value, of using focus groups to evaluate advertising creative work. (L02) Focus groups are a qualitative research method whereby a small group of consumers are led through a discussing regarding a particular topic or issue. They can be used to gather detailed insight as to why and how consumers use a product or service, problems they might have and are looking to resolve as consumers, what is important to them in choosing a particular brand, and what they like or dislike about various brands. They can also be used to evaluate advertisements as consumers can be shown examples of current or proposed ads and asked to evaluate them. All of this information can be useful to those involved in the creative process as input gathered from focus groups provides creative specialists with a better sense of who the target audience is, what they are like, their purchase motives, and what they like and dislike about various types of advertising. Malcolm Gladwell has been critical of focus groups as he argues that there is very little psychological justification for the notion that you can find out what people think about an in idea, particularly a revolutionary new idea, by asking them. In his book, Blink: The Power of Thinking Without Thinking, Gladwell examines the content and origin of instantaneous impressions and argues that decisions made quickly can be as good as those made after much deliberation. Agency creative personnel have long been critical of the idea of having their ideas and work critiqued by consumers as they argue that it limits their ability to develop innovative and breakthrough advertising. Recently focus groups have been criticized for a number of reasons. Many advertising creative people insist that good ideas don’t need to be tested and that testing can weaken a creative execution. They note that focus group participants often have difficulty expressing how they feel about a commercial and often mimic the responses of a dominant member of the group. It has also been argued that focus groups do not

Chapter 8 - Creative Strategy: Planning and Development

provide enough insight into consumer’s emotional responses to an ad and may encourage consumers to think too much rather than respond the way they might while watching television. While creatives may be opposed to the use of focus groups, it is very unlikely that clients will allow them to produce ads without some early indication of how consumers will respond to them. There are many examples of situations where the testing of creative concepts and even finished commercials has provided very valuable input that was used to make modifications to an ad or campaign before it ran. Companies that are spending millions in production and media costs want to be confident that their ads are going to effectively communicate with consumers and will want to test them either through focus groups or some other type of testing method. A very good article on this issue titled “Why the Traditional Focus Group is Dying” can be found in the October 31, 2005 issue of Adweek, pp. 24-25, 32. 8. Assume that you have been hired as an account planner by an advertising agency and assigned to work on the development of an advertising campaign for a new brand of bottled water. Describe the various types of general and product-specific preplanning input you might provide to the creative team. (L02) General preplanning input includes overall information on trends, developments and conditions in the marketplace that would be relevant to the marketing of the product. In the case of a new brand of bottled water, the advertiser would want to know about a number of trends and developments affecting the beverage market such as the increasing popularity of new age drinks. 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 such as Evian, Dasani, Arrowhead, Propel, and other brands. 9. Discuss the role an advertising slogan plays in the development of an advertising campaign as well as some of the factors that should be considered in developing an effective tagline. Find an example of a good tagline as well as one that does not communicate effectively. Discuss the reasons why you view these as either good or bad examples of advertising slogans. (L03) An advertising slogan or tagline is used to express the central theme or message that is being communicated in an advertising campaign. The slogan should serve as a summation line that succinctly expresses the company or brand’s positioning, as well as the message it is trying to deliver to the target audience. Marketing experts note that a good tagline must break through the advertising clutter, differentiate the company or brand and be memorable. As noted in IMC Perspective 8-1, the tagline is a hardworking collection of words that should give you that ‘aha’ moment every time you see or hear it.” A slogan or tagline is the brand’s sound bite and is often all you can expect consumers to remember. Long-time marketing executive Steve Cone argues that creating strong slogans is a marketer’s most important job but today is a forgotten part of marketing planning. He suggest that advertising messages should contain “powerlines”, or powerful taglines, which he describes as “words that are well-chosen and have the power to awe, inspire, motivate, alienate, subjugate, and in a marketing context, change the buying habits of consumers.” He argues that since we are bombarded by so many advertising messages, a powerline can do the heavy lifting and break through all of the sensory overload. Students should be encouraged to fine examples of slogans or taglines that they think are very good or effective in meeting these criteria as well as those that do a poor job of

Chapter 8 - Creative Strategy: Planning and Development

communicating because they use meaningless phrases that do little, if anything, to differentiate the brand or company using it from their competitors or providing an identity for the brand. 10. IMC Perspective 8-2 discusses how Siemens developed the “Answers” campaign to increase awareness of the company and create a stronger brand identity. Evaluate the big idea used for the “Answers” campaign and discuss what other business-to-business marketers might learn from analyzing this campaign. (L04) The Siemens “Answers” campaign is a very good example of how big ideas are important for business-to-business marketers as well as companies that are marketing their products to the consumer market. The initial “Answers” campaign used an informative, solutions-focused approach as the basis for the creative strategy and emotional imagery and copy that related Siemens product offerings to the everyday lives of people. The second phase of the campaign was called “Somewhere in America” and was designed to show how Siemens contributes to the local economy such as through the construction and operation of manufacturing plants in various towns and regions. Many large business-to-business companies are not very well known or understood by consumers since they do not directly use their products or services. However, it is important for them to communicate with consumers, many of whom are business people to whom they might eventually be trying to sell their products and services. Many other B-to-B marketers such as IBM, Adobe, General Electric and Xerox have used large scale advertising campaigns to build awareness of their companies and provide the general public with a better understanding of what they do and how it might relate to their personal lives, either directly or indirectly. Advertising Age covers B-to-B marketing on its website and is a very good source for examples of effective campaigns. 11. Discuss the challenges Under Armour faces in the female market for exercise apparel. Evaluate the strategy behind the “What’s Beautiful” campaign. Do you think this IMC campaign will be an effective way to position Under Armour as a brand for women? Why or why not? (L04) Under Armour faces a number of challenges in marketing its exercise apparel products to women. First, the brand image for Under Armour was built around male-dominated sports such as football and baseball, particularly the former. The original tagline for Under Armour was “We Must Protect This House” and the advertising focused heavily on associating the brand with the raw emotion and excitement of football. Although Under Armour expanded into other sports such as softball, lacrosse, golf, tennis, basketball and running, the core of its brand identity has been more male-centric. Also, as note in IMC Perspective 8-3, Under Armour was perceived by many women as a brand for serious and elite athletes, which potentially alienated the real women who work out at fitness classes or alone in the gym. Under Armour also faced competition from brands such as Lululemon which has been focusing on women by creating apparel for specific activities such as yoga and Pilates as well as Reebok which and been making aerobic shoes and apparel for women for many years. The “What’s Beautiful” campaign was designed to juxtapose beauty and femininity alongside the effort that women put forth in fitness classes as well as their own workouts. The campaign encouraged women to post photos of themselves on social media as well as submit inspirational stories that could be shared with other women. An important goal of the campaign was to challenge the perception that Under Armour was only a brand for elite male athletes. The campaign included a modified version of the iconic “Protect This House. I Will” tagline that was altered to “No Matter What Sweat Every Day. I Will” and featured women working out intensely in Under Armour gear in settings that would normally be associated with male athletes.

Chapter 8 - Creative Strategy: Planning and Development

Under Armour is clearly trying to move beyond its original “shrink it and pink it” strategy whereby it merely created smaller and more colorful versions of its men’s apparel to fit women’s bodies and expanded its product line to include shorts, tops and sports bras. The company now recognizes that the way it must communicate with women is quite different from the approach it has used for the male market. However, the company faces a delicate balancing act as they must be careful not to alienate their core male consumer as they market more to women. 12. Find an example of an ad or campaign that you think reflects one of the approaches used to develop a major selling idea such as unique selling proposition, brand image, inherent drama, or positioning. Discuss how the major selling idea is used in this ad or campaign. (L04) Jeweler refers to the major selling idea as “the strongest singular thing you can say about your product or service. This should be the claim with the broadest and most meaningful appeal to your target audience.” O’Toole describes the big idea as the insight that synthesizes the product benefit with consumer needs or desires. Major selling or big ideas should attract the consumers’ attention, get a reaction, and differentiate the advertiser’s product or service from the competition. There are four approaches discussed in the text for developing major selling ideas that can serve as the basis of the creative strategy. These include the unique selling proposition, creation of a brand image, the use of inherent drama and positioning. Students should bring in examples of ads that they feel are examples of each approach to developing a major selling idea and describe the logic of their selection. Additional Discussion Questions (not in text) 13. Explain what is meant by creative strategy and creative tactics in advertising. Find an example of an advertising campaign and evaluate the creative strategy and tactics used in the ads. Creative strategy determines what an advertising campaign and messages will say or communicate. It is best viewed as a process 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 various appeals and execution styles as well as the tactical issues involved in the design and production of advertising. Students should be asked to find an example of a current advertising campaign and evaluate the creative strategy and tactics used in the ad. They should analyze the creative strategy in terms of the big idea used as the central theme of the advertising campaign as well as the type of appeal, execution style and tactical elements used in the individual ads that are part of the campaign. 14. Television commercials are often developed that rely on unusual creative tactics and have very little relevance to the product or service being advertised. Creative personnel in agencies defend the use of the strange messages by noting that they are novel and break through the clutter. Evaluate the pros and cons of this argument Creative personnel do face a major challenge as they must develop ads that will break through the clutter that occurs in various media such as television, radio, online, magazines and newspapers and grab the attention of the viewer, listener or reader. This can be particularly difficult in the broadcast media and online as consumers watching TV, listening to radio or surfing the Internet are often trying to avoid ads rather than pay attention to them. While consumers may be more receptive to advertising in magazines or newspapers, the vast numbers of ads that appear in most publications makes it very challenging for any one ad to get notices. 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

Chapter 8 - Creative Strategy: Planning and Development

to entertain the viewer or listener rather than to deliver a strong message to them. These types of ads often do not contain a message that is relevant to the product or service but do manage to 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. 15. Evaluate the debate over creative versus hard-sell advertising. Discuss the arguments for and against each perspective. Who should be responsible for judging the creativity of an ad – clients or agency creative personnel? (L01) As discussed on p. 274, there has been an ongoing battle in advertising between those who believe ads should move people and those who feel they should just move product. The “suits” or “rationalists” on the hard-sell side argue that the primary function of advertising is to sell the product or service. They take the position that advertising isn’t creative unless it sells and are driven by sales results rather than creative awards. They argue that the high costs of commercial production and media time are making it more important than ever for advertising to produce measurable results. They also note that there is tremendous financial pressure on businesses to produce results so they are looking for campaigns that can move the sales needle. Those advocating the hard-sell approach often feel that the more selling points or information in an ad, the better its chances of moving the consumer to make a purchase. They argue that the goals of an advertising message or campaign should be to deliver relevant and favorable impressions to consumers which will help sell a product or service. The impact of advertising on sales is the real measure of its creativity and is more important than whether it is innovative or wins awards. On the other side are the “poets” or proponents of creativity, who argue that advertising has to build an emotional bond between consumers and brands or companies rather than focusing on product features and benefits. They feel that it has become very difficult to differentiate a company or brand on the basis of functional features, as most products have become indistinguishable from their competitors. They argue that in today’s highly competitive market place where many companies offer high quality products at similar prices, strong brand images are the key to differentiating a product or service. Their perspective is that consumers are tired of seeing traditional forms of advertising for products such as automobiles that focus on sleek appearances and advanced features. They argue that consumers want to see ads that are more entertaining, fun and make them feel good. The “poets” also defend the advertising as art and entertainment approach by noting that this type of advertising is needed to break through the clutter as well as the consumers’ boredom barrier. Moreover, they note that highly creative ads are often effective, even though it is difficult to quantify their impact on sales. They argue that creativity cannot be judged solely on the basis of sales since and might argue that advertising that is unique or different is often needed to break through the competitive clutter, grab the consumer’s attention and have some impact. They are more likely to view creativity in terms of the ad’s ability to generate an emotional response and create certain feelings or images that can be transferred to the brand.

Chapter 8 - Creative Strategy: Planning and Development

Those involved with an advertising campaign must understand the importance of balancing these two perspectives. The position of creative personnel must be respected and they should be given some latitude in developing advertising messages. However, the creative team should recognize that ads that are creative only for the sake of being creative often fail to communicate a relevant or meaningful message that will help sell a product or service. There are numerous examples of advertising campaign that have won awards for creativity but failed to sell the product (e.g., Alka Seltzer). When this occurs, the agency usually loses the account and the client looks for a new approach that will help move the sales needle. Students might be asked to debate these two perspectives on advertising creativity. There is no easy answer to the second part of this question as ideas and perceptions regarding what constitutes a creative ad vary among those who are involved with and evaluate advertising. The “Universal Advertising Standards” of the D’Arcy Masius Benton & Bowles agency, which are presented in Figure 8-1, offer some ideas for judging the creativity of advertising. The issue of who should have the responsibility for judging the creativity of an advertisement is debatable. Obviously creative personnel are probably best able to evaluate an ad in terms of criteria such as its novelty, uniqueness, and artistic merits. However, the client may be in the best position to evaluate the ad in terms of its ability to communicate the intended sales message to the target audience. Ideally, there should be agreement between the creative specialists and client. The client does not want creativity for creativity’s sake but rather a creative message that effectively communicates with consumers. On the other hand, the client must respect the creative insight and background of the agency 16. Briefly describe the five major communication interfaces and decision points in the model of marketing information flow shown in Figure 8-4. Discuss how breakdowns in communication can occur at each interface and how this might negatively impact the creative process. (L03) This model, which was developed by developed by John Sutherland, Lisa Duke, and Avery Abernethy, shows the flow of marketing information regarding customers, the product or service, and the market from clients to agency creative staff and the major interfaces and decision points where gatekeepers can impede the flow of information to agency creatives. The five major communication interfaces and decision points where breakdowns can occur include (1) between clients and their agencies (2) the client or client gatekeeper lacking knowledge of some or all of the information needed for effective advertising (3) the client deciding not to share all the available information that is relevant to creating effective advertising (4) the agency gatekeeper(s) deciding not share with creative staffers all the client information they receive (4) and internal agency communication failures which may result in the creative staff not receiving all the relevant information from the client. Breakdowns can occur at each interface clients may not have important marketing information or gatekeepers on the client side, such as brand managers, may choose not to share all the relevant information with their agency. Problems can also occur on the agency side as the gatekeepers such as account managers may not share all of the relevant information with their creative staff or there can be breakdowns in communications among the various departments within the agency. These breakdowns result in agency personnel often lacking the information needed to effectively design and execute creative strategies such as demographic profiles of the target audience, product usage information, information regarding the performance of the client’s product or service, competitive information, and insights into the client’s marketing strategy and major selling points.

Chapter 8 - Creative Strategy: Planning and Development

17. Discuss the key characteristics of a unique selling proposition. What are some of the factors an advertiser must consider in developing an advertising campaign that uses a USP as the basis for the major selling idea? (L04) 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.

IMC Exercise Find an example of a slogan tagline being used effectively by a company or brand as the basis for its advertising campaign theme. Evaluate the company or brand’s use of the slogan using the guidelines presented in the chart shown in IMC Perspective 8-1. What are the key attributes of this tagline that make it effective and appropriate for the company or brand? Find an example of a slogan that you do not feel is effective and evaluate it against the guidelines. What are some of the problems with this slogan that might make it ineffective? Can you suggest an alternative tagline or slogan that would be more effective?

Chapter 09 - Creative Strategy: Implementation and Evaluation

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

Learning Objectives 1. To analyze various types of appeals that can be used in the development and implementation of an advertising message. 2. To analyze the various creative execution styles that advertisers can use and the advertising situations where they are most appropriate. 3. To analyze various tactical issues involved in the creation of print advertising and TV commercials. 4. To consider how clients evaluate the creative work of their agencies and discuss guidelines for the evaluation and approval process.

Chapter and Lecture Outline I.

APPEALS AND EXECUTION STYLES

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

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

Chapter 09 - Creative Strategy: Implementation and Evaluation

• • • • • B.

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

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

Chapter 09 - Creative Strategy: Implementation and Evaluation

Professor Notes

Advertising Execution—Creative execution refers to the manner in which an advertising appeal is carried out or presented. A particular advertising appeal can be executed in a variety of ways and a particular means of execution can be applied to a variety of advertising appeals. Some of the more commonly used execution techniques include: 1. Straight-sell or factual message—this type of execution relies on a straightforward presentation of information about the product or service such as specific attributes or benefits. 2. Scientific/technical evidence—a variation of the straight sell where scientific or technical evidence or information is presented in the ad to support a claim. 3. Demonstration—this type of execution is designed to illustrate the key advantages or benefits of a product or service by showing it in actual use or in some contrived or staged situation. 4. Comparison—this type of execution involves a direct or indirect comparison of a brand against the competition. 5. Testimonials—many advertisers present their advertising messages in the form of a 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. 6. Slice of life—this type of execution is often based on a problem/solution type of format. The ad attempts to portray a real-life situation involving a problem, conflict or situation consumers may face in their daily lives. The ad then focuses on showing how the advertiser's product or service can resolve the problem. Slice-of-life executions are also becoming very common in business-to-business advertising as companies use this approach to demonstrate how their products and services can be used to solve business problems. 7. Animation—this technique used animated characters or scenes drawn by artists or on computer. Animation is often used as an execution technique for advertising targeted at children. Some advertisers use ads that mix animation with real people. For example, StarKist tuna often uses commercials featuring Charlie the Tuna that mixes animation with real people. A new type of hybrid technique known as rotoscoping has emerged in recent years which involves shooting live-action digital videos of actors and then using a special software to paint over the screen images on a computer to make them look animated. Television commercials for Charles Schwab & Co. used this technique and were very effective. Many advertisers now rely on computer-generated animation such as the award winning “Back to the Start” short film for Chipotle’s Cultivate Foundation which is shown in Exhibit 9-18.

Chapter 09 - Creative Strategy: Implementation and Evaluation

8. Personality symbol—this type of execution involves the use of a central character or personality symbol to deliver the advertising message and with which the product or service can be identified. The personality symbol can take the form of a person who is used as a spokesperson, animated characters or even animals. The chapter discusses how AFLAC has made effective use of this execution style by developing commercials that have made a duck a popular personality symbol for the company. Attention is also given to how Dos Equis beer has created a popular personality symbol for the brand with “The Most Interesting Man in the World” IMC campaign. 9. Imagery—this type of appeal is used when the goal is to encourage consumers to associate the brand with the symbols, characters, and/or situation shown in the ad. An imagery execution may be based on usage imagery by showing how a brand is used or performs and the situation in which it is used. It can also be based on user imagery where the focus is on the type of person who uses the brand. For example, ads for cosmetics and clothing often use very attractive models in the hope of getting consumers to associate his or her physical attractiveness with the brand. 10. Dramatization—this execution technique creates a suspenseful situation or scenario in the form of a short story. Dramatizations often use the problem/solution approach as they show how the advertised brand can help resolve a problem. 11. Humor—humor can be used as the basis for an advertising appeal. However, humor can also be used as a way of executing the message and presenting other types of advertising appeals. 12. Combinations—many of these execution techniques can be combined in presenting an advertising message. For example, slice-of-life ads are often used to demonstrate a product or make brand comparisons. Professor Notes

II.

CREATIVE TACTICS

Once the creative approach, type of appeal, and execution style has been determined, attention turns to creating the actual advertisement. The design and production of an advertising message involves a number of activities such as writing copy, developing illustrations and other visual elements of the ad and bringing all of the pieces together in a finished product. A.

Creative tactics for print advertising—there are three basic components of a print ad including the headline, body copy, and the visual elements or illustrations. These elements are brought together through a layout.

Chapter 09 - Creative Strategy: Implementation and Evaluation

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—many ads also contain a main headline and one or more secondary headlines or subheads. These subheads usually appear in a smaller type size than the main headline and are generally larger the type size used for the body copy. They are used to break-up or section off large amount of body copy and highlight key sales points in the ad. 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 various parts of the ad including the headline, subheads, illustrations, body copy and any identifying marks. B.

Creative Tactics for Television—as with print ads, television commercials have several components which must work together to create the right impact and communicate the advertiser's message.

C. 1. Video—the video or visual elements are what is seen on the television screen. Decisions have to be made regarding the main focus of the visual components of a television commercial such as the product, the presenter, scenery, action sequences, lighting graphics, color and other factors. 2. Audio—the audio portion of a commercial includes several elements such as voice, music and sound effects. Voices may be heard in several ways such as through the direct presentation of a spokesperson or as a dialogue or conversation among people in the commercial. A common method for presenting the audio portion of a commercial is through a 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.

Chapter 09 - Creative Strategy: Implementation and Evaluation

3. Music—a very important part of many television commercials is music which plays various roles and functions such as providing a pleasant background or helping create the appropriate mood or setting. IMC Perspective 9-2 discusses how marketers use popular songs to help deliver their advertising messages and how in recent years marketers have been giving more attention to associating themselves with original music and the development of artists by acquiring independent music labels. However, some artists are concerned about the backlash they might get when their songs are used in commercials Another important musical element in both television and radio commercials is jingles, which are catchy songs about a product or service that usually carry the advertising theme and a simple message. 4. Planning and production of television commercials—the various elements of a television commercial are brought together in a document known as a script which is a written version of a commercial that provides a detail description of its video and audio content. The script indicates the various audio components of the commercial such as the copy to be spoken by voices, music and sound effects. The video portion of the script provides the visual plan of the commercial. Once the basic script has been conceived, the writer and art director get together to produce a storyboard or a series of drawings used to present the visual plan or layout of a proposed commercial. Once the client approves the storyboard, the commercial is ready to move to the production phase. The production process for a commercial actually involves three phases: • • •

III.

Preproduction – all the work and activities that occur before the actual filming of a commercial. Production –the period during which the commercial is filmed or videotaped and recorded. Postproduction – activities and work that occur after the commercial has been filmed and recorded.

CLIENT EVALUATION AND APPROVAL OF CREATIVE WORK

While the creative specialists determine the advertising appeal and execution style that will be used in the campaign, the client must evaluate and approve the creative approach before any ads are actually produced. A number of different people on the client side may be involved in evaluating and approving the creative work of the agency. The amount and influence of these individuals will depend on the company's organization and policies, the importance of the product to the company, the role of advertising in the marketing program, and the nature of the advertising approach being recommended. IMC Perspective 9-3 discusses the challenges Apple co-founder Steve Jobs had in convincing the company’s board of directors to approve the famous “1984” television commercial that was used to introduce the McIntosh personal computer. There are two basic stages in the development of advertising—creation and production. Most of the attention in this chapter has focused on the creation stage and creative process. Once the creative approach has been determined and approved, the attention turns to the production process, which involves a variety of functions needed to produce the ad or commercial and put it into a finished form suitable for use by the media. The client will have the opportunity to review the final version of the advertisement after the production stage. However, it is important that a careful evaluation be made before the ad actually enters production as this stage requires a substantial investment of time and money.

Chapter 09 - Creative Strategy: Implementation and Evaluation

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

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

•

Is the creative approach appropriate for the target audience?

•

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

•

Does the creative execution overwhelm the message?

•

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

•

Is the advertisement truthful and tasteful?

Teaching Suggestions Nearly every student has an opinion about the quality and effectiveness of various ads and those they feel are particularly good or bad. Students should enjoy reading this chapter and learning about the various creative appeals and execution styles that can be used by advertisers. An interesting way of beginning the lecture on creative strategy is to ask the students to name the TV commercial or print ad they would rate as the "most outstanding" one they have seen lately. You might then ask them how they think their list of top commercials would compare against that of ad critics. Publications such as Advertising Age and AdWeek pick the best ads each year and feature them in special editions. For example, the Advertising Age Best Awards are given each year in various product and service categories and for various media including television, radio, newspapers magazines, out of home and interactive. There are two very interesting websites that you may want to visit and direct your students to: www.adforum.com and www.adcritic.com. Commercials currently running can be viewed on these sites and they also include reviews of spots, industry news and many other interesting features. A number of marketers now have their own YouTube channel where they make their commercials available as well as other videos used. For example, Nike’s channel can be found at http://www.youtube.com/user/nike. Attention should also be given to how a number of marketers are now using a form of advertising know as user-generated content whereby ads are created by consumers rather than a company and/or its advertising agency. The DEWmocracy campaign discussed in the Chapter 15 opener is an example of how brands such as Mountain Dew are making user-generated content a major part of their IMC program. A video case on the DEWmocracy campaign for Mountain Dew is available on the Instructor DVDs that accompany the text.

Chapter 09 - Creative Strategy: Implementation and Evaluation

The chapter begins with a very interesting discussion of the “ LIVE MÁS” campaign being used by Taco Bell to make the Mexican style fast food chain more appealing to young, hip and cross-cultural consumers. The tagline represents a repositioning of Taco Bell from the idea of food as fuel to food as an experience and lifestyle. The chapter opener also includes a discussion of the advertising used to launch the Doritos Locos Tacos (DLTs) which have been one of the most successful new product introductions in the history of the fast food industry. A new video case study is available on the instructor DVDs on the LIVE MÁS campaign and IMC program developed to launch the Doritos Locos Tacos. This chapter does not go into a great amount of detail regarding the process of creating and producing the advertisement. If more detail is desired on areas such as art and layout, copywriting or print and broadcast production students might be referred to a more traditional advertising principles book such as Contemporary Advertising by William F. Arens, Michael Weigold and Christian Arens. There are also numerous books available on the creative process such as Creative Strategy in Advertising by A. Jerome Jeweler and Bonnie L. Drewniany and Creative Advertising: Theory and Practice by Sandra E. Moriarty. Students interested in specific areas of the creative process such as copywriting or layout can be referred to some of the books in these areas such as Creative Advertising by Mario Pricken, The Design of Advertising by Roy Paul Nelson, Advertising Copywriting by Philip Ward Burton and Fundamentals of Copy & Layout by Albert C. Book and C. Dennis Schick. Answers To Discussion Questions 1. The chapter opener discusses the new “LIVE MÁS” campaign for Taco Bell. Analyze the creative strategy for this campaign, giving attention to the type of creative appeals used as well as the advertising execution. (L01,02) The LIVE MÁS campaign for Taco Bell has used a variety of creative appeals and executions. One of the best known ads was the “Viva Young” commercial that debuted on the 2013 Super Bowl and was one of the most popular spots on the big game. The commercial features a group of senior citizen sneaking out of their retirement home late at night and embarking on a night of partying that includes dancing, getting tattoos, sneaking into swimming pools and other escapades. They eventually end up at a Taco Bell for a “Fourthmeal’ before returning home. The purpose of the ad is to show that you are never too old to Live Mas. This commercial is clearly an emotional appeal that uses a combination of executions but is best classified as an entertaining humorous execution. It should also be noted that the spot uses music very effectively as a Spanish version of Fun’s hit song “We Are Young” is integrated very well into the commercial. Taco Bell has used a number of other types of advertising appeals and executions to help with the launch of the Doritos Locos Tacos. For example several spots for the DLTs relied on user-generated content. One spot is called “Road Trip” and is based on a video posted on YouTube showing a consumer who drove over 900 miles to find a DLT while another featured a series of Instagram posts strung together showing a consumers taking their first bite of a Cool Ranch DLT. Another popular TV commercial is the launch spot for the Cool Ranch DLT called “World’s Most Obvious Idea” which capitalized on the swell of consumers wondering when Taco Bell would make a Cool Ranch version of the new product. The humorous spot uses a form of a slice of life execution by showing various scenes of people eating a Nacho Cheese DLT as they go about their business and daily lives but noting that “they should make a Cool Ranch one.” All of the advertising for Taco Bell is very upbeat and designed to promote the positive experience consumers have at Taco Bell while building an image for the company as a lifestyle brand. Examples of television commercials used by Taco Bell can be found on the company’s YouTube channel.

Chapter 09 - Creative Strategy: Implementation and Evaluation

2. Discuss some of the reasons why emotion-based advertising appeals are effective. Find an example of a company or brand that is using an advertising campaign based on emotional appeals and analyze its effectiveness. (L01) Emotional appeals relate to the consumer's social and/or psychological needs for purchasing a product or service. Emotional appeals are most appropriate for products and services where social and/or psychological needs and feelings are important or where consumers need to be reached on an emotional level. Many consumer products are difficult to differentiate on a functional/utilitarian basis and advertisers often turn to appeals to emotions to create feelings, images and beliefs that can be activated when the consumer uses the product. Moreover, marketers recognize that commercials must be meaningful to consumers, as well as entertaining, and emotional appeals are often the best way to touch the consumer and hold their interest. Emotional appeals are not, however, limited to consumer products that are difficult to differentiate. Appeals to emotions are also used for major purchases such as automobiles, financial investments, and many other purchases. Figure 9-1 lists various personal psychological states (safety, security, fear, joy, nostalgia, pride) as well as social-based feelings or needs (recognition, status, respect, approval) that can be used as the basis for emotional advertising appeals. Students should have no trouble finding ads that use social and psychological needs as the basis for their appeal. However, they should be encouraged to discuss whether the needs appealed to in the ad are appropriate for the product or service they are analyzing. 3. Explain the concept of transformational advertising. Find an example of a company that is using transformational ads and discuss how the ads might enhance the experience of using the product or service. (L01) A transformational ad is one which associates the experience of using (consuming) the advertised brand with a unique set of psychological characteristics which would not be typically be associated with the brand experience to the same degree without exposure to the advertisement. Transformational ads create feelings, images meanings, and beliefs about the product or service that may be activated when consumers use it and thus "transforms" their interpretation of the usage experience. There are many good examples of how companies use transformational advertising to enhance the consumption experience of consumers. McDonald’s has used TV commercials showing parents or grandparents enjoying the experience of taking their children or grandchildren to the fast food restaurant and enjoying a bonding experience with them. These types of commercials can be very effective as they can make the experience of a trip to McDonalds with a child richer, warmer and more enjoyable. The “Find Your Beach’ campaign for Corona Extra beer that is discussed in the chapter is also a very good example of transformational advertising as the ads are designed to preserve Corona’s iconic beach image while extending the Corona state of mind beyond the sun, sand and surf. Advertising for Skyy vodka is another good of transformational advertising as it associates the brand with cinematic-based cocktail moments. The advertising campaign resonates very well with the target market of 21 to 34 year-old, urban metro consumers and has helped establish an emotional connection between them and the brand. The high-impact ads do not contain any copy but rather rely on stylish, seductive visuals that set up story lines but leave the interpretation up to the mind of the reader. Other forms of marketing communication have been used to build the cinematic image for Skyy including sponsorship of independent film festivals, event marketing the commissioning of short films that include a “cocktail moment” which can be shown at film festivals and on the Skyy vodka web site. In terms of transformational advertising, the strong association between Skyy vodka and cinema should be activated when consumers are using the brand which will enhance the consumption experience.

Chapter 09 - Creative Strategy: Implementation and Evaluation

4. Discuss the reasons marketers might use user-generated content (UGC) for an advertising campaign. Do you agree with the decision by Ford to rely on UGC for the advertising done to support the “Fiesta Movement: A Social Remix” campaign? Why or why not? (L01,02) There are a number of reasons why marketers are utilizing user-generated content (UGC) in their advertising campaigns. One of the primary reasons is that it provides a way to take advantage of crowd-sourcing and the creative ideas that come from it. While advertising agencies are used because of their creative expertise, many excellent creative ideas can come from the masses. A very good example of this is the “Crash the Super Bowl” contest run each year by Frito Lay whereby two spots are aired during the big game that were created by amateurs on a limited budget. Some of these UGC spots have been among the most popular appearing on the Super Bowl each year and they won the USA TODAY ad meter polling as the most popular spot on the big game three out of four years from 2009 to 2012. UGC ads are also used as a way of getting consumers more engaged with a company or brand, particularly through social media. A number of companies are now using contests and other types of promotions that encourage consumers to submit ads, photos, ideas for product use, and other materials as a way of increasing consumer engagement. It should also be noted that UGC can be a very effective way to promote a company or brand, particularly through social media. When consumers see that their friends and associates are talking about a product/service or brand through social media they may perceive it as more credible and also be more likely to go see what others are saying about it. The decision by Ford to use UGC by making all of the TV, print and digital advertising used to launch the2 014 Fiesta crowd-sourced was a way of taking the Fiesta Movement to another level. First all it should be noted that the original Fiesta Movement social media campaign (which is discussed in Chapter 5) was very successful. A major reason for its success was that through the realm of social media, consumers got a unique look at how real people felt about the Fiesta. Not only did they get drivers’ opinions of the car, they got to see videos that drivers made about their Fiestas, bringing an added dimension to the insight the campaign offered other consumers. Thus, Ford decided that it would build further on the success of UGC by having consumers develop the advertising used for the 2014 Fiesta launch as well. It should be noted that the Social Remix campaign included integration with traditional, digital and social platforms such as Facebook, Twitter, Google, and YouTube as well as shows such as American Idol and events like music festivals and the Summer X games on ESPN. It is truly an integrated campaign that has resonated very well with the millenials Ford is targeting for the Fiesta. 5. What is meant by the mere exposure effect? Discuss how banner ads that appear on various websites might take advantage of the mere exposure effect. (L01, 02) The mere exposure effect refers to the tendency for novel stimuli to be like more or rated more favorably after repeated exposure to them. Banner ads that appear on various websites can take advantage of this phenomenon simply by being presented to consumers who may have a tolerance for excessive exposure to them. This suggests that online advertising such as various types of banner ads may have positive effects through the incidental exposure that takes place when consumers visit a website. This provides support for the cost per impression contextual approach to online advertising whereby marketers try to maximize the number of exposures to their banner ads by placing them on various web sites that reach their target audience. The goal of this type of online advertising is to maximize consumer exposure to the banner ad as the mere exposure effect predicts that favorable affect will as a result of consumers simply seeing these messages repeatedly.

Chapter 09 - Creative Strategy: Implementation and Evaluation

6. Choose three of the advertising execution techniques discuss in the chapter and find examples of advertisements that are using them. Discuss why the marketers might be using these particular ad execution techniques. (L02) A number of advertising execution techniques are discussed in the chapter and students should be encouraged to select three of them to analyze and find examples of their use. We discuss two of them here to as an example of how this question might be answered. The slice-of-life format relies on a problem-solution approach that is often presented with a little drama. These spots usually begin by showing consumers facing or talking about a problem such as bad breath, dingy laundry, dandruff, headaches, or dry skin. The short drama always ends with the problem being resolved by the advertiser’s product. Many advertisers feel that the slice-of-life format is a more interesting and effective way to present their message than just making performance or efficacy claims. Consumers purchase products to solve problems and marketers feel the slice-of-life execution format is an effective way of registering a product feature or benefits and showing how it can resolve common problems we encounter in our daily lives. The slice-of-life execution format is very popular among packaged-goods companies such as Procter & Gamble because it is an effective way of connecting with consumers by showing common situations or problems they encounter in their everyday lives. Some business-to business marketers use a variation of the slice-of-life technique known as slice-ofdeath advertising which involves showing the negative consequences that can result when companies make the wrong decision in choosing a vendor or service provider. B-to-B marketers use this advertising execution technique to demonstrate how their products and services can be used to solve their customers’ business problems and how they are better than their competitors. This execution style is often used in conjunction with a fear appeal although some companies, such as Fed Ex, also integrate humor into their slice-of-death commercials. Another execution technique is dramatization where the focus is on telling a short story with the product or service as the star. The approach is similar to a slice-of-life execution in that it usually relies on a problem/solution approach but uses more excitement and suspense in telling the story. Products and services for which there are significant consequences or outcomes associated with their use or performance are good candidates for the use of dramatization executions. Dramatization is an effective way to draw the viewer into the action and hopefully to get them to experience the feelings and concerns of the characters. For example, Exhibit 9-22 shows some images from the TV commercial for the Buick Enclave which uses dramatization by showing a family coming home from trip and landing at an airport on a cold and snowy night. As the plane touches down the man uses the MyBuick remote start feature to start the vehicle so that is nice and warm when the family gets off of the shuttle bus and into the Enclave. This commercial fits the five steps of a dramatization commercial noted by Moriarty and discussed on p. 317. 7. Discuss some of the reasons a marketer might choose to create a personality symbol or character to represent the company or brand. Analyze the strategy behind Dos Equis’ use of “The Most Interesting Man in the World’ campaign. Why has this campaign been so effective? (L02) Marketers might choose to create a personality symbol or character for their company or brand for a number of reasons. One of the major reasons is that a personality symbol or character can be an effective way to draw attention to a company’s advertising and a way to break through the clutter of competing ads. They can also be a way to build and maintain an identity for a company or brand, particularly when the character is well liked by consumers. They can also bring some continuity to an advertising campaign as consumers will be seeing the person or character regularly and thus can associate him/her or the character with the company or brand. For example, Progressive Insurance has 9-11 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 09 - Creative Strategy: Implementation and Evaluation

used the Flo character for many years and when a commercial for the company airs, most viewers can immediately identify the advertiser. Of course the key to using personality symbols is to find or create one that is viewed favorably by consumers. While there are many examples of how personality symbols have been used successfully, there are many cases where they have not been effective. “The Most Interesting Man in the World” for Dos Equis has been a very successful campaign and is an example of how great creative strategy and execution can be used to differentiate a brand in a competitive product category and drive sales. Beer is a very heavily advertised product and it can be very difficult to break through the competitive clutter, particularly for a smaller brand such as Dos Equis which does not have the media budget to have a large share-of-voice. As noted in the chapter, the agency EuroRSCG recognized that they had to develop an advertising campaign that would create an identity for Dos Equis as a distinctive and desirable premium brand that was different from other imports. One of the major reasons for the success of the campaign is that it did not rely on sophomoric humor, images of sexy women or clichés. The big idea behind this campaign was the creation of a brand personality symbol who they portrayed as “The Most Interesting Man in the World” and appeals to the desires of import beer drinkers to be perceived as interesting. The ads deliver the key message that Dos Equis is the beer of choice for interesting people. It is important to note that the success of this campaign is based on more than creative advertising as EuroRSCG has used a variety of other IMC tools such as experiential promotions (The Most Interesting Man in the World Show) and an engaging web site where they have areas such as The Most Interesting Academy which delivers online advice on how to live a more interesting life. This campaign is a very good example of how a big idea can be leveraged into creative advertising as well as a multifaceted IMC program that helps develop a distinctive image for a brand and drive sales. 8. Discuss the role of headlines and in a print advertisement. What is the difference between a direct headline and an indirect headline and when might each be used? (L03) The most important function or role of the headline is to attract the readers' attention and make them interested in the remainder of the message. Headlines can also perform a segmentation function by engaging the attention and interest of consumers who may be most likely to buy a particular product or service. Some ads use little or no body copy so the headline must work with the illustration or visual portion of the ad to communicate the entire advertising message. Subheads are secondary headlines that are usually smaller than the main headline but larger than the body copy. Subheads are often used to enhance the readability of the message by breaking up large amounts of body copy and highlighting key sales points. Their content often reinforces the headline and advertising slogan or theme. A direct headline is very straightforward and informative in terms of the message presented and the target audience the ad is directed toward. Examples are headlines that make an announcement or provide news or information to the reader. Indirect headlines are not straightforward but rather may be designed to create attention, interest or curiosity through the use of questions, provocations, or challenges. Direct headline are used quite often when marketers have a specific product attribute or benefit they want to communicate or are making a promise or offering something that is very likely to be of interest to the reader. Indirect headlines are often more effective at attracting readers’ attention and interest because they provoke curiosity which can be a way to motivate readers to become more involved with the advertisement. Students should find an example of ads that use direct and indirect headlines.

Chapter 09 - Creative Strategy: Implementation and Evaluation

9. Discuss the role of music in advertising. Find an example of a television commercial that is using a song and discuss the role the music plays in delivering the message. (L03) 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/brands pay large sums of money for the rights to use these songs such as because they feel the music is central to the feeling or image they want to create in the commercial. For example, Google has used Lady Gaga’s hit song “Edge of Glory” in commercials for its Chrome web browser while Citibank has used Alicia Keys’ song “Girl on Fire” in its commercials. General Motors used the music from Led Zeppelin’s hit song “Rock and Roll” in its commercials for Cadillac as part of its effort to attract baby boomers by creating a more hip image for the brand. Microsoft licensed the rights to use the classic Rolling Stones song “Start Me Up” in ads for its Windows 95 operating system as the music helped deliver a message regarding the integral role the operating system plays in the functioning of a personal computer. The company also licensed the rights to Madonna’s hit song “Ray of Light” for use in ads introducing its new XP software as the company felt that the lyrics were very appropriate for promoting a technology product such as the XP software. The use of the Madonna song also helped attract and hold attention to the commercials because of her popularity and star power. Apple has also made music an important part of the advertising used to launch new products such as various versions of its iPod, iPhone and iPad. Students should be encouraged to find an example of a current advertising campaign that is using a song and analyze the role the music plays in delivering the message. There are a number of advertisers that are rely heavily on the use of music in their advertising such as Kia, Apple, Nike, Coca Cola, PepsiCo and many others. 10. Choose a current advertising campaign and analyze it with respect to the creative guidelines discussed in the last section of the chapter. Identify any areas where you feel the campaign does not meet the guidelines and discuss why this is so. (L04) The last section of the chapter discusses criteria or guidelines that can be used for evaluating the output from the creative process of advertising. Some of these concern factors that are not directly accessible and thus more difficult to evaluate, such as consistency with marketing and advertising objectives. However, answers to many of these questions are judgmental in nature and can be evaluated such as appropriateness for the target audience, communication of a clear and convincing message, whether the creative overwhelms the message, appropriateness for the media environment, and whether the ads are truthful and tasteful. Students should be encouraged to choose a particular campaign, conduct some research on it in the business press or trade publications, and then evaluate the creative approach as well as some of the individual ads against these guidelines. Excellent sources of information that can be helpful to students in this assignment are the ad reviews that appear in publications such as Advertising Age, Adweek, and Brandweek

Chapter 09 - Creative Strategy: Implementation and Evaluation

11. IMC Perspective 9-3 discusses the legendary “1984” commercial used to introduce the Apple Macintosh personal computer. Why do you think Apple chose to never run this ad again after the Super Bowl, given its popularity and impact? Do you think the “1984” sort would be as effective today as it was 30 years ago? Why or why not? (L03,04) Apple’s decision to never run the famous “1984” commercial after the Super Bowl given the popularity of the spot was very interesting. Usually when a company has a commercial that receives the attention this spot received, they try to capitalize on its popularity by airing it many times. Thus Apple’s decision not to do so is very interesting and has been the subject of debate and speculation for more the past 30 years. One reason Apple may have chosen not to air it again was that it received so much media attention in the weeks following the Super Bowl that they did not really need to do so as the television networks and local stations were doing it for them. It is likely that Apple recognized that the commercial was something special and would generate more attention and discussion if it was not shown again. By not showing the spot, Apple was able to add to the mystique surrounding it. It should be noted that there was not an Internet in 1984 so there really was no other way for consumers to see the famous commercial if Apple did not show it. It should also be noted that the “1984” commercial was very controversial and Apple’s board of directors did not want to run it on the Super Bowl. While the commercial did generate a great deal of media attention, Apple may have felt that a better strategy was to let the media and the public talk about it rather than keep showing it. It should be noted that the while Steve Jobs loved the “1984” spot and believed it would have a great impact, it did not test well in market research studies. In hindsight, it is clear that Apple made the right decision by not airing the ad again and moving on to other elements of its IMC programs such as the 20-page insert that appeared in Time and Newsweek magazines and the series of product-focused commercials that highlighted the features of the Macintosh. Much has been written about the “1984” commercial to celebrate the 30th anniversary of its airing. A very interesting article about the spot can be found online at: http://tv.yahoo.com/blogs/tv-news/5-things-you-didn-t-know-about-apple-s--1984--superbowl-ad--like-how-it-almost-didn-t-air-194148445.html. It is very difficult to determine whether the “1984” spot would be as effective today as it was 20 years ago. The commercial was definitely very novel in terms of its creative execution at the time and very different that the typical TV spot airing at that time. Advertisers have pushed the creative envelope much further over the past 30 years and the divergence of the spot might not be as great. However, one could argue that even today this commercial would be perceived a very bold and daring. You might show the spot and ask your students what they think about it and have them discuss it from a creative perspective.

Additional Discussion Questions (not in text) 12. Discuss the difference between an advertising appeal and a creative execution style. Find several ads and analyze the particular appeal and execution style used in each. An advertising appeal refers to the basis or approach used in the advertisement to elicit some consumer response or influence feelings toward the product, service, or cause. The creative execution style refers to the way in which a particular appeal is turned into an advertising message and presented to the consumer. A particular appeal can be executed in a variety of ways and a particular means of execution can be applied to a variety of advertising appeals. For example, an informational appeal that focuses on a product's features or advantages can be executed through a straight-sell or factual message, a demonstration or a comparison. A particular execution technique such as animation could be used for an informational/rational appeal or for an emotional appeal. Students should be encouraged to analyze the particular appeals and execution styles used in selected ads.

Chapter 09 - Creative Strategy: Implementation and Evaluation

13. IMC Perspective 9-1 discusses the need for a creative revolution in online advertising. Discuss how online advertising differs from the type of advertising done in traditional media such as print or television and the challenges marketers face when advertising on Internet web sites. (L01) Online advertising can take various forms including various types of banner ads such as skyscrapers and leaderboards, text-only ads that are used for paid search, webisodes and video. Many online video ads are similar to or the same as the commercials that are aired on television. One of the challenges facing marketers using online advertising is that getting consumer to attend to and engage with an online ad can be very difficult as doing so takes them away from the content on the website. Television and radio ads air during commercial breaks and do not compete for viewers’ attention during a program while print ads often appear on separate pages of a magazine or newspaper and can be easily attended to or ignored. The clutter problem that traditional media advertising faces is also an issue for online advertisers. IMC Perspective 9-1 discusses some of the ways marketers can address some of these issues and design more effective online ads. 14. Discuss how teaser advertising might be used to introduce a new product or brand or to reposition an existing brand. What factors should marketers take into consideration when using a teaser campaign? Teaser advertising is designed to build curiosity, interest, and/or excitement about a product/service or brand by talking about it but not actually showing it. Teasers can also be used to draw attention to upcoming advertising campaigns and generate interest and publicity for them. Teaser ads are often used to introduce a new product or brand such as automobiles, movies or television shows. They can also be used to reposition an existing brand as the curiosity and interest they generate can create some excitement and intrigue that can help increase consumer involvement and make them more receptive to subsequent advertising. When using a teaser campaign marketers will have to consider several factors. They must make sure the teaser generates enough interest and/or curiosity among the target audience to be effective. If the message is too subtle, consumers may not even attend to it. Marketers must also be careful not to extend their teaser campaigns too long as this can create confusion among consumers or even generate negative reactions. As noted in the text, you have to give consumers enough information to hold their attention and interest yet maintain some level of mystery, intrigue and or curiosity. 15. Why do many advertisers pay large sums of money to celebrities to do the voiceovers for their commercials? Do you think consumers recognize the voices of the celebrities doing the commercials? Is it necessary that they recognize them for the commercials to be effective? Advertisers will often pay as much as $500,000 to celebrities just to have them do the voiceovers for their commercials. Some celebrities prefer this more subtle form of product endorsement as they do not have to appear in the ads and thus can avoid the potential negative image of being perceived as “selling out” and pitching products. Advertisers and agencies that pay these large sums of money for celebrity voiceovers argue that a voice consumers have heard before is reassuring and makes the message more effective. They also argue that some celebrities have very distinctive and engaging voices that communicate very effectively. It is difficult to say whether consumers recognize the celebrities doing the voiceovers in many commercials. Actors who have very distinctive voices may be recognized such as Donald Sutherland (Volvo), Morgan Freeman (VISA), Demi Moore (Verizon Wireless), and Jeff Goldblum (Apple Computer). However, most consumers probably do not recognize the celebrities doing the voiceover in many commercials. It is not necessary that consumers recognize the celebrity’s voice for the commercial to be effective. Distinctive voices are often part of the talent offered by actors and actresses as they may be help them be perceived a certain way (honest, humble, sincere, funny and the like). The voice characteristics that help make them popular entertainers may also be effective for television commercial voiceovers. 9-15 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 09 - Creative Strategy: Implementation and Evaluation

16. The chapter discuses how the campaign featuring the Aflac duck has been very successful in increasing awareness as well as sales for the supplemental insurance company. Why do you think this campaign has been so successful? What challenges does Aflac face by continuing to use the duck as the focal point of the campaign? The AFLAC campaign is a very good example of how a company can take a cute character such as a duck and turn it into a personality symbol that can effectively deliver an advertising message with which the company can become identified. Aflac, which is an acronym for American Family Life Assurance Company, sells insurance policies which supplement primary health plans. The company’s various insurance plans are sold through independent agents who work with customers in putting together a program that best meets their needs. However, advertising plays an important role in making consumers aware of the company and interested in learning more about its insurance plans. Since this campaign was first introduced in 2000, awareness of AFLAC has increased tremendously and the ads have helped make potential customers more interested in the company. The campaign has been very popular and has been recognized by a number of major media which has generated a great deal of publicity for the company and helped increase awareness. The primary reason the campaign has been so successful is because the humorous commercials have clearly struck a responsive chord with consumers. The spots featuring the quirky duck in all sorts of odd places are very entertaining and have been a very effective way to break through the clutter, get consumer to attend to the ads, and register the Aflac company name. Supplemental insurance is a product/service category that is not very easy to advertise as consumers are not interested in it or do not want to address the need for insurance. However, once the agents have the sales lead, it is up to them to explain Aflac’s insurance programs and close the sale. The campaign has helped increase Aflac sales as it paves the way for agents who are trying to the company’s supplemental insurance program and also helps Aflac recruit more agents to handle its products. The iconic duck has become an important part of Aflac and has recently been integrated into the company’s redesigned corporate logo. However, the company is reaching the saturation point with regard to awareness as nearly everyone is now aware of Aflac after being exposed to the ads over the past six years. As discussed on p. 333, Aflac has had to modify the commercials using the duck after research has showed that consumers are aware of the company but do not understand its insurance programs. Commercials using the duck now focus more attention on explaining supplemental insurance and its importance to consumers.

IMC Exercise Find an example of a print advertisement or television commercial that uses one of the specific creative execution techniques discussed in the chapter. Discuss how this ad uses the creative execution technique and why the advertising agency may have chosen to do use it. Do you feel the creative execution technique is appropriate for the product or service and communicates effectively with the target audience? Could one of the other execution techniques discussed in the chapter been more appropriate for creating the print or television commercial? Explain why.

Chapter 10 - Media Planning and Strategy

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

Learning Objectives 1. To understand the key terminology necessary in media planning. 2. To know how a media plan is developed. 3. To know what constitutes media objectives 4. To know the process of developing and implementing media strategies. 5. To be familiar with various characteristics of media.

Chapter and Lecture Outline I.

AN OVERVIEW OF MEDIA PLANNING

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

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

Chapter 10 - Media Planning and Strategy

The Media Plan—the goal of the media plan is to find a combination of media that will enable the marketer to communicate the message in the most effective manner possible at minimum cost. The activities involved in this plan are detailed in Figure 10-4. Problems in Media Planning—a number of problems are identified, each of which directly impacts the planning process. These include: insufficient information, inconsistent terminology, time pressures, and problems in measuring effectiveness. An understanding of these problems is critical to the proper design of the media plan.

Professor's Notes

II.

DEVELOPING THE MEDIA PLAN

The process of developing the media plan involves a series of steps (see Figure 10-2). These steps are essentially the same as those presented in the decision sequence model presented in Chapter 1, except now they are involved directly with media decisions. These steps include: market analysis, establishment of media objectives, media strategy development and implementation, and evaluation and follow-up. III.

MARKET ANALYSIS AND TARGET MARKET IDENTIFICATION

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

What Internal and External Factors May Be Operating? As in the overall situation analysis, both internal and external factors will directly influence the media decisions. An example of using secondary sources to gain competitive information is provided, with an example of LEADING NATIONAL ADVERTISERS (COMPETITIVE MEDIA REPORTING) data shown in Figure 10-1.

Where to Promote? The decision as to where to promote at this point involves geographical considerations. Once again, the discussion turns to the use of secondary information and indices as aids in making this decision. A number of critical terms are introduced including: The Survey of Buying Power Index, the Brand Development Index, and the Category Development Index. The calculation of both BDI and CDI is provided, based on actual examples. Figure 10-11 is a useful way of presenting strategies evolving around BDI and CDI.

Professor's Notes

Chapter 10 - Media Planning and Strategy

IV.

ESTABLISHING MEDIA OBJECTIVES

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

DEVELOPING AND IMPLEMENTING MEDIA STRATEGY

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

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

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

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

Reach versus Frequency—Given that advertisers have differing objectives, and are constrained by budgets, the media decision usually involves a trade-off between reach and frequency. This decision is essentially one of exposing more persons to the ad, or exposing fewer persons more often. In making this decision, the media planner must take into consideration a number of factors involving reach and frequency including: 1. The determination of what levels of reach and frequency are needed 2. The establishment of reach and frequency objectives 3. Using gross ratings points (GRP's) 4. The determination of effective reach (the percent of the audience reached at each effective frequency increment)

Creative Aspects and Mood—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.

Chapter 10 - Media Planning and Strategy

Flexibility—the media strategy must be flexible enough to respond to marketing threats and opportunities, as well as to adjust for changes regarding availability and/or in the media themselves. Flexibility may need to address the following: • market opportunities • market threats • availability of media • changes in media or media vehicles

Budget Considerations—it is obvious that costs must be considered in the determination as to which media will be employed. Two types of costs must be addressed—absolute cost—which is the actual cost to place the ad in the medium—and relative cost—or the relationship between the price paid for advertising time or space and the size of the audience delivered. A comparison of media vehicles is usually necessary, using criteria such as cost per thousand (CPM), cost per ratings point (CPRP), and readers per copy. (Each of these is explained in detail in the text.)

Professor's Notes

VI.

EVALUATION AND FOLLOW-UP

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

CHARACTERISTICS OF MEDIA

There are a number of sources of information available which define the various advantages and disadvantages of media. Figure 10-27 lists the major media, and the characteristics of each. APPENDIX A Appendix A provides an example of a media flow chart of Asics shoes. Professors Notes

Chapter 10 - Media Planning and Strategy

Teaching Suggestions

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

Answers to Discussion Questions

1. Research has indicated that the number of exposures to reach optimal frequency to a commercial is three. However, this research was conducted decades ago, and many marketers believe that this number may be too low. Discuss the concept of optimal frequency and some of the factors that support or refute this number. (L03) Optimal frequency is that point at which the number of exposures is the exact amount necessary to communicate one’s message. Research conducted years ago has placed this number at a frequency level of three. Less than that number leads to the potential for the communication to fail. More than three results in overexposure and waste coverage. Thus the marketer would like to have the receiver receive exactly three exposures—nothing more, nothing less. Of course, in reality, this optimal exposure may be impossible to achieve, for a variety of reasons. One, no one truly knows how many times a receiver is exposed to the message. As an example, watch a college or pro football game. You will see the same commercials so many times that you become sick of them. Clearly, this is not in the advertisers best interest, as the commercial can actually become irritating and start to negatively impact the receiver. In addition, dollars are being wasted on ads that are clearly having no positive effect. At the time of this study, there was much less media proliferation than now. As a result there was less distraction, and less commercials. It has been estimated that at the time of the study one might be exposed to 1500 ads a day. Now the estimate is somewhere between 3,000 and 5,000 a day. As you can imagine, there is much more clutter in the environment, leading to less likelihood that one will pick up on any specific message. As a result, some media buyers argue that optimal exposure is at least 5 but perhaps as many as 12—though they have no research to back this position. The fact is that as we don’t know how many times an ad is seen, and the enormous number of ads out there, three remains the number based on scientific research. Until new research is conducted, we pretty much need to live with this number.

Chapter 10 - Media Planning and Strategy

2. Figure 10–27 discusses the advantages and disadvantages of media. Describe any factors that may be taking place that might change the disadvantages or advantages of various media. (LO5). As you can see from this figure, each medium has advantages and disadvantages that it offers. For example, think about TV. Clearly, one of the advantages of TV is its wide exposure, ability to achieve reach. But trends show that younger audiences are moving away from watching TV, preferring YouTube and videos, etc. As the audience’s viewing habits change so too will the advantages of various media. Another example is newspapers. Newspaper readership is on a major downward trend. Less and less young people are reading papers, particularly in print. As a result, coverage may no longer be an advantage. While students say they read the news online (if you believe that!), this is a different form of newspaper. Now a digital version, there may be no coupons to cut, the versions may be shorter, and the “art of newspaper reading” is going away (browsing, etc.). Advertisers have learned this, which is why newspapers are in trouble financially. You can take every medium in that list in Figure 10-27, and recognize changes that are occurring that will alter their advantages and disadvantages (radio v. Pandora). As the new digital media mature, they will change as well—Facebook now takes ads. Instagram is more useful to marketers than Facebook. YouTube will someday over take CBS, and on and on. 3. One of the more popular metrics now being used in nontraditional media (Internet, social media, etc.) is engagement. This term has also been used in evaluating traditional media. Explain what is meant by engagement. Is this term being used the same in referring to both traditional and nontraditional media way? (LO1)

The term engagement is nothing new to media planners, and has been discussed for the past few years but with still no agreement as to exactly what it means. The reason for such attention stems from the fact that current traditional metrics, while still useful, are considered insufficient for today’s media planners, who are inundated with media options from which to choose. One of the terms that they have not only settled on, but have become fixated upon is engagement. For the most part, engagement refers to the degree of involvement the viewer demonstrates with the message. Others have also considered relevance, intent, etc. In fact, at last count, there were no less than 28 different definitions of engagement being offered. The basic concept is that more involved readers, watchers, and/or users will be more interested in the communication than will those merely exposed. For example, if I am in the market for a car, I may spend more time “engaged” with the ad. On the internet, if I spend more time on a page, I may be considered as more engaged. More engaged consumers are supposed to remember and prefer the brand. While certainly relevant, engagement has not yet shown to be as important as one might expect. While some research studies show that engaged viewers may demonstrate higher recall and like the ad better, as well as take some behavioral action after exposure to the ad, skeptics say “so what”? They argue that engagement may be explained by mere involvement with the product or service category, and of course involved consumers would be more inclined to reflect the same results. They argue that engagement is nothing new. Whether it is engagement or involvement, or relevance, or others on the list, all of these terms reflect the assumption that more interest in the ad is likely to occur. While this is certainly an advantage over mere exposure, it does not mean that engagement has provided some major breakthrough. 10-6 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 10 - Media Planning and Strategy

4. Discuss the differences between CDI and BDI. When would an advertiser use these indexes? (LO2) Pages 347-350 discuss BDI and CDI. BDI compares the percentage of the brand's total US sales in a given market area with the percentage of the total population in the market. The resulting BDI indicates the sales potential for that brand in that market area. CDI provides information on the potential for development of the total product category rather than specific brands.

Figures 10-9,10-10 and 10-11 provide an excellent summary of how BDI and CDI can be calculated and used to develop marketing strategies. The use of these indices provides marketers with insights into the market potential for the product or brand. This, in turn, provides information regarding the amount of media emphasis, weighting, etc. to be allocated. Of particular value is Figure 10-11. This figure essentially sums up the value of BDI and CDI to marketers in developing their marketing strategies.

5. A number of studies have examined the role that personality and/or other personal characteristics may have on consumers’ media usage. Discuss some of these studies. Do you think that these characteristics may have an impact, or should marketers rely primarily on demographic characteristics? (LO2)

IMC Perspective 10-1 reports on a number of studies that seem to indicate that personality characteristics may be useful for developing media strategies. While not suggesting that these traits will replace demographics, the researchers believe that they may contribute to more effective media buying. Reading IMC Perspective 10-1, one can see that stages in one’s family lifecycle and degree of social interactions may affect media usage. In addition, heavier users of the internet exhibit different personality traits than light or moderate users, liberals may be heavier users than conservatives. Newspaper readers are more likely to be optimists, while magazine readers may be more open-minded. Going the other way, the study of Facebook users demonstrating correlations between what they “liked” and personality and preferences for programming. The Pew Study offers additional insights into the personalities of Facebook users. While personality characteristics provide additional insights into users programming and media habits, one has to be careful not to put too much faith into these findings. Like demographics, it is often difficult to generalize personality traits to behaviors. The best thing to do at this point is use these traits with demographics to enrich the media buy. 6. One well known media planner has noted that media buying is a combination of art and science with a definite bias toward art. Explain what this means and give examples of circumstances or situations in which this might be the case. (LO4)

Chapter 10 - Media Planning and Strategy

Marketers have a wealth of information available to them for their use in media planning. Besides those provided by syndicated services like Simmons and MRI, the media themselves provide valuable information. There are also computerized media buying software programs, ratings services and primary research companies that may be employed. At the same time, all information cannot be quantified. What might be referred to as ”local knowledge”, or information that one just knows, often enters into the picture. For example, media buyers know there is a difference between weekly and monthly magazines (the latter stays around longer, leading to a higher potential for reach and frequency), location in the medium (page placement, within TV shows, etc) and the editorial perspective may all have an effect. As an example, in one market, the sports anchor was loved by many and hated by an equal amount of viewers. Local buyers knew that many viewers would switch to another channel when the sports came on (often switching back when it was over). While a very careful analysis of the TV ratings may have revealed this, to those familiar with this scenario, the “art” of media buying was invaluable.

7. GfK MRI and Experian Simmons both provide indexes to describe profiles of product users. Using the index provided in Figure 10-5, describe the profile of the energy drink user. Who is least likely to drink this product? (LO2) Using the index, as the number exceeds 100, the potential for use increases. As shown in Figure 10-5, the profile of the energy drink user is: Education:

did not graduate high school (122); attended college (116); no college (103)

Age:

18-24 (225); 25-34 (160); 35-44 (112)

Sex:

male

Occupation:

construction and maintenance (170); sales and office occupations (123); other (132)

Income:

$60,000-74,999 (109); $30,000-39,999 (109); $50,000-59,999 (105)

The nonuser can best be described as a :

65+ year old, with a post graduate degree, employed in a business management profession with household income of $150,000+.

Chapter 10 - Media Planning and Strategy

8. What does it mean for a company when they discover that their product has a High BDI but low CDI? What about a low CDI and Low BDI? (LO2)

High BDI; low CDI:

The product category is not selling well, but the brand is. Probably a good market to advertise in, but should be monitored for declining sales.

Low CDI; low BDI

Both the product category and the brand are doing poorly; not likely to be a good place for advertising

Low CDI; low BDI

Both the product and the category are not doing well. Probably not a good market in which to advertise.

9. As the media landscape continues to change, and advertisers shift more and more of their monies into new media, there are those who predict that some traditional media like TV and newspapers may not survive—at least in their present forms. Discuss whether you think this is an accurate statement and why or why not. (LO5). There is no question that companies have shifted their advertising dollars from traditional media to nontraditional media. It is also true that some traditional media are in trouble—particularly newspapers and magazines—as advertisers have become enamored with the new media opportunities. A few years ago, some of the largest traditional advertisers like P&G and American Express made a major point of the fact that they were moving away from traditional media. In 2010, for the first time in a very long time, P & G did not advertise on the Super Bowl, using the money in new media. Many others have followed a similar path. However, there are indications that there may be changes taking place in the thinking of these large organizations. P & G announced that it will return to the Super Bowl in 2011, as has BMW. Others almost certainly will follow. Much of this may be attributed to the importance of IMC, and research supporting the value of traditional media. Numerous studies have shown that for the achievement of certain objectives—particularly those at the top of the consumer funnel— traditional media like TV have much to offer. These studies demonstrate that traditional media drive consumers to the Internet, and that magazines remain effective to special interest groups. Whether or not traditional media will survive is another matter, as many are already in trouble, and have lost significant advertising revenues. However, recent articles have demonstrated a new found interest in TV, and specialty magazines are thriving (as is direct marketing, and outdoor).

10. Some media claim that advertisers should focus more attention to Readers per Dollar than CPM as a relative cost figure. Explain why they feel this way, and discuss some of the advantages and disadvantages with the use of both of these measures. (LO2). The discussion in the text covers the topics of CPM and readers per dollar quite effectively. The basis for this differentiation is simple—how many people are being reached by the medium for a given cost? CPM refers to the relative cost for reaching an audience based on the cost of ad space divided by the circulation. As the text notes, this figure can over estimate or underestimate the relative cost. 10-9 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 10 - Media Planning and Strategy

Readers per dollar incorporates an additional figure—pass along rate. The proponents of using this measure argue that many magazines are read by more than one person (e.g., passed along), and that by using the CPM figure one underestimates potential exposures. They cite examples like Sports Illustrated, or Time or Newsweek noting that more than one family member may read each issue (these are just a few examples of such media), and that a more accurate figure would include these additional readers. Some magazines may even provide their measures of pass along readership. The problem with determining readers per dollar lies in the determination of pass along. While marketers know intuitively that magazines are passed along, making a specific determination as to the number of times is extremely difficult and often unreliable. Thus, most marketers do not calculate cost efficiencies on these numbers. Perhaps the best solution is a compromise—which is what many marketers do. They use the CPM figure as the base calculation, taking into consideration that many magazines are read by more that one person. In a sense, these extra readers are bonus readers. As you can see, using CPM and readers per dollar is truly a combination of art and science!

Additional discussion questions (not in the text).

11. Some business to business advertisers (for example, copy machine companies) advertise on NFL Sunday and/or Monday Night football games. As might be expected, such a buy would lead to a high level of waste coverage. Explain what is meant by waste coverage. Discuss whether this might or might not be a good media buy. (LO3) Waste coverage refers to overexposure, in which the media coverage exceeds the target audience. If the media reaches people who are not sought as buyers and are not potential users, then it is potentially wasted, and of little or no value to the marketer. At first glance, an ad for a copy machine that is used in business markets (as opposed to home use) may seem like a lot of money. How many of those people watching a pro football game are now, or ever will be, in the market for purchasing such an expensive machine? In fact, it may not be such a bad buy after all. While there certainly will be a large amount of waste coverage, many marketers are willing to live with that fact due to the fact that to reach the same amount of members of the target audience through more targeted media might be even more expensive. In other words buying ads in Office Management magazine and other business related periodicals may actually cost more than the television ad to reach the same amount of people. Thus the large waste coverage is acceptable. In addition, one never knows when new buyers may enter the market, and the exposure would not hurt. Finally, word of mouth, or reaching influencers or users, (not necessarily buyers) may also be of value. 12. Explain the differences between CPM and TCPM. Give examples of a company or product that might select one of the methods versus the other. (LO1) As products and brands become more and more targeted, the use of CPM has been on the decline. As you can imagine, years ago with less market differentiation and more use of mass media, CPM was a good standard by which to compare the relative costs for various print media. However, as markets continue to be segmented into smaller and smaller segments, the marketing strategies of companies

Chapter 10 - Media Planning and Strategy

have led to more and more targeting. TCPM is considered by many to now be the more relevant relative cost measure. Nevertheless, there are companies who may still make use of the CPM measure. Companies that reach very broad audiences, and those with offerings to a variety of target segments—for example, automobiles, and furniture stores, CPM may have more relevance. That is not to say that these companies do not also employ TCPM, just that the broader cost comparison may still be of benefit. For companies targeting specific markets, such as 18-24 year olds, males versus females, etc., TCPM will have more relevance. The question is which medium will most cost efficiently deliver the message to these segments—as opposed to the general reading audience. 13. The text lists both internal and external factors that might impact the media strategy. Provide examples of each and discuss how they might impact the media plan. (LO3) Both internal and external factors may affect the development of the media plan. Internal factors include the size of the media budget, managerial and administrative capabilities or the organization of the agency. External factors include the economy, changes in technology, competitive factors, and the like. The size of the media budget will obviously impact the number of media vehicles that the buyer can consider. Obviously, the larger the budget, the more options that can be considered. Managerial factors may include the number of employees and the experience and/or expertise that they have regarding media strategy development. Should there not be enough managerial talent to develop a media plan, outside agencies may be required. The organization of the external agency may also have an impact on the media plan. Larger, IMC oriented agencies are more likely to be involved with more media options. Smaller agencies may focus attention of advertising and/or public relations or other media with which they feel comfortable. Changes in the economy may directly impact the media plan. As the economy improves or recesses, media costs may rise and/or fall, making some media cost prohibitive. In addition, more advertisers may result in less media available. Changes in technology—for example, the advent of cable television and the Internet—may make more options available to the media planner. Finally, the competition may also force the planner to reconsider his/her media strategy. 14. As noted in the chapter, there is a trade-off between reach and frequency for advertisers with a limited budget. Explain what this means. Under which circumstances would a planner wish to emphasize reach? Frequency? (LO3) In an ideal world, advertisers would like to maximize reach and frequency. Unfortunately, in the real world, they are faced with budgetary constraints. Given budget limitations, the media planner is forced to choose between reach and frequency. Given specific objectives of the plan, one or the other may be emphasized. Maximizing reach at the expense of frequency is more logical when the message is simple and easily understood, the receiver is in the early stages of the response hierarchy (for example, awareness and/or interest) and the target audience is broad. For example, campaigns targeting cola users use very simple messages and are targeted to a broad audience. Thus reach is important. When the consumer is at a higher level in the response hierarchy, for example, comprehension, retention, etc., or the message is more complex, and/or the target audience is narrowly defined, frequency may be a more important objective. For example, messages that have a lot of copy, and may be more difficult to comprehend must consider the importance of effective frequency. One or two exposures may not be enough to achieve the media objectives. Likewise, a narrowly defined target market may allow for an emphasis on frequency, and the minimization of waste coverage, thus placing less emphasis on reach. 10-11 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 10 - Media Planning and Strategy

15. Describe the three methods of promotional scheduling. Give examples of products and/or services that might employ each method. (LO3) The text discusses the various scheduling options available to the marketer. Given the fact that there are always budgetary constraints, and that some products/services do not need to be marketed 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, particularly Memorial Day, The 4th of July and Labor Day.

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

Chapter 11 - Evaluation of Media: Television and Radio

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

Learning Objectives 1. To examine the structure of the television and radio industries and the role of each medium in the advertising program. 2. To examine the advantages and limitations of television and radio as advertising media. 3. To explain how advertising time is purchased for the broadcast media, how audiences are measured, and how rates are determined. 4. To consider future trends in TV and radio and how they will influence the use of these media in advertising.

Chapter and Lecture Outline I.

TELEVISION

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

Advantages of Television 1. Creativity and impact—the interaction of sight and sound offers tremendous creative flexibility and makes possible dramatic, lifelike representations of products and services. 2. Coverage and cost effectiveness—Marketers selling products and services that appeal to broad target audiences find that TV lets them reach mass markets, often very cost effectively. Digital and Social Media Perspective 11-1 discusses advertising on the Super Bowl, the television program that draws the largest viewing audience each year. 3. Captivity and attention— Television commercials are intrusive in that they impose themselves on consumers. Unless we make a special effort to avoid commercials, most of us are exposed to thousands of them each year. While some of the viewing audience may be lost during commercial breaks, most viewers are likely to pay some attention to commercials.

Chapter 11 - Evaluation of Media: Television and Radio

4. Selectivity and flexibility—TV has often been criticized for being a nonselective medium, since it is difficult to reach a precisely defined market segment. However, some selectivity is possible due to variations in the composition of audiences as a result of program content, broadcast time, and geographic coverage. The growth of cable and alternative delivery systems, such as direct broadcast satellite (DBS), has made it possible for most households to receive more than 100 channels which makes narrowcasting to specific viewing audiences based on program content possible. Limitations of Television 1. Costs—the absolute costs for commercial time can be very high, particularly on the major networks. Production costs for quality commercials can also be prohibitive. The production costs for a national brand commercial average nearly $400,000 and can be much higher for more elaborate spots. Major companies with national brands will produce several commercials as part of their advertising campaigns which increases production costs. 2. Lack of selectivity—Advertisers who are seeking a very specific, often small, target audience find the coverage of TV extends beyond their geographic market, reducing its cost effectiveness particularly within a local market area. 3. Fleeting message—Most TV commercials are only 15 or 30 second spots and leave nothing tangible for the viewer to examine or consider. Thirty-second spots remain the dominant commercial length and account for 51 percent of network spots and nearly 70 percent of nonnetwork ads. Fifteen second spots have remained at around 38 percent of commercial activity on the major television networks since 2003. 4. Clutter—the problems of fleeting messages and shorter commercials are compounded by the fact that the advertiser’s message is only one of many spots and other non-programming material seen during a commercial break. 5. Limited viewer attention—the increased penetration of DVRs and prevalence of remote control channel changing or zapping is creating a major problem for advertisers. Studies have shown that nearly a third of a TV program’s viewing audience is lost during commercial breaks as they stop watching television or switch to another channel. The opening vignette the chapter provides an interesting discussion of new technologies such digital video recorders, (DVRs), are impacting television advertising and have led to a change in way Nielsen Media Research now measures viewing audiences for commercials. Nielsen now makes commercial ratings available rather than just program rating. These new ratings take into account how many viewers bail out during a commercial break by changing channels or fast-forwarding (zipping) through ads and promotion spots. Digital and Social Media Perspective 11-2 discusses how multitasking and social media are changing the way we watch television and the implications for advertisers. 6. Distrust and negative evaluation—TV commercials are probably the most criticized form of advertising because of the intrusiveness of the medium. Studies have shown that of the various forms of advertising, distrust is generally the highest for TV commercials.

Chapter 11 - Evaluation of Media: Television and Radio

Professor Notes

II.

BUYING TELEVISION TIME

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

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

Chapter 11 - Evaluation of Media: Television and Radio

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

Selecting Time Periods and Programs—another consideration in buying television time is the selection of the particular time period and program during which the commercial will be shown. Considerations here include the selection of a specific time period or daypart segment and audience size and demographic composition. Common television dayparts are shown in Figure 11-3 of the text. The different dayparts are important to advertisers because they attract different demographic groups.

Professor Notes

Cable Television 1. The growth of cable—Cable or CATV (community antenna television) is probably the most significant development in the broadcast media. By 2013 cable penetration reached 91 percent of the nation’s 114.7 million households, either through wired cable or alternative delivery systems such as direct broadcast satellite (DBS). Cable subscribers receive and average of more than 100 channels, including the local network affiliates and independent stations in various markets. Cable channels now have the majority of the prime-time viewing audience and national cable networks such as CNN, TNT, USA Network, ESPN and MTV have become very popular.

Chapter 11 - Evaluation of Media: Television and Radio

2. Advertising on cable—as with broadcast TV, cable can be purchased on a national, regional, or local (spot) basis. Many national advertisers are turning to spot advertising on local cable systems to reach specific geographic markets. Spot cable is also becoming very popular among local advertisers since they find it very affordable. 3. Advantages of cable—cable television has some important advantages including the opportunities it offers for narrowcasting or reaching very specialized markets though stations such as ESPN (sports), MTV (music/reality shows) or CNN (news) and the various other channels. Figure 11-4 shows the most popular cable channels along with the type of programming they carry. Cable TV also offers lower rates and greater flexibility in the types of commercials that can be used. The low costs of cable make it a very popular advertising medium for local advertisers such as retailers. 4. Limitations of cable- limitations of cable include the fact that it is still overshadowed by the major networks as it has less desirable programming and production than broadcast television. Another drawback is audience fragmentation as the ratings for most cable channels is very low. The prime time program rating for most cable programs is only about a 1 or 2. Lack of penetration is also a problem, particularly in some major market areas. 5. The future of cable—cable television faces a number of challenges over the next decade such as competition from new channels, continued fragmentation, and changes in government regulation. However, as cable penetration increases and its programming quality continues to improve, more advertisers are discovering its efficiency and ability to reach very targeted market segments. For example, as discussed in IMC Perspective 11-1, cable has become a very popular source of sports programming and is important to advertisers who want to reach the male market on networks such as ESPN. E.

Measuring the TV Audience—one of the most important considerations in using television advertising concerns the size and composition of the TV viewing audience. Audience measurement is critical to the advertiser since they want to know the size and characteristics of the audience they are reaching when they buy time on a particular program. Audience size and composition are important to the network or station as these figures determine the amount they can charge for commercial viewing time. Programming decisions are made on the basis of audience size and composition. 1. Audience measures—the sole source of network TV and local audience information is Nielsen Media Research since Arbitron exited the TV ratings business at the end of 1993 due to steep financial losses. There are some important terms and various types of information the rating services provide which should be covered: a. Television households – the number of households in a market with at least one operable TV or monitor. Nielsen estimates that 114.7 million U.S. households that own at least one television set or monitor that can be used to watch TV. b. Program rating – the percentage of TV households in an area that are tuned to a specific program during a specific time period. c. Ratings point – a figure that represents 1 percent of the TV households in a particular market tuned to a specific program. d. Households using television (HUT) – the percentage of homes in a given area where TV is being watched during a specific time period. This figure is sometime referred to as sets in use and is always expressed as a percentage.

Chapter 11 - Evaluation of Media: Television and Radio

e. Share of audience – the percentage of households watching TV in a specified time period that are tuned to a specific program. Share figure are important because they reveal how well as program does with the available viewing audience. f. Total audience – the total number of homes viewing any five-minute part of a program. 2. Network audience information—the source of national and network television audience information is Nielsen Media Research’s Television Index (NTI) which provides daily and weekly estimates of TV viewing and network program audiences. For many years the audimeter was used as the basis for the famous “Nielsen Ratings.” However, the people meter has become the sole basis for the Nielsen’s national rating system. The people meter is an electronic measuring devices that records not only what is being watched but also by whom in the sample of 10,000 Nielsen households used to determine the national ratings. 3. Local audience information—Information on local television audiences is provided by the Nielsen Station Index (NSI). These measures are taken using the diary method whereby record what they are programs they are watching and who is watching. Nielsen provides NSI measures in 210 local markets known as designated market areas (DMAs). DMAs are nonoverlapping areas used for planning, buying and evaluating TV audiences and are generally a group of counties in which stations located in a metropolitan or central area achieve the largest audience share. The ratings period when all 210 DMAs are surveyed is known as the sweeps periods. As discussed in the chapter, there are many problems with the audience estimates gathered during the sweeps periods and advertising people are calling for changes in this system. 4. Developments in audience measurement—the advertising industry is likely to see changes in the way viewing audiences are measured. Much of the concern over the Nielsen audience measurement numbers involves the use of the diary system to measure local viewing audiences. Nielsen has been expanding the use of people meters to measure local viewing audiences as they are currently used in the top 56 markets and the company plans to expand their use to other markets as well. In 2007 Nielsen made a significant change in the way viewing audiences are measured when the company began providing commercial ratings data, know as “C3,” which includes measures of the average viewership of the commercials in a program, both live and up to three days after the ads on played back on a DVR. It is important to note that the new ratings do not track individual ads or specific time slots, but rather provide an average viewership of all the national commercial minutes in a program. The reasons behind the move to this new system and the ongoing issues associated with measurement of TV commercials are discussed in the chapter. Many television network executives are pushing for “C7” ratings which include viewership of programs and commercials up to seven days after the airing of a show. This will allow for inclusion of viewers who may record a shown on a DVR and watch it during this time period. Viewership across multiple platforms including tablets and mobile devices is needed to give marketers a better picture of total viewership of a program. In 2013 Nielsen introduced its Cross-Platform Campaign Ratings which measures the number of people who watch an ad only on television the number who view it online, and the overlap between the two. Nielsen Media Research is working to address the ongoing challenges of audience measurement through a major initiative known as Anytime Anywhere Media Measurement (A2/M2) which includes the expansion of the use of electronic measurement in local markets and out-ofhome measurements such as bars and restaurants.

Chapter 11 - Evaluation of Media: Television and Radio

III.

RADIO

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

Advantages of Radio 1. Cost and efficiency—Radio commercials are inexpensive to produce and the absolute and relative costs for radio advertising time is generally lower than for television. 2. Selectivity—Radio allows marketers to focus their advertising on specialized audiences such as certain demographic and lifestyle groups. For example, talk radio reaches the adult market effectively while top 40 music reaches teens and young adults. 3. 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. 4. Potential for mental imagery—Radio encourages listeners to use their imagination when processing a commercial message. Radio can also reinforce TV messages through a process called image transfer where the visual elements of TV commercials are implanted in a radio spot. 5. Integrated marketing opportunities—Radio provides marketers with a variety of integrated marketing opportunities such as event marketing and point-of purchase promotions. Advertisers often use radio stations and personalities to enhance their involvement with a local market and to gain influence with local retailers.

Limitations of Radio 1. Creative limitations—Radio is an advertising medium without a visual image. The radio advertiser cannot show the product, demonstrate it, or use any type of visual appeal or information. 2. Audience fragmentation—the percentage of the market tuned to any particular station is usually very small. 3. Chaotic buying procedures—acquiring information and evaluating and contracting for radio time with even a fraction of the nearly 11,000 commercial stations that operate across the country can be difficult and time consuming. 4. Limited research data—Audience research data on radio are often limited, particularly compared with TV, magazines, and newspapers. 5. Limited listener attention—Radio programming particularly music, is often the background to some other activity and may not receive the listeners’ full attention. Many people who listen in their cars preprogram their radios and change stations during commercial breaks. Another factor that is detracting from radio listening in motor vehicles is the rapid growth of mobile telephones. Commuters who own a mobile phone are talking on it more and listening to less radio.

Chapter 11 - Evaluation of Media: Television and Radio

6. Competition from digital media – commercial radio faces competition from several digitalbased technologies that are impacting the listening audience such as satellite radio. The major satellite radio companies, Sirius and XM, merged in 2008 and now have nearly 24 million subscribers. In addition to satellite, terrestrial radio is also being impacted by the growing popularity of MP3 players such as the Apple iPod as well as music services that are now available over the Internet such as Pandora, Spotify and Yahoo!Music. Apple recently entered the online radio market with its iTunes Radio streaming service as has Google with its All Access Service. 7. Clutter—most radio stations carry an average of nearly 10 minutes of commercials every hour. During the popular morning and evening rush hours, the amount of commercial time may exceed 12 minutes. A 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. However, a number of radio companies such as Clear Channel Communications have cut back on the number of commercials run per hour. The radio industry is looking for other ways to make radio advertising more valuable to marketers. In 2010 Clear Channel began offering advertisers a new service known as contextual ads that can automatically insert radio commercials immediately after specific programming or certain kinds of content. C.

Buying Radio Time—the purchase of radio time is similar to that of television in terms of purchasing options as advertisers can make either network, spot or local buys during various time periods or dayparts. Various options should be discussed including: 1. Network radio – there are seven major national radio networks, such as Citadel Media, CBS, and Premiere. Advertisers can reach a national audience by advertising on one of the networks. There are also more than 100 regional radio networks across the country. An important trend is the number of syndicated radio programs that offer advertisers a package of several hundred stations. The Dan Patrick Show and Rush Limbaugh Show are examples of popular syndicated programs. 2. Spot radio – national advertisers can use spot radio to purchase airtime on individual stations in various markets. 3. Local radio – most radio advertising is done by local companies who purchase advertising time from stations in local markets.

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 11-7. Audience Information—one problem with radio is the lack of audience information that results from the vast number of radio stations with small, fragmented audiences. Developing precise measures of radio listenership is difficult because of the nature of the medium and the many station options available. There are two major radio rating services which should be discussed:

Chapter 11 - Evaluation of Media: Television and Radio

1. Arbitron—covers over 300 local radio markets with one to four ratings reports per year by having a sample of representative listeners in each market maintain a diary of their radio listening for seven days. Various figures measured by Arbitron include person estimates, ratings, and share. Arbitron also recently began measuring listenership to webcasts of radio stations. Nielsen’s acquisition of Arbitron was completed in September 2013 and the company plans to change the name to Nielsen Audio. 2. RADAR— another rating service that is now owned by Nielsen following its acquisition of Arbitron that collects audience estimates twice a year for the major radio networks on the basis of 12,000 telephone interviews covering seven day of radio listening behavior. Teaching Suggestions This chapter is designed to provide the student with a general understanding of the media of television and radio. Radio and television are probably the most pervasive media in the lives of most American consumers. The instructor may want to direct the students’ attention to the statistics cited in the text regarding penetration of radio and television and the amount of time spent with these media. It is important for students to understand the general characteristics of television and radio including their specific strengths and weaknesses, the role they play as advertising media vehicles, how television and radio time is purchased and how audiences are measured and evaluated for each medium. For nearly 80 years the broadcast media of radio and television have been a dominant part of the lives of most Americans. Radio was a major news, information and entertainment medium from the 1920s to the early 1950s. The introduction of television as a mass medium began in 1950 and has seen unprecedented growth over the past three decades, both as an entertainment and advertising medium. Much of the growth in the popularity of television has come at the expense of radio, although the latter has been experiencing a resurgence in popularity. As we enter a new millenium, television is changing as an advertising medium as the growth of cable has led to a fragmentation of viewing audiences and the major networks are facing a decline in the size of the viewing audiences they attract. An interesting and informative website that you may want to visit is that of the Television Advertising Bureau which can be found at www.tvb.org. The nature of television as an advertising medium has changed dramatically in recent years and will continue to do so with the evolution of digital technology. The trend toward shorter commercials and the resulting clutter problem, the growth of cable and concomitant decrease in network viewing audiences, the continued penetration of digital video recorders (DVRs), video on demand (VOD) and Internet steaming services such as Netflix, Hulu and Amazon Prime are likely to have a profound impact on television as an advertising medium. Advertisers are increasingly calling for more precision in audience measurement such as measures of commercial viewing rather than simply program viewership. The instructor should encourage the student to explore these changes and consider their impact on advertising in terms of not only media planning, but also creative strategy and sales promotional programs. It is important to keep informed about the changes occurring in the areas of audience measurement such as the development of the portable people meter system by Arbitron (which is now owned by Nielsen). This device is beginning to be used for measuring radio audiences and many in the industry would like to see it used to measure televisions viewing audiences as well. The chapter discusses the ongoing battle between the television networks and advertisers over the measurement of television viewing audiences and how they are being impacted by new technologies such as digital video recorders. In 2007 Nielsen Media Research began making commercial ratings available rather than program ratings. In exchange for letting advertisers have commercial ratings, the networks are now asking that they be paid for the DVR-enabled viewers who may watch programs and the ads they contain up to three days later. Television networks are now advocating the use of “C7” measures that include viewership of TV programs up to seven days after they are aired.

Chapter 11 - Evaluation of Media: Television and Radio

When teaching this chapter, we encourage you not to contribute to the “Rodney Dangerfield” problem of radio by giving it only limited attention. Radio has become a very viable media option for national as well as local advertisers. Examples of the creative and effective use of radio are readily available just by spending some time listening to the medium. Since students tend to be heavy listeners of radio, you might ask them to record some radio ads that could be discussed in class. The Radio Advertising Bureau has a very informative web site (www.rab.com ) which you may want to visit for some interesting material and information on the effective use of radio by various advertisers. There are several interesting developments in radio that 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. Attention should also be paid to the growth of satellite radio and SiriusXM which was formed by the merger of the two companies. While satellite radio offers more options to listeners, both companies are finding it difficult to attract subscribers.

Answers To Discussion Questions 1. The chapter opener discusses how intercollegiate athletic programs have become very dependent on revenue from broadcast right to football and basketball games. Discuss the impact this is having on colleges and their athletic programs in particular. What are some of the negative implications of this situation? (L01) As discussed in the chapter opener, television networks have been paying large sums of money to the NCAA as well as the major conferences such as the Big 10, Pac 12, Big 12, Southeastern Conference (SEC), Atlantic Coast Conference (ACC) and others to broadcast their football and basketball games as well as end of the season tournaments. This revenue is very important to collegiate athletic programs as the vast majority of them operate at a loss each year as they must fund their entire athletic programs, not just the two revenue producing sports of football and basketball. The NCAA requires Division 1 programs to offer 15 sports collectively for men and women which is very expensive. In addition to monies for scholarships, travel, equipment, and insurance the schools must pay for coaching staffs, administrative support and other expenses. Most athletic programs rely on monies from student fees and the school’s general fund to operate their athletic programs. Given this situation, the importance of the revenue that comes to schools from television broadcast rights is critical for them to continue offering their athletic programs. The reliance on monies from TV broadcast rights is impacting collegiate sports in many ways as schools are doing whatever they can to maximize TV revenue such as changing conference affiliations, abandoning long-standing rivalries, adding additional games including conference championships, and even dismantling the traditional system of post-season bowl games and the much maligned Bowl Championship Series (BCS) system. Some teams have moved to new conferences that are willing to pay them more money because they are located in major media markets and thus can help increase TV ratings. There is a great deal of concern that Division 1 collegiate football will eventually end up with four to six major conferences that include 12 to 16 teams. There has even been speculation that these schools might withdraw from the NCAA and govern themselves. While the major football schools would receive a large amount of revenue from broadcast rights deals, the remaining schools would be at a major competitive disadvantage and would find it difficult to build their programs and attract talented athletes. There is also concern that television will become saturated with football and basketball games which could lead to a decline in popularity of the sports on television. Collegiate football games currently are televised five days and/or nights a week with a full slate of games being shown on Saturday. There is also concern that the networks might eventually pass on the rights fees to cable operators who in turn will try to pass them on to subscribers, many of whom do not watch collegiate sports on television.

Chapter 11 - Evaluation of Media: Television and Radio

2. Discuss the major developments that are impacting the television industry and TV’s role as a major advertising medium. How might these factors impact he way marketers use television as part of their IMC programs? (L01,04) There are a number of developments impacting the television industry and TVs role an advertising medium. Digital video recorders and video on demand (VOD) are major technological developments impacting the way people watch television and will continue to do so in the future. DVRs allow shows to be recorded and saved to hard drives that can hold hours of programming. DVRs also allow users to rewind or pause in the middle of a live broadcast while the device keeps recording, resume watching from the point where they stopped, and then skip ahead to catch up to the live broadcast. These devices also allow viewers to skip past commercials at super high speeds. DVRs also give viewers the power to control when they watch television shows and what shows they watch. This is having a tremendous impact on television advertising as it will be more difficult to measure TV viewing audiences. As discussed in the chapter, Nielsen Media Research has started providing new commercial ratings that include viewership of commercials both live and up to three days after the ads are played back on a DVR. They are also being asked to provide C7 ratings that measure the number of viewers who watch a recorded show within seven days of its airing. Video on demand is now being offered by cable operators as well as some satellite television services. VOD systems allow user to select and watch programs interactively and pause, fast-forward or rewind the program just as they might on a VCR or DVR. VOD makes it easier for content providers to push programming directly to end users, potentially on a pay-per-view, commercial free basis. Digital video recorders and VOD will have a major impact on television’s traditional advertising business model as households will not have to watch programs at scheduled times and will have the ability to fast forward through commercials or skip them altogether. As noted in the chapter, the Dish Network has developed a device called the Hopper which allows viewers to automatically skip ads on all TV programs they record. This will make it more difficult to measure viewing audiences and make it more difficult to develop media plans for television. However, companies such as TiVo argue, that advertisers should be embracing the new technology, as it will allow them to take certain commercials out of a program and replace them with ads that are of more interest to certain types of TV viewers. They also see their devices as helping in the move toward interactive advertising whereby consumers will be able to purchase products right off of the TV screen or enter contests or sweepstakes. One major impact DVRs are already having is to encourage marketers to experiment with extended adforms and other types of “advertainment” that can be shown to subscribers of these systems. It will become important for marketers to make their ads more interesting and entertaining in order to encourage consumers to watch them. In addition to DVRs and video on demand, there are other developments that have impacted television over the past two decades. One is the continued fragmentation of the viewing audience that is occurring with the increase in channels available through digital cable and satellite systems. The four major networks have been impacted by this as their collective viewership has declined by 42 percent over the past 15 years and they now account for only 25 percent of the prime time viewing audience. Top rated shows that used to be watched by 20 percent of the TV households now struggle to get double digit ratings as viewers are being lost to cable channels that offer programs that appeal to very specific audience. It is likely that television will be impacted significantly in the near future by Internet Protocol Television (IPTV) which makes it possible to have content available on the Internet delivered to television sets. Major companies such as Apple (Apple TV) and Google (Google TV) have already developed products that allow consumers to connect to and access the Internet through their television sets and more are likely to do so over the next few years. This will give households even more viewing options which result in even further fragmentation of the television viewing audience. Also, many households now have the capability to stream video from computers, tablets, gaming consoles and other devices, such Google Chromecast, directly to their HDTV sets or

Chapter 11 - Evaluation of Media: Television and Radio

to just watch programs on their computers or mobile devices. Services such as Netflix, which now has more than 30 million subscribers, Hulu Plus, and Amazon Prime now stream movies and TV shows which provide households with additional television viewing options. 3. Discuss how companies that advertise on the Super Bowl are using it as an integrated marketing opportunity and leveraging their involvement with the game. Evaluate the pros and cons of releasing a Super Bowl ad prior to the day it is shown on the big game. (L02) There are a number of reasons why companies spend large amounts of money to advertise on the Super Bowl. The Super Bowl has become the most important advertising showcase of the year. The big game usually delivers the largest viewing audience of any program and it is the one program where as much attention is paid to the commercials as to the program. Despite the high costs of advertising time on the Super Bowl, from a cost per thousand perspective it is a very efficient media buy. Also, there is a tremendous amount of attention and publicity given to the commercials that are run on the Super Bowl each year, both in the weeks leading up to the big game as well as during the few days immediately following. Many companies feel that by advertising on the Super Bowl they can receive a considerable amount of publicity about their company and/or brands which extends the value of the media buy. Finally, many companies are using their involvement with the Super Bowl as an IMC opportunity. They run sales promotions such as contests or sweepstakes that are tied to the game which can be promoted for several weeks prior to the game both in the media and on their web sites. Some companies are official sponsors of the game and thus can leverage their sponsorship into IMC opportunities as well. As discussed in IMC Perspective 11-1, marketers have become very creative in finding ways to extend their Super Bowl advertising and get consumers involved. A very good example of this is the “Crash the Super Bowl” contests Frito Lay has developed for the past few Super Bowls which have included having amateurs create their own commercials and writing and producing songs that embody the brand image of the company. With the growth of the Internet and online video sharing sites such as YouTube, many marketers are using pre- and post-game public relations efforts to extend the value of their multi-million investments in Super Bowl advertising time. Marketers are making sneak previews of their ads available online prior to the game and also make their ads available on various web sites to be viewed after the game. As noted, popular ads may receive millions of views online during the week after the Super Bowl which augments the value of the media buy and helps justify the multi-million dollar cost of a 30 second spot during the big game. A number of marketers are releasing their Super Bowl ads, or teaser versions of them, prior to the big game as they want to generate buzz about them leading up to the big game and leverage the investment they have made for a Super Bowl spot - which now costs at least $4 million for 30 seconds. This can be done by making the ads available on their web sites, Facebook pages, YouTube channels and using social media to drive comments and discussions about them. The media will also pick up on press releases and stories regarding Super Bowl ads in the two weeks leading up to the big game which can increase the number of view and word-of-mouth discussion. Of course advertisers who release their entire ad prior to the game are taking away the surprise element that has become part of the experience of watching the commercials during the Super Bowl. If an ad has already been seen, viewers might not attend to it and discourage others from doing so. Many marketers still believe in the power the anticipation and surprise and choose to keep their ads under wraps until they air during the game. It should be noted that there are some valid arguments against spending large sums of money to advertise on the Super Bowl. Many media experts feel that it does not make sense for companies with limited media budgets to spend most of their advertising monies to advertise one or two times on the Super Bowl. They note that the cost of advertising on the game has become too high and these companies would be better off spending the $4 million they might spend for one spot on the Super Bowl on ads spread across a variety of media and over a longer time period. Many companies are looking to other major events that deliver a large audience but do not cost as much as the Super Bowl 11-12 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 11 - Evaluation of Media: Television and Radio

such as the Academy Awards and Grammy’s. The Super Bowl has also become a showcase for new commercials that use humor and other types of emotional appeals. Thus it may be difficult for a rational appeal message to generate much attention and/or interest among Super Bowl viewers. 4. Discuss the advantages and limitations of television as an advertising medium and how these factors affect its use by both major advertisers as well as smaller local companies. (L02) Television has often been described as the ideal advertising medium because of the many advantages it offers. These include the opportunity TV offers for developing creative and imaginative messages with high impact; its wide coverage and ability to reach large audiences in a cost-effective manner; the captive nature of the TV viewing audience which usually results in attention to commercials; and the selectivity and flexibility television offers for reaching various types of target audiences, particularly with the growth of cable television. These factors are very important to major advertisers such as automobile companies or packaged goods marketers. These companies are generally trying to reach mass audiences with their advertising messages and television is an excellent media vehicle for doing this. However, they can also take advantage of the selectivity TV offers through various programs or cable channels to reach more targeted audiences. Automobile companies and packaged goods marketers also rely heavily on the creativity and impact that is possible through TV commercials. These companies use the sight, sound and visuals offered through television to create high impact ads, develop images for their brands, and develop emotional or entertaining appeals. Television advertising can be particularly valuable for creating emotional or entertaining appeals that help make a low involvement product more exciting or interesting. Of course there are limitations to television as an advertising medium, even for major advertisers with large budgets. Television can be a very expensive medium for national advertisers and production costs for high quality commercials are also very high. The viewing audience for television programs is becoming increasingly fragmented with the increase in the number of channels available to viewers. Clutter also continues to be a problem as the average amount of non-programming time averages more than 15 minutes during prime time and even more during the daytime. The increase in the number of homes with digital video recorders 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. 5. The most popular form of television commercials is the 30-second spot. Discuss why 30-second spots are so popular among advertisers. When might a marketer be able to effectively use a 10 or 15 second commercial? (L02) Thirty second commercials have become the most popular form of commercials because most marketers and agencies view this as the optimal amount of time for a TV commercial. Marketers recognize that they rarely need 60 seconds to deliver their advertising message and the cost for these longer spots can be very expensive. Creative personnel in agencies have learned to develop messages that fit well in the 30 second time frame as this is usually ample time to deliver a sales message. Marketers recognize that there are some situations where they do not need 30 seconds to deliver an effective message and can use a 15 or even 10 second spot. The growth in the use of 15-second peaked at 38 percent in 1989 and then declined in the early ‘90s to a low of 30 percent in 1994. Since

Chapter 11 - Evaluation of Media: Television and Radio

then their use has stabilized and they now account for a little over a third of all network commercials. It appears that 15-second spots are not taking over as predicted. The trend toward shorter commercials resulted from several factors including increased demand for a limited amount of broadcast time on the major networks, which led to very high rates for commercial time. Many advertisers saw shorter commercials as a way of getting more impressions from their media budgets. Marketers also feel that shorter commercials can deliver a message just as effectively as a longer spot and for much less money. Research has shown that the communication performance of 15-second spots is very good. For many brands, such as those characterized by low-involvement buying behavior, the advertising message is often quite simple and can be communicated effectively in a 15second spot. Market leaders often seek only to use reminder advertising whereby the brand name and a slogan or brand positioning statement is registered. This often can be done effectively in a 10- or 15-second spot and the media budget can be used to run additional ads and/or reach a wider audience. The down side of the trend toward shorter commercials is the increasing clutter that results from shorter spots and the greater difficulty individual advertisers are having in attracting and holding viewers’ attention. It is very difficult to register anything more than a brand name, slogan and/or positioning statement in a 10- or 15-second spot. Thus advertisers may find it difficult to differentiate their brands when they use short commercials. 6. What are the various options available to advertisers for purchasing advertising time on television? How does the use of these options differ for national versus local advertisers? (L03) A number of options are available for purchasing advertising time on television. Advertisers can purchase time in a variety of program formats and it can be purchased on a national, regional or local basis. Advertisers can also sponsor an entire program, participate in the sponsorship of a program, or use spot announcements between programs. For national advertisers, one of the basic decisions is whether to purchase network versus local or spot announcements. Most national advertisers purchase advertising on the major networks to provide national coverage and supplement this with regional or local spot purchases. When network advertising is purchased, the commercial is shown on all of the affiliated stations in all designated market areas. National advertisers will also use spot advertising (also referred to as national spot advertising) which refers to commercials shown on local TV stations with time purchased directly from the individual stations. Spot advertising offers the national advertisers flexibility in adjusting to local market conditions as they can purchase more time in areas where market potential is greatest or where additional advertising support is needed. Local advertisers want to purchase television time on stations whose coverage is limited to the geographic markets in which they do business. This is done by purchasing spot ads on local network affiliates, independent stations or local cable networks. 7. Discuss the reasons for the growing popularity of sports programming on television. What are some of the ways advertisers can capitalize on the popularity of sports programs as a media vehicle? (L02) Sports programming has become very pervasive on television reflecting the general popularity of sports in society. The public’s love affair with sports continues to grow as there is tremendous interest in professional sports including the National Football League, Major League Baseball, the National Basketball Association and the National Hockey League. Interest in college sports has also grown, particularly NCAA football and basketball. In addition to these traditional sports, there is also interest in individual sports such as golf and tennis and action sports have also become a source of sports programming such as the winter and summer X Games on ESPN. The growing popularity of sports programming also reflects the fact that there are a lot more sporting events being televised as there are national cable networks such as ESPN, Fox Sports 1, NBC Sports, the Golf Channel, Tennis Channel, NFL Network and MLB Network. There are also cable networks devoted to college sports such as ESPNU and CBS College Sports and any collegiate conferences now have their own cable networks such as the Big Ten, SEC and Pac 12 Networks. Media companies are willing to pay large amounts of money to the broadcasting rights for sports programming because they can deliver good 11-14 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 11 - Evaluation of Media: Television and Radio

ratings and sporting events are usually watched live rather than recorded and played back later. Sports programming also are a good way to reach young males who are an elusive, yet very valuable target audience for many companies. Advertisers are capitalizing on the growing popularity of sports programs in several ways. First, they are making sports programs a major part of their media buys and airing more commercials during sporting events. They are also taking advantage of the segmentation opportunities available through sports programming. For example, golf equipment companies can advertise heavily on the Golf Channel and reach avid golfers with minimal wasted coverage. Beer companies recognize that the heavy consumers of beer are younger males who are big sports fans and can be reached through ads during professional football, baseball or basketball games. The home viewing experience for sports programs has also improved tremendously with the proliferation of HDTV sets and the quality of the broadcast coverage of sporting events. Marketers are also recognizing that advertising or sponsoring major sporting events allows them to stretch their television budgets further as they can reach consumers on multiple screens. Many media companies are selling packages that include both broadcast and second-screen experiences which take place through social media. For example, ABC/ESPN sells sponsorship packages for NBA games that includes digital media platforms. Companies also activate their sponsorships at many sporting events that they sponsor and now view sports as an integrated media buy. 8. IMC Perspective 11-1 discusses the popularity of ESPN and the high rights fees cable operators must pay for the network as part of their basic cable package. Do you think it is fair for households that are not interested in sports programming to have to pay higher cable bills that include ESPN as part of their basic cable package? Rising prices for cable television has become a major issue in recent years as the average monthly bill was nearly $100 in 2013 and is expected to reach $123 by 2015. Cable subscription rates have been increasing by about 6 percent annually while the inflation rate has been only 1.5 percent. A growing portion of these increases come from retransmission fees that that cable operators must pay to local broadcast stations which can now charge cable companies for their content. However, many critics argue that one of the factors contributing to the high cost of cable is the ESPN network, which charges cable operators by far the industry's highest fees at more than $5 per month. Nearly all other channels charge less than $1 monthly, such as CNN (57 cents) and MTV (39 cents). And ESPN insists operators carry the channel on basic cable, which is the minimum a subscriber can purchase, so they can't recoup their costs by putting it on a pay tier. Many cable subscribers argue that they should not have to pay for ESPN given its high price and the fact that they may not be interested in watching sports on television. Moreover, many advocacy groups have been pushing for a la carte services whereby subscribers can pick and choose which channels they want to pay for. However, many channels are sold to cable companies on a bundled basis by the media companies and they are unlikely to unbundle them. For example, ESPN is owned by Disney w3hich includes it in a bundle of less popular channels. Moreover, if ESPN was sold on an unbundled basis, many sports fans would drop the channel which would mean that Disney would charge cable operators a substantially higher rate per subscriber as it would want to generate the same amount of revenue form a smaller pool of subscribers. ESPN also defends the high price it charges cable operators by noting that it is consistently ranked by cable operators as the major driver of their business and its license fees reflect the value it provides to them. For example, an annual survey conducted by the Beta Research firm in 2013 found that operators named ESPN as the cable network with the most "perceived value" for the 13th consecutive year. ESPN, like all other sports channels, argues that sports pays off for cable distributors by helping them reach the young male viewers that advertisers covet. They also note that most sporting events are watched live which means that viewers do not skip through commercials as they might do with a show that has been recorded and is being played back. Thus ESPN is in a very powerful position when it bargains with the cable companies. ESPN also argues that it uses the money it generates to 11-15 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 11 - Evaluation of Media: Television and Radio

pay for rights fees for sports programming such as NFL Monday Night Football, Major League Baseball, NBA games and collegiate sports including football and basketball. The cable network also has purchased the broadcast rights to other major sporting events such as the Masters golf tournament and FIFA World Cup. ESPN argues that the rights fees for all sports programming is being driven higher by other networks such as CBS, NBC and Fox. It will be interesting to see how long ESPN can continue to require cable operators to offer the network as part of its basic cable package. Legislation has been proposed that would end the bundling of cable channels and allow consumers to pay for them on an al a carte basis. While this might drive prices for ESPN higher, one might argue that the network would have to adapt to market forces and lower its prices if it wanted to maintain its subscriber base which is very important in determining the rates it can charge advertisers. 9. Evaluate the use of sweeps ratings periods as a method for measuring local television viewing audiences. Do you feel think sweeps ratings provide reliable and valid estimates of local television viewing audiences? How might they be improved? (L03) As discussed in the chapter, there are a number of problems with the sweeps ratings periods used to measure local TV viewing audiences. One of the major concerns is over the tactics used by the networks and their local affiliates to bolster their ratings during the sweeps periods such as special programming, contests games, and other promotional gimmicks. These extraordinary programming and promotional efforts during the sweeps periods pull in extra viewers and negatively impact the validity of audience measurements for the remainder of the year. They may inflate the size of the viewing audience for a particular network show or a local news cast and result in advertisers having to pay higher rates for advertising time during other nine months of the year. The advertising industry argues that the only real solution to the problems associated with the use of the sweeps is to do away with the “sweeps period” and move to a system of continuous audience measurement. However, a continuous measurement system like that used for the national ratings would be very expensive and the television and advertising industry would have to be willing to pay a higher price for local ratings information. 10. Discuss recent developments in the measurement of television viewing audiences and their implications for advertisers. Do you think advertisers should have to pay for viewers who watch TV shows on a time-shifted basis on their DVRs or video on demand? The chapter discusses the debate between the television networks and advertisers over measurement of TV viewing audiences. Evaluate the changes that have been made to provide advertisers with better measures of television viewing audiences as well as commercials. (L03) The major television and cable networks have been battling with Nielsen Media Research for years over the best way to measure the television viewing audience, particularly given the penetration of DVRs into more than 40 percent of television households. The two sides reached a compromise in 2007 when Nielsen Media Research began making commercial ratings available rather than program ratings. For decades Nielsen had provided the number of TV viewers per half-hour for programs and prices for advertising time were based on the average viewership of the programs they interrupted. However, commercial ratings take into account how many viewers bail out during a commercial break by changing channels or fast-forwarding through the ads if they are watching a recorded show. Nielsen’s new commercial-ratings data, known as “C3”, includes measures of the average viewership of the commercials both live and up to three days after the ads are played back on a DVR. Nielsen is also now making available C7 or Live+7 ratings that measure viewership of programs and commercials up to seven days after the airing of a show. However, advertisers do not usually go by Live+7 rating as they focus on the C3 commercial ratings. Currently C3 is the primary metric under which most broadcast prime-time is bought and sold although this may change in the future as more consumer watch TV shows on a time-shifted basis.

Chapter 11 - Evaluation of Media: Television and Radio

Television and cable networks use rating data from Nielsen Media Research to set prices for television advertising time and changes in that data can have a major impact on the prices advertisers ultimately pay. Nielsen’s new “C3” ratings mean the networks now have to negotiate with advertisers on the basis of smaller live viewing audience numbers. However, in exchange for letting Madison Avenue have its commercial ratings, the networks are now paid for the DVR-enabled viewers who may watch the programs and the ads at a later time. They note that the Nielsen data refutes the myth that nearly all DVR viewers skips the ads when they playback a show and that those who watch the ads raise the program’s total commercial audience. However, many advertising and media executives still disagree with the networks over the value of the DVR viewers. They point to research showing that while the viewing audience may grow over time, viewership of commercials still lags significantly behind viewership of programs. While Nielsen’s current C3 ratings are seen as an improvement over the old measurement system, many are still dissatisfied with the system since it is based on an average of all national commercial minutes in a program. Marketers argue that payment should be based on the viewership of each individual commercial rather than an average across all the commercial minutes. They argue that there is a substantial amount of research data available showing that viewership of commercials during a break depends on position as the first or second commercial may have more viewers than spots aired during the middle of a two or three minute pod. As DVRs become more pervasive along with Internet Protocol TV, the viewing patterns of consumers will continue to change and Nielsen will have to continue to adapt its measurement of the television viewing audience. 11. What is a commercial rating and how does this measure differ from a program rating? Discuss why advertisers and media planners prefer commercial ratings rather than program ratings. (L03) A commercial rating is a measure of the number of viewers of actual commercials in a program rather than the program itself. Traditionally, Nielsen Media Research has provided advertisers and media planners with program ratings which are a measure of the percentage of households in an area that are tuned to a specific television program during a specific time period. However, the advertising industry has long argued that there is a need to measure the viewing audience of the commercials rather than just the program since many TV viewers switch channels when commercials come on or fast-forward through them if the show has been recorded on a DVR. In 2007 Nielsen began providing commercials ratings known as “C3” which includes measures of the average viewership of the commercials both live and up to three days after the ads are played back on a DVR. The new ratings do not track individual ads or specific slots in the commercial Pod, but rather offer an average viewership of all the national commercial minutes in a program. Obviously advertisers and media planners prefer commercial ratings since they have always argued that viewership of commercials is much lower than viewership of programs and they do not want to pay for eyeballs that are not watching their advertising messages. 12. Discuss the advantages and disadvantages of advertising on radio. Discuss how radio advertising might be used by national versus local advertisers. (L02) 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.

Chapter 11 - Evaluation of Media: Television and Radio

Disadvantages of radio include creative limitations due to the absence of a visual image, a high level of audience fragmentation because of the large number of stations, chaotic buying procedures for purchasing radio time, limited amount of research data on radio audiences and limited listener attention (particularly in cars where station changing occurs frequently or where commuter are talking on cellular telephones). Radio is most likely to be used by local advertisers such as retailers who are trying to reach consumers in their trade area However, radio has also become a popular medium for national advertisers, particularly those with products and/or services which appeal to hard-to-reach audiences such as teenagers. National advertisers can purchase time on network radio and the growing number of nationally syndicated programming such as sporting events and talk radio shows. 13. Discuss how radio stations, as well as advertisers, can deal with the clutter problem on radio and draw attention to their commercials. Provide an example of an advertiser who might be able to benefit from the contextual programming service offered by Clear Channel. (L03, 04) One of the problems facing radio, like most other advertising media, is that of clutter as most radio stations carry an average of nearly 10 minutes of commercials each hour and during the popular early morning and evening drive times the amount of commercial time may exceed 12 minutes. Some stations have begun offering “commercial free” blocks of programming time (such as music) but this often results in listeners switching to another station when they begin airing commercials. The clutter problem for radio is compounded by the fact that many people listen to radio in their cars and can easily change channels or may choose to listen to a CD or their iPods rather than radio. Advertisers deal with this problem by trying to develop creative commercials (often by using humor) or may hire a local celebrity to help attract the attention of listeners. Some radio stations have also addressed the clutter problem by reducing the number of commercials aired each hour which is more appealing to both listeners as well as advertisers. Contextual programming is a service that can automatically insert radio commercials immediately after specific programming or certain kinds of content, including other ads. This service allows marketers to better target their advertising messages by airing them when the radio audience is more likely to be listening to the programming. Students should be asked to identify examples of an advertiser who might benefit from the contextual programming service.

Additional Discussion Questions (not in text) 14. 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? (L02) For many years television was essentially a mass medium as there were only three major networks which accounted for over 90 percent of the prime-time viewing audience. However, some selectivity has always been available due to variations in program content, broadcast time and geographic areas. For example, Saturday morning cartoon shows appeal primarily to children while weekend sports programs are watched primarily by males. Geographic selectivity is possible through local of spot ads in specific markets. With the growth of cable TV television has become less of a mass medium. The major networks now account for less than 50 percent of the prime-time viewing audience and the market has become very fragmented. The selectivity of TV has increased significantly as advertisers can reach groups with specific interests such as sports, news, music, the arts or business on cable channels. There is even greater segmentation within these television programming categories. For example, the Golf Channel is a new cable network devoted entirely to the sport. There are cable networks devoted to a variety of music genres, such as MTV, VH1 and Country Music Television, as well as to business and financial news (CNBC) and home decorating and gardening (Home and Garden Television).

Chapter 11 - Evaluation of Media: Television and Radio

15. Discuss how the growth of Spanish-language television networks in the United States such as Univision and Telemundo affects the media strategy of marketers targeting the Hispanic market. (L02) As discussed in the chapter, the Hispanic market is very large as there are now 40 million Hispanics living in the U.S. and this group is estimated to grow another 15 percent by 2010. The availability of Spanish-language TV stations is important to marketers who want to reach this segment as there are over 11 million Hispanic-American television households in the U.S. and approximately 90 percent speak some Spanish at home. Language usage has an important impact on their impact of TV programs and a substantial amount of the TV viewing in these homes goes to Spanish language shows. Moreover, Hispanics tend to be younger, have larger families and watch nearly two hours more of television per day than non-Hispanics. Thus, television is a very important medium for reaching this market. A number of marketers have recognized the importance of the Hispanic market and have developed IMC programs specifically for this market. These companies recognize that Spanish language TV networks such as Univision and Telemundo are the best way to reach the Hispanic market as these networks have larger viewing audiences than network shows in a number of big city markets with large Hispanic populations such as New York, Los Angeles, Houston and Dallas. As more companies develop marketing programs and commercials specifically for the Hispanic market, Spanish language television networks will become increasingly important as a way to advertise to this market segment. Spanish-language networks are becoming increasingly popular among young bilingual Hispanics and are gaining on the four major networks (CBS, NBC, ABC and Fox). This is leading many marketers to allocate a greater portion of their media budget to these networks as they have become an efficient and effective way to reach the growing Hispanic market. Some of the Spanish language networks such as Telemundo are also providing marketers with the opportunity to integrate their products into some of their shows which is appealing to many companies. 16. The text discusses the Extended Home study conducted by Nielsen Market Research to measure the television viewing patterns of college students living away from home. Discuss why the results of this study are of value to televisions networks (including cable) as well as advertisers. What are some of the other away-from-home viewing audiences that are of importance to advertisers and show be measured? (L03) The results of this study are of value to television networks, including cable, for several reasons. First of all the results show that college students watch as much TV as other 18 to 24 year olds which refutes the notion that they are busing studying, socializing or doing other things that keep them from watching television. These results should not be surprising since many college dormitories, fraternity and sorority houses, and off-campus housing make cable television service available to residents. The study also provides insight into the particular shows that are popular among college students as well as the time periods during which they are watching television. This information is valuable to the cable networks such as ESPN, Comedy Central, MTV, and TBS which carry the programs that are watched by college students. The information is also helpful to advertisers who want to reach college students as it provides them with insight into the cable channels and specific shows where they should be purchasing commercial time. Other away from home viewing audiences that are of importance to advertisers include those watching television in bars and restaurants, hotels rooms and at airports. There is a significant amount of television viewing that occurs in these places and this information would be valuable to the networks as well as advertisers who want to reach these viewers. Of course some away from home venues such as bars and restaurants or airports are more conducive to watching a program such as a sporting event or news show rather than commercials. Thus, advertisers may discount the size of the viewing audiences for these venues and the amount they are willing to pay to reach consumers watching there.

Chapter 11 - Evaluation of Media: Television and Radio

17. Discuss how the concept of image transfer can be used in radio advertising? Find an example of a radio campaign that is using this concept and evaluate it. (L02) 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. 18. Discuss some of the factors that media buyers should take into consideration when buying advertising time on radio. (L03) Media buyers take a number of factors into consideration when buying advertising time on radio. First they must decide whether they want to make a network, spot or local buy. National advertisers such as automobile companies or major business-to-business marketers are likely to purchase time on one of the three major radio networks since they are generally trying to reach a national audience. Companies who are interested in buying time in certain geographic markets would make a spot buy while local companies such as retailers will be the major purchasers of radio time on local stations. A second major factor to consider is the audience that can be reached through various radio stations. Radio allows companies to focus their advertising on certain demographic and lifestyle groups. As shown in Figure 11-6, 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.

IMC Exercise There are many advantages to advertising on cable TV including the opportunity for narrowcasting or reaching a very specialized target market. Select a cable network from the list shown in Figure 11-4 and develop a profile of it by visiting the Cable Network Profile section of the website for the Cable Television Advertising Bureau (http://www.thecab.tv/). Using the information provided, discuss the target audience reached by this network, the programming on it , and the types of companies that might choose to use it as part of their television advertising media plan. Watch the network and discuss the types of commercials used by the advertisers with respect to factors such as creative style and execution, length and format. Do the commercials appear to differ from those found on the major networks? If so, in what ways?

Chapter 12 - Evaluation of Print Media

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

Learning Objectives 1. To examine the various types of magazines and newspapers and the value of each as an advertising medium. 2. To examine the advantages and limitations of magazines and newspapers as advertising media. 3. To discuss how advertising space is purchased in magazines and newspapers, how readership is measured, and how rates are determined. 4. To consider future developments in magazines and newspapers and how these trends will influence their use as advertising media.

Chapter and Lecture Outline I.

INTRODUCTION AND THE ROLE OF MAGAZINES AND NEWSPAPERS

Magazines and newspapers have been in existence as advertising media for more than two centuries and until the 1920s were the only major media available to advertisers. Despite the growth and competition of the broadcast media, newspapers and magazines have remained important to both their readers and advertisers. Magazines have become a highly specialized medium that reaches specific target audiences in both the consumer and business markets. Newspapers are still the largest advertising medium in terms of both ad revenue and number of advertisers and are particularly important to local advertisers. Advertising revenue is extremely important to magazines and newspapers as few, if any, could survive without it. However, as discussed in the chapter opener and in Digital and Social Media Perspective 12-1, both newspapers and magazines are facing major challenges as a result of the digital disruption from the Internet and the increasing use of mobile devices such as tablets and smartphones. While both types of media have developed digital versions of their publications, they are finding it difficult to attract the same number of subscribers and are also trading analog dollars for digital pennies with regard to ad rates. The role of magazines and newspapers differs from broadcast media in that they are high-involvement media which allow the presentation of detailed information that can be processed at the readers’ own pace. However, the characteristics of each medium, their advantages and limitations as advertising media vehicles, and their role in the media mix are quite different.

Chapter 12 - Evaluation of Print Media

Professor Notes

II.

MAGAZINES

Magazines serve the educational, informational, and entertainment needs and interests of a wide range of readers in both the consumer and business markets. Magazines rank second only to television as a medium for national advertisers. There has also been a tremendous growth in business publications as their number has grown to more than 7,000. While some magazines are general mass-appeal publications, most are targeted to very specific types of audiences in both the consumer and business markets. A.

Classifications of Magazines—a useful way of classifying magazines is provided by SRDS, the primary reference source on magazines for media planners, which divides the publications into three broad categories based on the audience to which they are directed. 1. Consumer magazines—those that are bought by the general public for information and/or entertainment. SRDS divides more than 3,000 consumer magazines into 80 classifications or groupings such as general interest, sports, travel, and women’s. Consumer magazines represent the major portion of the magazine industry in terms of advertising revenue. 2. Farm publications—the second major SRDS category consists of magazines direct to farmers. There are approximately 300 publications targeted to nearly every possible type of farming or agricultural interest. These are broken down into nine classifications ranging from general-interest magazines for all types of farmers to those in specialized agricultural areas. 3. Business publications—these are magazines or trade journals that are published for specific businesses, industries, or occupations. Major categories of business publications include those directed to specific professional groups, industrial magazines directed to various manufacturing and production industries, trade magazines, and general-business publications.

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

Chapter 12 - Evaluation of Print Media

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

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

Chapter 12 - Evaluation of Print Media

4. Clutter and competition for readers’ attention—Clutter is a problem for magazines as the average consumer magazine contains ads on 45 percent of its pages while some publications contain as much as 70 percent. The clutter problem for magazines is something of a paradox: the more successful a magazine becomes, the more advertising pages it attracts, which leads to greater clutter. Clutter is often less of a problem for magazines versus other media since consumers tend to be more receptive and tolerant of ads and they can also control their exposure to a magazine ad simply by turning the page. Professor Notes

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 or store purchase. The number of copies distributed to original subscribers or purchasers is known as primary circulation and is used as the basis for the magazine’s rate structure. Many publications base their rates on guaranteed circulation and provide rebates if the number of delivered magazines fall below the guarantee. a. Circulation verification—these services are provided by several companies to ensure circulation figures for magazines are accurate. Consumer magazines and farm publications are audited by the Alliance for Audited Media (formerly known as the Audit Bureau of Circulations) while certain business publications are audited by the Business Publications Audit (BPA) of Circulation. Many business magazines are published on a controlled-circulation basis which means that copies are sent (usually free) to individuals the publisher believes can help build an audience and have influence on a company’s purchase decisions. 2. Readership and total audience—in addition to primary circulation figures, advertisers may be interested in the number of people that a publication reaches as a result of secondary or passalong readership. Total audience or readership of a magazine can be determined by taking the readers per copy and multiplying this figure by the circulation of an average issue.

Chapter 12 - Evaluation of Print Media

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

Purchasing Magazine Advertising Space—While magazine rates are primarily a function of the circulation and readership of the publication, rates will vary in response to a number of other variables including size of the ad, position, particular editions chosen (geographic, demographic), any special mechanical or production requirements and the number and frequency of insertion. Advertising space is generally sold on the basis of space units such as full page, half page and quarter page, although some publications quote rates on the basis of column inches. Ads can be produced in black and white, black and white plus one color or four colors. Magazine networks offer the advertiser the opportunity to buy space in a group of publications in a package deal. Exhibit 12-14 shows an ad promoting the Ivy League Magazine Network which is a consortium of alumni magazines for Ivy Leagues schools along with Stanford and the University of Chicago. Rate comparisons for magazines are generally made on the basis of the cost per thousand (CPM) criterion along with targeted CPMs.

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

Chapter 12 - Evaluation of Print Media

2. Circulation management—Circulation is becoming the major source of revenue for many publications, and they must carefully consider the costs of attracting and maintaining additional readers or subscribers. 3. Cross-magazines and media deals—Multimagazine deals involve two or more publishers offering their magazines to an advertiser as one package. Many magazines are also making cross-media advertising deals that include several different media opportunities from a single company or a partnership of media providers. 4. Online delivery methods—many magazines are providing online versions of their publications that offer the advantages of the Internet to publishers and subscribers. They can integrate animation, video, audio, graphics, and text to provide an interactive medium. As more magazines become available online the industry will have to address important issues regarding audience measurement and readers’ exposure to and interactions with online advertising. According to the Association of Magazine Media, three are more than 15,000 magazines with websites including nearly 7,500 consumer magazine websites. Digital and Social Media Perspective 12-2 discusses how many online magazines are turning to native advertising which takes on the look and feel of the surrounding content. However, critics argue that native advertising is blurring the line between editorial and advertising

Professor Notes

Chapter 12 - Evaluation of Print Media

III.

NEWSPAPERS

Newspapers are the second major form of print media and represent the largest of all advertising media in terms of total advertising volume. In 2013 an estimated $23 billion was spent on newspapers advertising which represents about 14 percent of the total advertising expenditures in the United States. Newspapers are an especially important advertising medium to local advertisers such as retailers. However newspapers can also be a valuable medium to national advertisers as well. A.

Types of Newspapers—the vast majority of newspapers are daily publications serving a local community. However, there are other types of newspapers 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. Daily newspapers can further be classified as morning (67%) and evening (33%). Many daily newspapers also publish Sunday editions. 2. Weekly newspapers—most weekly newspapers originate in small towns or suburbs where the volume of news and advertising is not adequate to support a daily paper. Weeklies appeal primarily to local advertisers in the community because of their limited geographic focus. 3. National newspapers—Newspapers in this with national circulation including The Wall Street Journal, The New York Times, and USA TODAY. National newspapers appeal primarily to large national and regional advertisers who use specific geographic editions. The Christian Science Monitor is also considered a national newspaper although the publication has dropped its daily print edition to focus on online publishing. 4. Special-audience newspapers—there are a variety of papers that offer specialized editorial content and are published for specific groups. Advertising Age is an example of a special audience newspaper as are college newspapers. 5. Newspaper supplements—although not a category of newspapers per se, many papers include magazine type supplements, primarily in their Sunday editions. These include syndicated magazines such as Parade or USA Weekend as well as local supplements produced and distributed by the paper itself.

Types of Newspaper Advertising—Advertising in newspapers can be divided into different categories which include: 1. Display advertising—display ads are found throughout the paper and generally use illustrations, headlines, white space and other visuals in addition to copy text. Display ads account for approximately 70 percent of the advertising revenue of the average newspaper. Display ads can be further classified as local or national/general advertising. 2. Classified advertising—classified ads are those arranged under subheads according to the product, service, or offering being advertised and run in the classified section of the newspaper. Major categories include employment, real estate, and automotive.

Chapter 12 - Evaluation of Print Media

3. Special ads and inserts—special ads in newspapers include a variety of governmental and financial reports and notices and public notices. Preprinted inserts do not appear in the paper itself but are printed by the advertiser and then distributed with the newspaper. These include circulars, catalogs, brochures and free standing inserts (FSIs) which are popular for distributing coupons. C.

Advantages of Newspapers 1. Extensive penetration—In most areas, 40 percent or more of households read a daily newspaper, and the reach figure may exceed 60 percent among households with higher incomes and education levels. 2. Flexibility—Newspapers are flexible in terms of requirement for producing and running the ads and from the creative options they make available to advertisers. 3. Geographic selectivity—Advertisers can vary their coverage by choosing a paper that reaches the areas with the greatest sales potential. Most major newspapers offer advertisers various geographic or zone editions within their market. 4. Reader involvement and acceptance—An important feature of newspapers is consumers’ level of acceptance and involvement with the paper, including the ads it contains. Consumers are generally very familiar with the various sections of the newspaper and knowledgeable about the types of ads they contain. 5. Services offered—Many newspapers offer merchandising services and programs to manufacturers that make the trade aware of ads being run for the company’s product and help convince local retailers they should stock, display and promote the item.

Limitations of Newspapers 1. Poor reproduction quality—The coarse paper used for newspapers, the absence of color, and the lack of time papers has available to achieve high-quality reproduction limits the quality of most newspaper ads. Many newspapers are now offering four-color ads but advertisers must pay a premium for them. 2. Short life span/hasty reading—Because a newspaper is generally kept for less than a day, an ad is unlikely to have any impact beyond the day of publication and repeat exposure is unlikely. 3. Lack of selectivity—While newspapers can offer advertisers geographic selectivity, they are generally not a selective medium in terms of demographics or lifestyle characteristics. There is some selectivity available, however, with regard to the type of consumers who read various sections of the newspaper such as sports, business, entertainment, and travel. 4. Clutter—Because 64 percent of the average daily newspaper in the United States is devoted to advertising, the advertiser’s message must compete with numerous other ads for consumers’ attention and interest. Many newspapers are now offering advertisers the opportunity to use innovative shape-based ads that use unconventional sizes and formats as those shown in Exhibit 12-22 which are offered by the Los Angeles Times.

Chapter 12 - Evaluation of Print Media

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

Purchasing Newspaper Space—The cost of advertising space in newspapers depends not only on the paper’s circulation but also on factors such as premium charges for color or special sections as well as discounts available. Rates paid for newspaper space also differ for national versus local advertisers.

1. General versus local rates— General advertising rates apply to display advertisers outside the newspapers designated market area or to any classification deemed by the publisher to be “general’ in nature. The rates paid by general advertisers are, on average, 75 percent higher than those paid by local advertisers. Newspapers offer several reasons for the rate differential including added costs of serving general advertisers, the method by which general advertisers purchase ad space, and the inelastic nature of demand for national advertising space. National advertisers who constitute most of the companies paying general rates do not view these arguments as valid justification for the rate differential charged by newspapers. Many marketers sidestep the higher rates by channeling their newspaper ads through special category plans, cooperative advertising deals with retailers and local dealers and distributors. 2. Newspaper rates—Traditionally, newspaper space has been sold by the agate line system. However, newspapers use page formats of varying width, which has created problems and complicated the buying process for national advertisers. To address this problem and make newspapers comparable to other media who sell space and time in standard units, the newspaper industry developed standard advertising units (SAUs), which are used by about 90 percent of daily newspapers for national advertising rates. Rates for local advertisers continue to be based on the column inch method. 3. Rate Structures—While the column inch and SAUs are used for determining basic newspaper advertising rates, there are other options and factors which must be considered. Mention should be made of flat rates versus open-rate structures, run-of-paper (ROP) versus preferred position rates, and combination rates for using several newspapers as a group. Professor Notes

Chapter 12 - Evaluation of Print Media

The Future of Newspapers—As noted in the chapter opener, advertising revenue for traditional print newspapers has declined dramatically over the past several years from $42 billion in 2007 to $23 billion in 2013. This decline is due in part to reductions in ad spending that have occurred during the recession as well as declines in circulation and readership for most newspapers. It is unlikely that newspapers’ importance as a local advertising medium will change in the near future. However, newspapers will continue to battle for advertising dollars from national advertisers as problems with reproduction quality and the rate differential continue. Newspapers are concerned with competition from other media and the increasing potential to lose advertising dollars to digital media including search advertising sites such as Google, Yahoo! and Bing as well as social media. Local radio and television stations (particularly cable) are also pursuing local advertisers who traditionally relied heavily on newspaper advertising. The decline in readership of newspapers that has resulted from the fast-paced, time-poor lifestyle of the modern dual-income household and popularity of television is also a problem worth discussing. Some specific issues regarding the future of newspapers that should be discussed include: 1. 2. 3. 4.

Competition from other media such as direct mail, local radio and television, and the Internet. Declining Circulation Attracting and retaining readers, particularly younger people Online Delivery and Multiple Platforms

Teaching Suggestions This chapter is designed to provide the student with a general understanding of the two major types of print media, magazines and newspapers. As with television and radio, it is important for students to understand the general characteristics of magazines and newspapers including the different types or classifications of each medium, their specific advantages and limitations as advertising media, how readership is measured, and how rates are determined and advertising space is purchased. The instructor should call students attention to the wide variety of magazines available and their ability to reach nearly every consumer interest, lifestyle, and activity as well as most businesses. You might ask your students if there is any segment of the consumer or business market that does not have one or more magazines targeted towards it. One interesting point of discussion is whether there are too many magazines on the market and whether it is possible for the highly specialized publications to survive. A very interesting web site that you may want to visit for some interesting information on magazines is that of the Association of Magazine media (formerly known as the Magazine Publishers of America (MPA). Their site can be found at www.magazine.org. With regard to newspapers, it is important to cover the challenges facing the industry which has seen its total advertising revenue decline by nearly 50 percent over the past five years. Circulation and readership of traditional newspapers continues to decline in most major markets and publishers are now making their papers available online to retain readers and ad revenue. Newspapers are likely to continue to be an important advertising medium for local advertisers and attention might be given to how national advertisers can be encouraged to allocate more of their budgets to newspapers. Attention should also be given to the problem of declining newspaper readership, particularly since the young generation of people in this country spend more time online and are less likely to read a newspaper. You might ask students how many of them read a newspaper on a daily basis and what particular sections they read. It is likely that many of them do not read a newspaper regularly. The implications of this for advertisers can be discussed. The Newspaper Association of America also has an excellent web site that contains a great deal of information that can be helpful in discussing trends and development affecting newspapers, both in general and as an advertising medium. Their site can be found at www.naa.org.

Chapter 12 - Evaluation of Print Media

Answers To Discussion Questions 1. Discuss the digital disruption that is impacting the traditional print media of newspapers and magazines. What are some of the ways publishers can respond to these changes and attract and retain advertisers? (L01) As discussed in the chapter opener, newspapers and magazines are facing major challenges on a number of fronts. Both of these print media were hit hard by the recession led many marketers to reduce their advertising budgets and shift more of the monies they are spending to nontraditional media and the Internet in particular. The increasing use of mobile devices such as smartphones and tablets to access the Internet has had a major impact on traditional print media. One of the major problems facing the print media is that more consumers are now going online to get their news and information as well as to read magazines and newspapers. Moreover, most are unwilling to pay for online subscriptions to digital versions of magazines and newspapers. Some of the major publications such as The Wall Street Journal, New York Times, and Economist have been successful in creating paywalls that require subscriptions to access digital content. However, since many newspapers and magazines have been unable to get readers to pay for online subscription, they are not getting an important source of revenue. Moreover, the rates for banners and other forms of online advertising they sell to marketers cannot match what they can charge for traditional print advertising which is also resulting in revenue reductions. It should be noted that online ad revenue is based on page views which means that publishers attempting to charge for access run the risk of reducing web traffic which would be self-defeating. Newspapers have also been impacted by online sites that have taken away much of their revenue from classified advertising in categories such as automobiles, real estate, rentals, and employment. The newspaper industry’s initial response to the digital disruption was to put their content online for free which lead to an increase in the number of digital readers. However as noted above, revenue from online advertising has not been able to compensate for the decline in monies received for print ads as online advertising rates are significantly lower. Moreover, newspapers must compete against search advertising sites such as Google, Yahoo and Bing as well as social media sites such as Facebook and YouTube that offer advertisers very sophisticated ad-targeting techniques. Many newspaper publishers are now implementing paywalls and charging for their digital editions as well as transforming their business models to generate revenue from new products and services. Magazines and newspapers still play an important role in the media strategy of many advertisers as they have a number of important characteristics which they must continue to promote. Print media allow the presentation of detailed information that can be processed at the receiver’s own pace whereas TV and radio are externally paced media which means the receiver cannot control the rate at which the information is processed. Magazines offer excellent reproduction quality and high selectivity as they reach very targeted audiences. Newspapers are important to both national and local advertisers. They are often used to reach consumers who are looking for information as to where they might purchase a product locally and when it might be on sale at a local retailer. They have a number of advantages that make them popular among both local and national advertisers. These include their extensive penetration or market coverage, their flexibility in terms of production requirements and short closing times, the geographic or territorial selectivity of newspapers, the high level of involvement and acceptance consumers have with newspapers and the advertisements therein, and the valuable services many papers offer. However, both of the major print media may find it difficult to survive in the future unless they are able to adapt to the new digital world and find ways to charge for their content.

Chapter 12 - Evaluation of Print Media

2. Discus how mobile devices such as the iPad and other types of tablet computers are impacting magazines as advertising media vehicles. Do you agree with Jann Wenner, publisher of Rolling Stone and other magazines, that it will take a decade or more before there is a shift from print magazines to digital editions? (L01, 02) Mobile devices such as the iPad, Kindle, Samsung Galaxy , Microsoft Surface and others brands of tablet personal computers, are becoming very popular among consumers and making it possible for magazines and newspapers to be easily downloaded to these devices. Market penetration of tablets is growing very rapidly is expected to be very rapid as nearly 184 million were sold globally in 2013 and the forecasted CAGR growth rate is expected to be around 40 percent over the next few years. Market penetration of tablets and other mobile devices will be driven by a variety of factor including declines in prices due to heavy competition and the marketing efforts of the various competitors such as Apple, Amazon (Kindle), Microsoft (Surface) and various PC companies who are entering this market. Magazine publishers recognize that people are becoming very comfortable reading magazines on their tablet as these devices have high resolution, color touch screens and offer video viewing as well as interactive capabilities. They also provide a very viable advertising platform to marketers who can make their traditional print ads available as well as video. The interactive ads can also link to advertisers’ web sites. Many major magazines now offer digital app versions of their publications for the iPad and tablets using the Android operating system. Although the magazine industry recognizes that it must embrace its digital future, they are not ready to abandon their traditional print publications and have even gone on the offensive to promote them. For example, Digital and Social Media Perspective 12-1 discusses the “Power of Print” campaign developed by the five leading magazine publishers which targets the marketing and advertising community including advertisers, media decision makers and other industry influencers as well as consumers. The campaign is designed to promote the vitality of magazines and the idea that they remain an effective advertising medium in the age of the Internet because of the depth and lasting quality of print media compared with the fleeting nature of the Web’s content. One of the major advantages of magazines as an advertising medium is their ability to engage readers and hold their attention. Consumers are more receptive to and involved with magazines because they are not intrusive like broadcast media such as television and radio and readers control the rate and duration of their exposure to both editorial content and the advertisements. This means that ads are less disruptive of their media consumption experience. Also, people read magazines because they are interested in the information they contain and often even the ads themselves. Magazines ads are often viewed as valuable sources of information for products and services, particularly in special interest publications such as fashion or travel magazines. By running ads such as the one shown in Digital and Social Media Perspective 12-1, the magazine industry can encourage those who work in the advertising and media industries to rethink the value of magazines as media vehicles. The ads also can serve as a reminder to consumers of the value of magazines and why they enjoy reading them. This may be an effective way to retain magazine readers and subscribers. However, since the campaign relies on magazine advertising, it may not be as effective in attracting new readers Jann Wenner of Wenner Media, which publishes Rolling Stone and a number of other popular magazines, continues to argue that there is still a place for traditional print magazines as they have enduring value for both readers and advertisers. Wenner was a major proponent of the “Power of Print” campaign discussed above and played a leading role in its design and execution. He also argues that it will take a decade or so before there is a decisive shift from traditional magazines to digital versions that are read on the iPad and other tablets. He notes that there are still major advantages to physical versions of magazines as they are easier to read and still widely available in stores, on newsstands, at airports and through subscriptions delivered in a timely manner to people’s homes. Wenner also recognizes the challenges magazine publishers face in trying to generate revenue 12-12 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 12 - Evaluation of Print Media

through their digital editions. He suggests that the industry should not rush to move away from its traditional print business model which will only accelerate the move to digital and make it more difficult for many magazines to survive. 3. Discuss the role of magazines as part of an advertiser’s media strategy. What are the advantages are and limitations of magazines? (L01, 02) Magazines play an important role as advertising media in an integrated marketing communications program. They allow the presentation of detailed information that can be processed at the receiver’s own pace whereas TV and radio are externally paced media which means the receiver cannot control the rate at which the information is processed. Magazines are more suitable than the broadcast media for delivering detailed ads with a great deal of information or visuals that the reader needs time to study or examine. However, magazines are not as effective as television for reaching mass audiences and they do not offer advertisers the same creative options that are available through TV commercials. There are numerous advantages of magazines as advertising media. These include their selectivity or ability to reach specific target audiences, their reproduction quality, creative flexibility in terms of the type, size and placement of advertising material, their permanence or long life span, the prestige associated with advertising in some publications, consumer receptivity to and involvement with magazine advertising, and the special services offered by some publications. Limitations of magazines include the high costs for advertising in some publications, the limited reach and frequency of magazines, the long lead time required to place an ad, and the high clutter level in many magazines which makes it difficult for an ad to get noticed and read. 4. What is meant by selectivity with regard to the purchase of advertising media? Discuss the various ways magazines offer selectivity to advertisers. (L02) 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. 5. What is meant by native advertising? Do you think it is appropriate for advertisers to run native ads that appear to be editorial content rather than sponsored advertising? Why or why not? (L04) Native advertising has been defined in various ways but generally refers to a form of paid media where the ad takes on the look and feel of the surrounding content and follows the natural form and function of the user experience in which it is placed. Advertorials in magazines and newspapers are a form of native advertising and have been around for many years. However, native advertising has become a major issue in recent years with the growing popularity of digital media as many marketers are using ad formats whereby they integrate their message seamlessly into the editorial content of a web site or an online publication. Thus their ad takes on the look and feel of the surrounding content and its visual design which makes it look less like an ad and more like editorial content. Concerns have been expressed over the use of native ads as critics argue that they are threating one of the most important assets of a magazine which is its relationship with readers. The church-and-state

Chapter 12 - Evaluation of Print Media

divide of editorial versus advertising has always been important and the American Society of Magazine Editors (ASME) has maintained guidelines upholding that separation. ASME guidelines state that ad pages should not be related to editorial material in a manner that implies endorsement ad that advertiser-provided content should be clearly labeled as advertising. Readers of a web site or online magazine are likely to attribute more credibility to information that they view as editorial content rather than advertising. However, the ASME really has little power to enforce its guidelines and there is pressure on the magazines to find ways to increase revenue. However, the print media must be careful not to go too far with this practice as it may undermine the integrity of the publications which could in turn lead to even fewer readers as well as advertisers. 6. If you were buying print advertising space for a manufacturer of golf clubs such as Callaway or TaylorMade, what factors would you consider? Would your magazine selection of magazines be limited to golf publications? Why or why not? (L03) In purchasing magazine space to advertise golf clubs, the media planner would obviously want to know what publications are best suited for reaching golfers and their advertising space rates. Consideration should also be given to the amount of advertising for golf equipment that appears in these publications and the problem of getting the company’s ad noticed among all the competing ads. Many marketers of golf clubs equipment limit their advertising to publications that focus specifically on this market such as Golf or Golf Digest since virtually all of the readers of these publications are golfers and there would be very little, if any, wasted circulation. They might also advertise in magazines that reach members of golfing associations such as Inside the USGA, which is published by the United States Golf Association, or publications of various regional golfing associations. Consideration also has to be given to the number of golfers who may be viable prospects for golf clubs and equipment but do not read any of these golfing publications. To broaden its reach, the company might want to look at other magazines that reach golfers such as general sports publications (e.g., Sports Illustrated or ESPN The Magazine), travel magazines, business magazines, or other publications that reach this age and lifestyle group. A problem the company faces in advertising in these general publications is that of wasted coverage as many of the readers may not be golfers. Thus, advertising in general sports, business or travel magazines may not be as cost-effective as the more narrowly targeted golf publications. 7. Discuss some of the reasons why marketers would want to advertise in a college newspapers. Analyze the types of companies that advertise in the newspaper published by your university. (L01, 03) Many companies are now advertising in college newspapers because they view them as an excellent way to reach a very coveted but elusive target market. More than 17 million full and part-time students (undergraduate and graduate) are enrolled in U.S. colleges and universities and they spend an estimated $200 billion a year on a variety of products and services. Moreover, studies show that students read college newspapers as 76 percent of full-time students read at least one of the last five issues of their school paper and 38 percent of students regularly read the online edition. College students are a very attractive demographic group that spends a lot of money for various products and services including clothing, computers, mobile phones, iPads, and other electronic products as well as entertainment. Students should be asked to analyze the companies that advertise in the newspaper published by their school and be encouraged to classify these advertisers by type of product or services and whether the advertiser is a local, regional or national company.

Chapter 12 - Evaluation of Print Media

8. What are the major challenges facing the newspaper industry and the use of newspapers as an advertising medium. How can newspapers respond to these challenges? (L04) Newspapers face challenges from other media such as direct mail, television and the Internet. Many advertisers are already spending more of their media budgets online as they can target their messages more precisely through digital media. Newspapers also face challenges from local cable stations, which are attracting more advertising revenue from local advertisers such as retailers. The growth of the Internet is a major concern for newspapers as consumers are spending more and more time online, which means they have less time available to read newspapers and magazines. The Internet is also becoming an important source of information for many purchases and thus competes directly against magazines and newspapers, which have traditionally played this role. More people are spending time surfing the Internet and on social media which means they may be spending less time reading magazines and newspapers. People only have so much time available for leisure activities such as reading or watching TV and the Internet is likely to cannibalize some of the time that might have been spent reading a magazine or newspaper. Newspapers are responding to this challenge by making their publications available online. Newspapers are likely to remain a very important advertising medium in the future, particularly for national advertisers. However, newspapers’ battle to win more ad dollars from national advertisers will continue to present a challenge. Newspapers must also continue to expand services and efforts to both local and national advertisers to encourage them to continue to use the paper as an advertising medium. Cross-media buys are another area where newspapers might focus their efforts to help increase their advertising revenue. Newspapers can also take advantage of their distribution system and the fact that they reach a large number of households. Many papers are collecting information from their readers and building data bases that can be made available to marketers who want to target consumers with direct-marketing efforts. Newspapers are dealing with the problem of declining readership by making their papers more interesting as well as faster and easier to read. Many papers are using better graphics and shorter articles to attract readers and including special sections on travel, lifestyle, business and other topics that will appeal to their readers. The newspaper industry is also attacking the problem with ads such as those from the Newspaper Association of America’s “Smart is the New Sexy” integrated campaign that promotes the value of newspapers to current and prospective reader. The campaign also uses digital and social media to highlight the multiplatform experience provided by newspapers. 9. What are some of the reasons there has been such a dramatic decline in the readership of newspapers? What might newspaper publishers do to address this problem? (L03,04) Declining readership is also a serious problem for newspapers, particularly among certain groups such as young people and women. There are several reasons for the decline in circulation and readership including the fast-paced, time-poor lifestyle of the modern dual-income household and competition from the Internet. As noted in the answer to question 1, newspapers have been impacted tremendously by the Internet as the content they provide has been unbundled with the explosion of news and information sources available online through various web sites as well as aggregation sites. There also has been a tremendous increase in the amount of news programming available on television through sources such as CNN, CNBC, MSNBC and many other cable networks. Many local stations are now offering 24-hour broadcasts of their news on local cable channels. There is also very thorough coverage of sports on television with programs such as ESPN’s SportsCenter, a one hour sports news show that is aired numerous times throughout the day. In 2013 Fox launched Fox Sports 1 which is another major cable sports network that offers hour coverage of sports and a news show, Fox Sports Live, aired multiple times per day. Many young people are simply more likely to get their news online or through broadcast media rather than newspapers. Moreover, if they do not see their parents reading a newspaper regularly, it is less likely they will become regular readers. The

Chapter 12 - Evaluation of Print Media

obvious problem of the decline in readership is that newspapers must lower their advertising rates if they attract fewer readers. Young people and women are very important target audiences to advertisers since they are heavy users of many products and services. If newspapers cannot reach these audiences on a regular basis, advertisers will turn to other media vehicles that can such as radio or cable TV. There is no easy answer to the question of what newspaper publisher can do to address the problem of declining readership. The Newspaper Association of America has develop a number of marketing campaigns in recent years that have targeted young people to encourage them to get into the habit of reading a newspaper and also have run campaigns such as the “Smart if the New Sexy’ campaign discussed above. The newspaper industry will continue to develop digital versions of their papers which a way to attract more readers. The industry’s efforts might be best spent retaining the subscribers and readers they currently have and focusing on the value of them to advertisers. 10. What are some of the advantages online newspapers have for advertisers? Find the online media kit of a newspaper and analyze how the publisher is promoting the digital edition to prospective advertisers. (L04) Many magazines and newspapers are keeping pace with the digital revolution by making their publications available online. They are doing so as consumers’ media consumption patterns as they are spending more time online than with traditional media. Younger consumers in particular spend a great deal of time surfing the Internet and are very comfortable reading magazines and newspapers online rather than in traditional print form. Some of these online readers are crossover users who read both the print and online versions which expands the overall audience for the magazine or newspaper. However, in many cases, the online readers are choosing to read the publication online as they can get the same information as well as additional stories of interest to them. Magazine publishers in particular have to decide if they want the online version of their publication to mirror what is in print to build the overall brand or make the online version different. Many publishers are viewing the online version of their magazines and newspaper as an opportunity to attract more advertising as they can provide marketers with a variety of advertising options including video and banner ads, sponsorships and other interactive based tools. Magazine and newspaper publishers recognize more and more consumers prefer to consume media online and thus they are going to have to adapt their publications to the online environment if they are to survive.

Additional Discussion Questions (Not In Text) 11. Discuss how advertisers deal with the clutter problem in both magazines and newspapers. Explain why advertisers of products such as cosmetics or women’s clothing would choose to advertise in a publication such as Vogue or Elle, which devote most of their pages to advertising rather than articles. (L01, 02) Clutter is a serious problem in both magazines and newspapers as the ratio of advertising to editorial content is very high in both. The main way for advertisers to deal with the clutter problem is through creative advertising and space buys. Ads with strong visual images, catchy headlines and copy or very creative approaches such as “pop-ups,” gatefolds, or special inserts are ways of breaking through the clutter. Creative space buys such as “island ads” or consecutive page space buys may also help ads get noticed. Of course it is also important to remember the basic advertising principle of developing an ad that offers a benefit or promise to the readers and invites them to explore it further. The clutter level that results from the high number of advertising pages magazines such as Vogue or Elle is clearly a problem for advertisers. However, they must weigh the clutter problem against the fact that women are very likely to be receptive to ads for cosmetics or clothes in these publications. In fact, one might argue that one of the reasons women buy fashion magazines such as Vogue or Elle is 12-16 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 12 - Evaluation of Print Media

to see the ads. For example, clothing ads give provide some insight into new styles and fashions and will be of great interest to many of the magazines readers. Advertisers will tolerate the high number of ads in these publications because they create a very favorable environment that includes high quality photography and artwork as well as articles that are of interest to women. 12. Why are young males such a difficult market to reach through magazines? What types of magazines might be effective in reaching the young male market? (L01, 02) The teen male market is a very difficult market segment to reach through magazines as this group spends a lot of their free time socializing with friends on social media, listening to music, watching television, and surfing the Internet. Many older teens also have a part-time job which means they have less free time to devote to reading magazines. Another reason for the low readership of magazines among young males is that there really are not that many publications that are of interest to this group. Older teens may be interested in some of the “lad mags” such as Gear, Maxim, Stuff and FHM as these publications do cover many of the things of interest to teenage boys. Several magazines published by TransWorld Media such as Skateboarding, Surf, Motocross, and ridebmx have also been successful in reaching young males as their editorial content deals with extreme sports which are of interest to many young males today. Advertisers would like to see more magazines that are successful in attracting young male readers and provide them with more media opportunities to reach this elusive market segment. 13. Choose a specific target market that an advertiser might want to reach. Discuss how magazines and/or newspapers could be used to reach this particular market segment in a cost effective manner. (L01) 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 zip code, metropolitan area, region or demographics. Students should be asked to choose a product or service targeted at a specific market and discuss how magazines are an effective way to reach this group. They might find an online media kit for a magazine which usually provides very detailed information on how the magazine can reach specific target audiences and users of various products and services. Newspapers offer the advantage of offering advertisers geographic selectivity since they can reach areas or cities of specific interest to them. However, newspapers are not a selective medium in terms of demographics or lifestyle characteristics. One way advertisers can increase selectivity of newspapers is by advertising in certain sections of the paper such as the sports, food, entertainment or business section. Within a local market area advertising in specific geographic or zone editions of a paper can enhance selectivity. Many newspapers in large metropolitan areas offer zone editions so local retailers can reach readers in their trading area. Again, students might be encouraged to contact a local newspaper (even the college paper) and request information about advertising in the publication as well as information on advertising rates. They should analyze how effective the newspaper is at reaching a target market for a specific product or service

Chapter 12 - Evaluation of Print Media

14. Discuss how circulation figures are used in evaluating magazines and newspapers as part of a media plan and setting advertising rates. (L03) 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 and newspapers use circulation figures and readership estimates to set their advertising rates. The greater the number of readers the publication can deliver, the more than can charge for advertising space. Media buyers often prefer to use circulation figures of a publication in making their purchases since they are more verifiable. Total audience or readership figures rely on estimates of pass-along readership which occurs when the publication is read by individuals other than the primary subscriber or in places out of the home such as waiting rooms, airplanes, etc. Media buyers generally attach greater value to the primary in-home reader versus the out-of-home or pass-on reader as the former generally spends more time with the publication, picks it up more often and is thus more likely to be attentive and responsive to advertising. 15. Discuss how the role of newspapers as an advertising medium would differ for national versus local advertisers. Do you feel that the rate differential newspapers charge national versus local advertisers is justified? (L03) Newspapers have become primarily a local advertising medium as nearly 85 percent of newspaper revenue comes from local advertising. However, more than $6 billion is spent in newspapers each year by national advertisers. Much of this money is spent in national newspapers such as USA Today, The Wall Street Journal, and New York Times. However, national advertisers advertise in local newspapers, particularly the larger metropolitan publications that reach the top 50 or 100 markets. Automobile companies, movie studios, and national retailing chains are heavy users of newspaper advertising as consumers rely on newspapers to get timely information about these product/service categories. Many national advertisers are using newspapers more since advancements have been made that make it easier and less expensive to use four-color for newspaper ads. To attract more business from national advertisers, newspapers must sell them on the advantages of advertising in newspapers. They have to point out the various advantages of advertising in newspapers such as extensive penetration, geographic selectivity and reader involvement and acceptance. They also need to coordinate promotional programs between national advertisers and local retailers to encourage them to use newspapers more. Newspapers must convince them of the value of advertising in their publications and work to improve relations with national advertisers. Newspapers need to become more flexible to attract national advertisers. Some ideas may include guaranteeing specific positions in newspapers in multiple markets, offering creative space options such as “island ads” amidst stock tables, and making color more readily available and less expensive. Newspapers also need to simply the purchasing process for national advertisers, which is why the Newspaper Association of America formed the Newspaper National Network that is discussed on page 437. The NNN’s goal is to attract more advertising revenue from national advertisers in six low-use categories by promoting the strategic use of newspapers and facilitating the purchase of newspaper space in a number of different papers with their one order/one bill model.

Chapter 12 - Evaluation of Print Media

Local advertisers account for the vast majority of newspaper advertising as the medium is used heavily by retailers in a variety of product and service categories. Local retailers know that consumers rely heavily on newspapers for information regarding sales, special promotions, and to determine availability of products and services. The value of newspapers as a source of information is a major reason why they are used so heavily by local advertisers. Students should be encouraged to find some ads used by a national advertiser such as an automobile company as well as some used by local advertisers and compare them with regard to factors such as the type of message used, the information provided and the use of price or other promotional incentives. The rate differential most newspapers have for national versus local advertising is a very controversial issue. Those supporting the differential argue that it is justified because the way newspaper ad space is purchased by national advertisers often requires the paper to pay commissions to both sales reps and agencies. They also argue that national advertisers are less dependable than local advertisers and that demand for national advertising is inelastic and thus will not increase if rates are lowered. National advertisers do not view these arguments as valid justification for the rate differential. They argue that the costs of handling their advertising business are not greater than that of local advertisers since their ads are prepared by agencies and they are less likely to request special services such as the design and preparation of their ads. They also note that many national advertisers do use newspapers on a regular basis. IMC Exercise Choose a specific consumer or business magazine and analyze it as an advertising media vehicle. Many publications now make online media kits available that can be used for this assignment and you might also consult sources such as MRI+ and SRDS. Your report should include an analysis of the following: • • • • •

The target audience for the magazine in terms of both demographics and life style of the readers it attracts. 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? How the magazine positions itself as a media vehicle to potential advertisers.

Chapter 13 - Support Media

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

Learning Objectives 1. To examine the role of support media in the IMC program. 2. To recognize the various traditional and nontraditional support media available to the marketer in developing a promotional program 3. To develop an understanding of the advantages and disadvantages of support media. 4. To know how audiences for support media are measured.

Chapter and Lecture Outline I.

THE SCOPE OF THE SUPPORT MEDIA INDUSTRY

Support media are referred to by several titles, among them alternative media, non-measured media and nontraditional media. Many advertisers, as the top 10 advertising agencies, have increased their use of both traditional and nontraditional support media, and as new alternatives are developed, this use will continue to grow. II.

TRADITIONAL SUPPORT MEDIA

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

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

Chapter 13 - Support Media

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

Alternative Out-of-Home Media—as noted, the outdoor advertising industry has been able to remain successful through the development of new outdoor media, as well as innovations in existing ones. Digital outdoor is one of the fastest growing areas in all outdoor advertising. Some additional outdoor media of note are aerial advertising, mobile boards, point-of-purchase media and a variety of others such as parking meters, ski-lift poles, etc.

In-Store Media—Advertisers promote their products in supermarkets and other stores with atypical media like displays, banners, and shelf signs. These point of purchase materials include video displays on shopping carts, kiosks that provide recipes and coupons at counters and cash registers, LED boards, and ads that broadcast over in-house screens.

Miscellaneous Outdoor Media—Figure 13-4 lists a number of additional out-of-home media that can be used.

Transit Advertising—another form of out-of-home advertising is transit advertising. While similar to outdoor in the sense that signs and electronic billboards are often employed, transit differs in that these ads are oriented around transportation. Buses, taxis, commuter trains, airplanes, and subways are some of the transit forms employed. 1. Types of transit advertising—three types of transit advertising are most commonly employed: a. inside cards are found on the insides of buses, taxis or commuter trains. b. outside posters are those found on the backs and tops of taxis, and/or on the backs, sides and fronts of buses. c. station, terminal and platform posters are found in bus and train stations, airport terminals, and on train platforms.

Advantages and Disadvantages of Outdoor Advertising 1. Advantages of outdoor advertising: • • • • • • • •

wide coverage of local markets frequency geographical flexibility creativity ability to create awareness efficiency effectiveness production capabilities 13-2

Chapter 13 - Support Media

2. Disadvantages include: • high waste coverage • limited message capabilities • wearout • high cost • measurement problems • image problems 3. Advantages and disadvantages of transit advertising—In addition to sharing some of the advantages and disadvantages of outdoor media, transit offers the advantages of long exposure and frequency while being limited in reach and influenced by audience mood. Professors Notes

III.

PROMOTIONAL PRODUCTS MARKETING

The Promotional Products Association International defines promotional products marketing as: “The advertising or promotional medium or method that uses promotional products such as ad specialties, premiums, business gifts, awards, prizes or commemoratives” This definition succeeds the older definition of specialty advertising: “...an advertising, sales promotion and motivational communications medium which employs useful articles of merchandise imprinted with an advertiser’s name, message, or logo.” Over 15,000 advertising specialties such as ball-point pens, matchbook covers, mugs, or expensive gift items have been used to account for over $18.1 billion per year in expenditures in this medium. A.

Advantages and Disadvantages of Promotional Products Marketing—because of the wide variety of forms that this form of advertising might assume this medium offers advertisers a variety of advantages. As stated in the book, selectivity, flexibility, frequency, low cost, goodwill and the ability to supplement other media are just a few of these. At the same time, image problems brought on by the perception that many of these specialty ad forms are little more than junk, and the fact that there are so many different companies employing this medium (leading to saturation) often offset some of the advantages.

Chapter 13 - Support Media

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

Yellow Pages Advertising—one of the more commonly utilized—and overlooked—forms of advertising is the Yellow Pages. The Yellow Pages were expected to account for over $6.9 billion in U.S expenditures in 2011, and 75% of consumers who visited the pages (print or online) said they made a purchase. About one third of these were new customers.. Online versions of the Yellow Pages are now commonly used, though the print editions of the Yellow Pages are on the decline.

Professors Notes

IV.

OTHER TRADITIONAL SUPPORT MEDIA

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

Advertising in Movie Theaters —one of the fastest growing advertising mediums is ads at the movies. While in the past the practice has come under fire from movie makers and consumers, they are being used more and more for the advertising of new movies as well as products and/or services. 1. Advantages and disadvantages of movie and theater advertising—the text notes that the advantages associated with these forms of advertising include: high exposure, ability to create mood, low costs, high recall, and the avoidance of clutter. Disadvantages may also include cost (relative to some other media) and irritation. It is noted that the latter of these is particularly critical, as strong opposition has been voiced in this regard. V. NON-TRADITIONAL SUPPORT MEDIA As advertisers attempt to find different ways to reach consumers when and where consumers want to be reached, they are turning to a variety of new media. In this section of the chapter we discuss some of these new media. A. Branded Entertainment—this form of advertising blends marketing and entertainment through television, film, music talent and technology. Branded entertainment takes on a variety of forms including: 13-4

Chapter 13 - Support Media

1. Product Placements —whether one considers product placements an advertising form or a form of promotion, no one can argue the fact that this means of getting exposure to a product is on the increase. Ever since the incredible success of Reese’s Pieces (in the movie ET) more and more products are appearing in movie theaters and on television. (Again, an interesting discussion can be stimulated by asking students to name products that have appeared in movies or on TV.) 2. Product Integration—product placements are integrated throughout the program, and in some instances being a key part of the script (i.e., Dancing with the Stars; Extreme Makeover Home Edition; America’s Next Top Model) 3. Advertainment—the creation of video or music content in an attempt to entertain viewers while advertising their products. 4. Content Sponsorship—advertisers sponsor specific programs, receiving placements, integrations and/or promotions in return for content sponsorships. 5. Ad-supported Video on Demand (VOD)—content programs offered to cable operators for free with advertising included (i.e., MTV’s How to Show; NFL 10 Minute Game Summaries; ESPN College Football Highlights). 6. Others—Various other forms of branded media also are increasing in use. B. Advantages and Disadvantages of Branded Entertainment Advantages include: • high exposure • potential for high frequency • support for other media • source association • cost • recall • the ability to bypass regulations • acceptance by viewers • targeting Disadvantages include: • high absolute cost • limited exposure • limited appeal • lack of control by advertiser • negative public reaction • competition • negative placements • clutter

Chapter 13 - Support Media

C. Measurement in Branded Entertainment—While there is no accepted standard of measurements in branded entertainment, a number of companies are now offering measurement services, including Nielsen Media Research. D. Guerilla Marketing—often referred to as stealth, street, buzz, ambush or viral marketing, this form of promotion attempts to have the product or brand exposed through a variety of no or lower cost methods that attempt to capitalize on free exposures, benefit from competitors’ promotional efforts, etc. E. Miscellaneous Other Media—while the list is too extensive to include all here, some media increasing in usage include videogame advertising, ads in parking lots and garages, restroom ads, place-based ands and more. 1. Advantages of these media may include • gaining awareness and attention • targeting 2. Disadvantages of these media may include • irritation • wearout

Professor’s Notes

Teaching Suggestions As the instructor is no doubt aware, there is a lot of information that can be (and needs to be) conveyed regarding support media. When students think about advertising, they usually think about broadcast and print media. In fact, there is a great deal of moneys spent to advertise in these alternative support media— both traditional and nontraditional. More and more advertisers are shifting their monies previously spent on traditional media like TV and newspapers, to the various forms of support media and the Internet. Some of these media will also readily come to mind—for example, outdoor—while others are less likely to do so. Coverage of the characteristics of some of the media presented in this chapter can lead to interesting discussions. As indicated, discussions of product placements and integrations, advertising in movie theaters, and new places where ads are appearing generally get students involved, and may lead to heated discussions. Students may be encouraged to engage in a debate over the merits and/or ethics of some of these advertising forms. Our lectures generally follow the outline set forth in the text. We discuss the characteristics of the various media, the advantages and disadvantages, and some of the sources of information that are available. We then tie these materials back to the media strategy chapter and the communications models chapter to demonstrate how and when such media might be employed. It is also possible to integrate films, videos and guest speakers into this coverage. The Yellow Pages Advertising Association, the PPAI and many outdoor advertising agencies offer guest speaker programs and/or a variety of videotapes that can be effectively used. 13-6 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 13 - Support Media

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

Answers to Discussion Questions

1. Content sponsorship has been on the increase in a variety of mediums. Give examples of sponsorships in different media and explain why their use is increasing. (LO3) Content sponsorship, in which advertisers sponsor specific content or even create it –for example, on the Internet or in magazines, has been on the increase due in large part to the advertisers’ fascination with engagement as a measure of effectiveness. Many advertisers believe that by getting consumers engaged they are moving them one step closer to purchase. The logic is that if someone is reading specific content, then they must be interested in it. For example, if I am reading about new cameras, then I must be interested in them. So advertisers figure that by placing an ad for their camera, or even creating an advertorial, they are more likely to reach the target audience they want to reach. Why else would one be reading about cameras? Where this becomes a problem is when the advertiser does not make clear that the content is being influenced by –or even provided by—them. This is when potential deception may occur. There are many agencies now examining the use of content sponsorships and there will soon be guidelines as to when one over steps the legal limits. 2. Explain why marketers have increased their use of product placements and integrations. Do you think that product placements and integrations are effective? Explain your answer. (LO2) While product placements are really nothing new, their recent increase in use is somewhat amazing. Some companies like Apple and BMW have extensively increased their placements, and likely will continue to do so. Others have just entered the game, and are finding placements an inexpensive way to get product exposure. Product placements offer the client a number of positive aspects. The exposure is not obtrusive, it is usually inexpensive, and the product and or brand can benefit from source association. To this point, the placements are not considered as intrusive as commercials, and thus have not met with too much negative feedback (though there is evidence that this may be changing). The fact that many segments are getting more difficult to reach (for example, teens) through traditional media, has also led to the increased adoption of placements—particularly in the movies. For now, it appears that product placements will continue to be a darling of many companies. At the same time, increasing irritation, clutter resulting from too many placements, and blatant placements may lead to consumer backlash and decrease the attractiveness of this form of marketing. Once considered forbidden turf, placements in television programs have become much more common. The lead-in discusses the Apple iPad placement (actually an integration) in Modern Family. Watch NCIS-Los Angeles and you will see NCIS agents driving a Cadillac. Programs have become very popular places to place one’s products.

Chapter 13 - Support Media

3. Digital advertising media seem to be more and more effective, but at the same time, more and more controversial. Explain why both of these situations have arisen. (LO2)

This question will be based only on the digital media discussed in the chapter. Chapter 15 will go discuss additional digital media. Digital outdoor like boards, shelters, etc. are one form of digital media. In addition, digital media in office buildings, stores and other locations have also become much more common. Because they can be more eye catching, and interesting than traditional media, digital outdoor media have become more popular among advertisers. The numerous advantages associated with these media including visibility, the ability to change messages quickly, and the ability of utilizing GPS to strategically locate ads offers advertisers options not previously available. When done well, these media can be much more effective than their traditional counterparts. At the same time, digital media have their pitfalls. Many people are not enamored with the glitz and glare of the lighted digital displays—particularly when in non urban settings. Imagine driving on a road with no lights, outside of the city, and all of a sudden a bright- lighted neon sign appears. Such an event could well be perceived as offensive. Privacy is another issue. The Las Vegas outdoor kiosk that can read your profile while you stand in front of it and recommend products or places to go. The outdoor billboard that recognizes your demographic as you go by and calls out to you, or other types of similar media are considered by many to infringe on one’s privacy, and thus may be less effective than desired. Many people are just tired of the intrusiveness of ads. Digital ads are appearing in so many more places—subways, transit stops, buses, sports venues, elevators ---the list goes on. The result is an increase in clutter that is increased through digital capabilities. 4. Why has the use of guerrilla marketing been on the increase? Take a position as to whether or not this form of marketing has become controversial, and explain whether or not this criticism is warranted. (LO2) Guerilla marketers have attempted everything from giving out free hats at sporting events to gain free exposure to paying tolls at the Lincoln Tunnel to painting sidewalks with ads. While many of these may be harmless (they can pay my toll anytime!) others have led to defaced property, potential for injury and other negative possibilities. In the chapter on publicity we discuss one such effort gone awry which led to the closing down of traffic in Boston for hours, and hundreds of thousands of dollars in emergency equipment deployment. While all ended well, it could have been worse. The involved company had to pay a million dollar compensation fine. The Dead Man Down example in the chapter provides another good example. Frightening people, or catching them off guard is not only inconsiderate, it could be rude and dangerous. While many guerrilla tactics may be cute and possibly beneficial to the consumer, others may be unfair to the advertisers, products or even audiences they are trying to reach and/or take advantage of. While guerilla tactics may be harmless in some instances, in others they are—at the very least— unethical and potentially illegal. Marketers seem to be continuing to push the limits as to when we cross over that line. The net result is likely to be laws passed limiting such practices. 13-8 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 13 - Support Media

The reason underlying some of these tactics seems to be the over anxious quest for publicity. Many marketing stunts are designed specifically to get in the news at free o minimal costs. In addition, some marketers believe that any publicity is good publicity (not true) and will push the envelope to get in the news and in front of potential consumers. Their over zealous acts will eventually make it more difficult for everyone to engage n guerilla marketing. In chapter 15 we will see the attempt to go viral as a guerilla tactic and the advantages and disadvantages of this strategy. 5. What are some of the advantages and disadvantages of promotional products? What are some of the situations in which promotional products may be most valuable to marketers? (LO2)

Pages 464-466 discuss the advantages and disadvantages of promotional products. These include: 1. Selectivity. Because specialty advertising items are generally distributed directly to target customers, the medium offers a high degree of selectivity. The communication is distributed to the desired recipient, reducing waste coverage. 2. Flexibility. As the variety of specialty items in Figure 13–5 demonstrates, this medium offers a high degree of flexibility. A message as simple as a logo or as long as is necessary can be distributed through a number of means. Both small and large companies can employ this medium for a variety of objectives limited only by their own creativity. 3. Frequency. Most forms of specialty advertising are designed for retention. Key chains, calendars, and pens remain with the potential customer for a long time, providing repeat exposures to the advertising message at no additional cost. 4. Cost. Some specialty items are rather expensive (for example, leather goods), but most are affordable to almost any size organization. While they are costly on a CPM basis when compared with other media, the high number of repeat exposures drives down the relative cost per exposure of this advertising medium. 5. Goodwill. Promotional products are perhaps the only medium that generates goodwill in the receiver. Because people like to receive gifts and many of the products are functional (key chains, calendars, etc.), consumers are grateful to receive them. The products also lead to a favorable impression of the advertiser. 6. High recall. Specialties lead to high recall of both the advertisers’ name and message. Some disadvantages may include: 1. Image. While most forms of specialty advertising are received as friendly reminders of the store or company name, the firm must be careful choosing the specialty item. The company image may be cheapened by a chintzy or poorly designed advertising form. 2. Saturation. With so many organizations now using this advertising medium, the marketplace may become saturated. While you can always use another ballpoint pen or scratch pad, the value to the receiver declines if replacement is too easy, and the likelihood that you will retain the item or even notice the message is reduced. The more unusual the specialty, the more value it is likely to have to the receiver. 3. Lead time. The lead time required to put together a promotional products message is significantly longer than that for most other media. 4. Reach. Use of other media—such as television—leads to greater reach.

Chapter 13 - Support Media

6. Digital out-of-home media have been experiencing rapid growth. Give examples of some of these new media forms and why they have an advantage over existing traditional out of home media. (LO2) Digital has taken on a variety of new forms, including digital billboards as well as smaller signs. These digital media offer a variety of advantages over existing media. Besides being able to attract attention, the messages on the boards can be changed very quickly, they can be put in a number of locations not previously available and they are affordable. Digital signage is now appearing in sports arenas, at rock concerts and in retail locations. Because of their flexibility, the mediums can be very useful in tailoring the messages and changing them quickly to provide real time information, offer sales or other promotions, etc. Traditional outdoor has been limited by the inability to do these things. 7. Promotional products, often referred to as advertising specialties, constitute a multi-billion dollar industry. Explain some of the various forms of promotional products, and how they might be used. (LO2) 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 favor 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.

Chapter 13 - Support Media

8. Traditional out-of-home advertising such as billboards, transit, etc. have recently experienced growth in years when other media forms have seen their business decline. Why is this so? Give examples as to when outdoor may be more attractive to advertisers than other media. (LO3). Consumers are increasingly attempting to avoid advertising. Using DVRs, they skip or fast forward through commercials, use pop up blocker software on their computers and switch stations when commercials come on the radio. One of the advantages of outdoor is the fact that it is often unavoidable. Given this advantage and the improved technologies which make them more attractive and informative, billboards have seen an increase in advertising expenditures while other traditional media have experienced declines. Think about when you are stuck in traffic. It is not at all unusual for drivers to look around outside of their vehicles, and to read the signage. Likewise when you are in a cab, or riding mass transit. The inside signage as well as outside is able to get your attention—particularly with the new digital alternatives. Advertisers have figured this out as well, and are buying more outdoor media. 9. Discuss some of the advantages and disadvantages of branded entertainment. Do you see business in this area increasing or decreasing in the future? Explain your answer. (LO3). The chapter describes the various forms of branded entertainment. No doubt, by now, even more forms have been added. As noted therein, a number of reasons for their popularity are evident, including cost factors, lack of unobtrusiveness and novelty. While these media forms are quite popular right now, once the novelty wears off, issues will remain. For example, for all intents and purposes, measurement in this industry does not exist. On the one hand advertisers continue to push for accountability and ROI, on the other hand they continue to increase investment in media that have no measures of effectiveness, and no track records of success. Most of them don’t even have relative cost comparisons or evidence of impressions that will occur. Advertisers, like most of us, like new things. Branded entertainment –relative to traditional advertising forms—is novel, and reaches consumers through a variety of means. However, like the Internet, there will be mounting pressure for entertainment marketers to come up with guidelines, standards, and cost and effectiveness measures, once the novelty has worn off. There is already some evidence of wearout in the declining ratings of some of these shows. As the proliferation of these reality shows continues, consumers will no doubt get tired of them, and their appeal will diminish. It seems that between reality shows and branded entertainment shows, the number of viewing options are declining. As a result, it will not be long before consumers become oblivious to branded programs.

Chapter 13 - Support Media

10.

Discuss some recent examples of product placements and/or integrations. Describe the context in which they were used, and how they intended to reach their target markets. Do you think these placements/integrations were successful? Why or why not? (LO4) The chapter notes a number of examples of product placements. As also noted, both placements and integrations have increased to become very commonplace. For example, Lady Gaga has had numerous placements in her videos. Recently actors Vince Vaughn and Owen Wilson starred in a movie titled The Internship, a B-rated movie filmed on the Google campus where the two were interning. Moet & Chandon’s integration into the movie The Great Gatsby was a bit too obvious. Louis Vuitton sued the makers of the movie Hangover: Part II for unauthorized use of the brands’ bag in one of the scenes. Budweiser sued to have their products taken out of the movie Flight because of the way the product was depicted. Each of these movies attempted to use the product placements to reach viewers whom they considered in the target market for the brands. How well they worked really is not known as the companies would not realize the information even if they had it. It is rare for companies to reach the product placement success that Reeses, RayBans, Apple and McDonald’s have garnered through their placements. At the same time, companies see placements as low risk investment that will gain exposure, and properly integrated will help their brand image. At the same time, some placements (including those mentioned above) are too obvious and blatant to be successful.

Additional Discussion Questions (Not in Text)

11.

Advertising in video games is becoming more popular. Discuss some of the reasons this medium is attractive. Do you see any downside to advertising through video games? (LO3) Once again, it all comes down to the target market. The size of the videogame target market continues to increase. Likewise, the video gamers’ lifestyles make the advertising of certain products a natural for this medium. Finally, the gamers obviously have money, or they wouldn’t be buying games. In addition to the advertising, product placements in video games is on the increase. Like movies and TV, advertisers claim that the placements add a touch of a more natural environment. The placements actually enhance the atmosphere, they say. The potential downside, is the same as product placements and/or movie ads. Some gamers may not like the fact that ads appear and the backlash may be negative for the marketer. Over a period of time, these ads and placements—like product placements in movies or on TV—will become so routine as to lose all effectiveness. .

Chapter 13 - Support Media

12.

What is going to happen to the Yellow Pages directories? The Yellow Pages, which have been existence for quite some time, seem to be at a crossroads for their future. As consumers become more and more comfortable with the Internet, there are indications that customers are using this medium to provide the services the traditional hard-copy books have provided. Do you think the traditional Yellow Pages directories will eventually go away? What should the Yellow Pages be doing to ensure their survival? (LO2) There is little doubt that the Yellow Pages as we know them will need to undergo significant changes to continue to exist. Changing media habits and lifestyles have affected all print media, and the YP are no exception. A quick glance through your local YP will indicate some of the problems. Notice the number of empty spaces on each page, where there could be ads. Many of these are due to space constraints, others due to advertisers pulling their ads. Long lead time, production limitations, etc. are also contributing to the decline of this medium. The online Yellow Pages are also an issue. As more and more people go online to conduct their activities, including search, they are less likely to turn to the print versions. Stanley Steemer the carpet cleaner, recently announced in San Diego that they will no longer advertiser in the print YP, as most of their customers come from online—should this be the rule rather than the exception, it will not bode well for the print pages. At this point, the Yellow Pages are still a viable print medium. However, there is little doubt that they are facing a crossroads, and that changes in their existing practices will have to occur for them to survive.

13.

Discuss some of the various means of measuring effectiveness in branded entertainment, and their advantages and disadvantages. Given the emphasis by marketers on ROI, discuss how these measures fit in with this attempt to determine return on investment.(LO4) A review of the measures provided in the chapter will indicate the paucity of available effectiveness measures for branded entertainment. The companies listed there—while highly respected companies—are new at measuring these new media. As can easily be seen, they mostly discuss their future plans. Many of these will necessarily involve more traditional measures such as tracking, etc. As noted in later chapters in the text, measures that involve tracking, recall, etc. have been around for quite some time, and are generally accepted practices in the advertising world. Media equivalencies are wrought with problems and are less valid and reliable. When considering the branded entertainment media in light of the discussion in Chapter 7, one finds somewhat of a contradiction. On the one hand, there is increased pressure for accountability being placed on traditional media. On the other, monies are being transferred into the new nontraditional media even though audience measures and measures of effectiveness are not proven or do not exist. This speaks to the sophistication (or lack thereof) of media buyers. As noted, there has been a rush to get involved in these media, yet no one truly knows who, or how many are being reached, and the effects of these buys. Unfortunately, as pointed out in the JAR article cited in the chapter, they really don’t seem to care.

Chapter 13 - Support Media

14.

Transit advertising takes a variety of forms, and many advertisers may be reluctant to use these media. Discuss some of the various forms of transit advertising and their relative advantages and disadvantages. Give examples of which products and/or services might effectively utilize this medium. (LO3) As noted in the text, there are a variety of types of transit advertising including (1). inside cards(ads inside of busses, subways, etc); (2) outside posters (those that appear on the sides of busses, trains, trolleys, etc., and on the tops of taxis; and (3). Station, platform and terminal posters (those appearing in the terminals of trains, subways, etc. The advantages of transit advertising include many of those associated with out of home advertising in general pp. 422-423. In addition, transit offers the advantages of: • •

long length of exposure frequency of exposure

The disadvantages of transit advertising include:

15.

poor reach

audience mood

Describe what is meant by “guerilla marketing.” Give examples of products and/or services that you know have employed this strategy. Then describe some of the characteristics of companies that might most benefit fro stealth marketing. (LO3) A variety of terms including stealth marketing, viral marketing, guerilla marketing and ambush marketing all have been used to describe a strategy of attaining free or very low cost exposure to one’s products and/or services. Akin to guerilla warfare, in which the warrior is not large enough or strong enough to compete in traditional combat, these forms of marketing attempt to market the brand through less conventional and/or traditional techniques. Rather than mass advertising, these companies may get their products exposed in a variety of methods including product placements, on-campus opinion leaders, through appearances at events, etc. The book discusses a variety of companies that have explored these methods, including the lead-in story about Samsung. Others like Calvin Klein, Revlon, Sony and P&G have also employed these methods. In the heyday of the dotcoms, guerilla marketing was even more rampant as these start-up companies employed a variety of methods to get their names noticed. Initially, guerilla marketing tactics were the domain of small companies with limited budgets and marketing capabilities who were being creative in getting their name out. (One particularly interesting example was a dot.com that paid drivers’ tolls at the Lincoln Tunnel if they would accept a bumper sticker with the company’s name on it). Due in-part to some of these early success stories, and the cost efficiencies involved, larger companies have employed these methods as well. As noted in the lead-in, and later in the chapter, many very large companies now employ these methods as well.

Chapter 13 - Support Media

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

AdForum Exercise: “ Examining the Objectives of Airline Media Usage” (See Advertising and Promotion Playlist, Chapter 13) In chapter 13 a number of support media were explored. In the playlist for Chapter 13 are a number of ads for airline companies that have used a variety of media to deliver their messages from cinema advertising to posters. Review these ads and then answer the following questions: 1. 2. 3. 4.

What is the objective being sought with each ad? Is this the best medium the airline could have used to accomplish this objective? What other media could be used to accomplish this objective? Are there other objectives that might be being achieved by these media?

Access to the chapter playlist is available through www.mcgrawhillconnect.com

Chapter 14 - Direct Marketing

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

Learning Objectives 1.

To recognize the area of direct marketing as a communications tool.

To know the strategies and tactics involved in direct marketing.

To demonstrate the use of direct-marketing media.

To determine the scope and effectiveness of direct marketing.

Chapter and Lecture Outline I.

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

the catalog the use of consumer credit cards direct-marketing syndicates the changing structure of the American market technological advances various other factors.

Chapter 14 - Direct Marketing

C. The Role of Direct Marketing in the IMC Program—Direct marketing activities support and are supported by other elements of the promotional mix. 1. Combining direct marketing with advertising—Direct marketing is in itself a form of advertising. Whether through mail, print, or TV, the direct-response offer is an ad. Sometimes the ad supports the direct selling effort (i.e. Victoria Secret runs image ads to support its store and catalog sales.) 2. Combining direct marketing with public relations—Private companies may use telemarketing activities to solicit funds for charities or cosponsor charities that use these and other direct response techniques to solicit funds. 3. Combining direct marketing with personal selling—Nonprofit organizations often use telemarketing to solicit funds. Companies use telemarketing to screen and qualify potential prospects. 4. Combining direct marketing with sales promotions—For example, many local merchants send out mailers announcing sales and promotional offers. D. Direct-Marketing Objectives—Direct marketers most often seek a direct response. This response need not necessarily be a behavioral response, as direct marketing is now used for other purposes: to build an image, maintain customer satisfaction, and inform and/or educate customers in an attempt to lead to future actions. E.

Direct Marketing Strategies and Media—Direct marketers generally pursue either a (1) one-step approach or a (2) two-step approach in developing media strategies. In the one-step approach, the medium is used to directly obtain an order (for example, direct response television ads). In the two-step approach, more than one medium may be used, with the first effort designed to screen or qualify buyers and the second designed to generate the response. A number of direct response media are available to the marketer including: 1. Direct mail—Mail order sales are expected to exceed $57 billion by 2016, meaning that more monies have been spent in this medium than any other. Keys to the success of direct mail are the mailing list and the ability to segment markets. 2. Catalogs—Over 11.8 billon catalogs were mailed in the year 2012. The text lists some interesting examples of articles available through catalogs on page 486. 3. Broadcast media—Two broadcast media are available to direct marketers: TV and radio. The majority of direct marketing broadcast advertising now occurs on TV, which receives the bulk of our attention in the text 4. Infomercials—The lower cost of commercials on cable and satellite channels has led advertisers to a new and very effective form of advertising. IMC Perspective 14-1 discusses some of the many companies employing this medium. 14-2

Chapter 14 - Direct Marketing

5. Teleshopping—The major shopping channels in the United States—QVC, and the Home Shopping Network, are now being joined by others including Shop@Home, Shop NBC and others. Together they account for billions of dollars in sales, and there seems to be no indications that this medium is reaching maturity. 6. Print media—Magazines and newspapers are difficult media to use for direct marketing because of clutter and the relative expense. In addition, the benefit of an immediate response is not as apparent. 7. Telemarketing—Almost $305 billion dollars worth of sales took place through telemarketing phone calls in 2012. Telemarketing has been hurt by the do not call lists, though the business to business sector remains strong. Professor’s Notes

II.

DIRECT SELLING

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

III.

EVALUATING THE EFFECTIVENESS OF THE DIRECT MARKETING PROGRAM

In addition to some of the effectiveness measures employed by other marketers, direct marketers also employ a measure based on cost per order (CPO). Using CPO the marketer knows almost instantly whether or not the advertisement is working. IV.

ADVANTAGES AND DISADVANTAGES OF DIECT MARKETING

Advantages of direct marketing are cited including: (1) selective reach; (2) segmentation capabilities; (3) frequency; (4) flexibility; (5) timing; (6) personalization; (7) cost efficiencies; and (8) ability to measure effectiveness.

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

Chapter 14 - Direct Marketing

Teaching Suggestions As noted, direct marketing is a rapidly growing field. Students typically think of this area in terms of direct mail, and sometimes the 800 and 888 number ads that appear on television. It is a helpful and interesting exercise to start the class with a discussion as to what direct responses students are familiar with, and to point out the fact that some very large firms are engaging in this form of marketing (not just the George Foreman Grill, Snuggies, and the Magic Bullets). Students know doubt are familiar with online buying (Amazon, etc.), and home shopping channels, but are probably not as informed about the size and growth of these industries. Direct response TV still accounts for billions of dollars of sales revenue.

Answers to Discussion Questions

1. Explain what is meant by Customer Lifetime Value. How does this formula benefit the direct marketer? (LO4) CLTV is a formula used by direct marketers to determine the dollar value associated with a longterm relationship with a customer, thus evaluating her or her net worth. Direct marketers will use this formula in an attempt to determine whether or not a customer should be acquired, and how much attention they should receive. By estimating the potential return they will receive from a customer, direct marketers can determine how much attention they should dedicate to the customer, what kinds of deals they should offer, etc. Obviously, the more potential sales and profits they see, the more attention the customer will get.

2. A study by the Harvard Business School has shown that e-mail marketing is much more effective than traditional direct mail in that it provides a much greater return on investment (ROI) Explain some of the reasons this would be. (LO4) While the cost of direct mail is not that expensive, the cost of sending an e-mail is ridiculously low. While both of these methods have very low response rates, the fact that e-mail messages cost so little makes it more profitable. Secondly, the younger generation clearly disregards direct mail pieces. The message goes directly from the mailbox to the trash, never to be seen. While click-throughs on emails are only slightly better, they are essentially better than nothing.

Chapter 14 - Direct Marketing

3. Direct marketing has been an effective tool for marketers for a long time. Provide some reasons why direct marketing ahs been so effective. Do you think this trend will continue? (LO1) There are a number of reasons why direct marketing has been successful. Many of these bode well for its future success as well. Reasons for the rising success of direct marketing can be attributed to a number of factors: • •

• •

•

The changing marketing environment. The increased use of credit cards, lack of time, and acceptance of mail-order products by consumers have all increased the effectiveness of the direct marketing medium. Cost efficiencies. The continued high cost of mass media, and the lack of availability of time and space in some of these media have forced advertisers to consider alternative ways of advertising. Likewise, the increasing costs of personal selling directly favor the use of telemarketing and direct mail. Target marketing. As marketers more narrowly define their markets, direct marketing media offer a more effective way of reaching them through the reduction of waste circulation. Database technologies. More effective database marketing techniques also promote more specific targeting. Companies are now able to know more and more about their customers (and potential customers) by building more effective databases. Kimberly Clark can literally track babies through childhood, changing the products advertised and the appeals as the child gets older. Advances in technology. Direct marketing no longer means just catalogs and direct mail. Home shopping channels, the Internet and other innovations have allowed for more successful direct marketing efforts. Even the success of cable television has aided the direct marketer, who now has a more specific target audience at which to target direct marketing efforts. Advances in technology have also increased the value of the databases, as names can be added and purged, and information can be updated much more quickly. Effectiveness measures. Perhaps the greatest value of direct marketing is the ability to measure the effectiveness of the program. As noted in the text, direct marketers have very sophisticated measures of effectiveness which can tell them almost immediately how their programs are working.

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

Chapter 14 - Direct Marketing

4. Explain why digital catalogs will not drive the traditional catalog into extinction. Cite some of the advantages of maintaining a traditional print catalog. (LO3) Even though the younger generation has basically abandoned traditional media—particularly anything in print—the traditional catalog is not likely to go away soon. One reason is the myriad of users that receive different benefits for using traditional catalogs. These include those who are: Time starved—as noted in the chapter, catalogs are especially appealing to those short on time. The working wife and or husband with a busy social life and or active lifestyle may find catalogs great time savings devices. Shopping at stores requires time and effort, while catalogs may be perused at their leisure in the comfort of their home, while relaxing in front of the TV, etc. Older or disabled—while the active young person may use catalogs for time savings reasons, the elderly or those with difficulties getting around may use them by necessity. Older persons, who do not drive, are afraid to go out or have disabilities, which make shopping difficult, may rely on the convenience of catalogs for doing their purchasing. They are also less likely to shop on the internet, or rely on digital catalogs. Others—those geographically isolated, with limited or no access to certain types of stores may find catalogs valuable. Students, shopping for lower prices, or for products that are hard to find, those purchasing the same products repeatedly (including reorders for business to business marketers), and those who just like to browse to get new ideas for their own purchases or gifts also find catalogs valuable. Teenagers, with an inability to drive or get to the retail stores, have become direct shoppers—not always on the Internet. Ask anyone how they use traditional catalogs. They are read while eating breakfast. They are perused during down time. They are read in bed, with the pages dog-eared (folded over) and then revisited—maybe to purchase online, or by phone. While the digital catalog has its advantages it also has its disadvantages, as noted above. As a result, it will still be around for a long time to come.

While a very effective medium, direct marketing also has a number of distinct disadvantages. Discuss some of these, and what marketers could do to decrease them. (LO4) Perhaps the major problem associated with direct marketing is its image. Putting aside all of its other advantages, image problems continue to plague the industry, making it difficult to shed the “junk mail” role. These problems stem from all direct media. In direct mail, one’s mailbox is full of unwanted catalogs, ads and solicitations. The very mention of telemarketers evokes negative images, and around election time are still incredibly intrusive and annoying. Infomercials , despite their advances in sophistication, are still offering “psychics”, “amazing discoveries” and other offerings that many perceive as being questionable if not deceptive. The industry still suffers fallout from, and the potential for fraud. While the vast majority of direct marketers are not guilty of such actions, it is the few that reflect negatively on the image of the many. Each news story of fraud and/or deceit associated with direct marketing hurts the overall image. A number of steps have been taken to improve upon this image. The DMA--the direct marketing trade association--has established guidelines for appropriate actions, and has worked closely with academia and industry as well as the government to help eliminate many of the problems. 14-6

Chapter 14 - Direct Marketing

Recent legislation such as the do not call list goes a long way in solving some of the problems, but obviously will not solve all. As more and more large companies become involved, the costs of infomercials will be beyond the reach of many , and this, too will help. But like any other medium, there will always be those that will attempt to make money in a less than honest fashion. They will never be eliminated, they can only be reduced in numbers. Until these numbers are under control, additional legislative steps are likely, and the industry will suffer. 6. As noted in the text, a number of home shopping channels now offer a variety of upscale products. Discuss reasons why you think this will work to their advantage. Are there any disadvantages to this strategy? (LO1) Over the years home shopping channels have developed an image of a place for shut-ins and women in their 40’s and 50’s. The products offered were typically in the low to midrange price wise, with no luxury or high end offerings. Some of the home shopping channels have set out to change this image by offering more upscale products and services. This strategy offers a number of advantages. First, it improves the image of all of the products offered in the shopping sites. Hopefully, this will change opinions of the merchandise offered, and the stigma (to some) of purchasing from a shopping channel. Secondly, this strategy broadens the base of potential consumers. By attracting new consumers with upscale offerings, the home shopping channels become a viable alternative to shop, just as Internet sites have. Not only will new shoppers come, but they will, in turn, spread the word to others, who may also pay a visit. We have talked in the book about many people who are “money rich and time poor’. A shopping channel that offers upscale merchandise offers just one more possible alternative to this dilemma. Other than impacting the present product line, and potentially changing the image as a low cost shopping alternative, there is little downside to this strategy.

7. What is customer relationship management? Discuss how direct marketing can be employed to improve customer relationship management. (LO1) Customer relationship management (CRM) requires that the marketer develop and maintain a significant amount of information about its clients. The aim of CRM is to establish a relationship with one’s customers through affinities, personalized communications and product/service offerings. In a CRM relationship the seller and customer act as partners, working together to the betterment of both parties. To be successful, direct marketers must have a full understanding of the customers’ needs and wants, as well as a history of their relationship. This is where database marketing comes in. In CRM, a database is a must. Only through the utilization of this database can the marketer truly understand the customer, helping them solve their problems and take advantages of opportunities through product offerings and services.

Chapter 14 - Direct Marketing

What is an infomercial? What are some of the reasons that infomercial have been so successful. Which types of products and services to you think are likely to be candidates for successful infomercials? (LO3). Infomercials—often referred to as long-form commercials—typically range from 30 to 60 minutes, and are often made to appear as television programs. Infomercials have continued to increase in popularity sine their inception in the 1980’s, to now include a wide variety of products and services. Once despised by retailers, the infomercial has become a partner in the selling effort. While the infomercial once was used non-Fortune 500 companies, now companies like BMW, Volvo, Coca Cola and Disney are just a few of the many big companies now employing this form of communication. Infomercials are effective for the advertiser as the media cost is minimal. The infomercial is usually shown late at night, early in the morning, or other hard to sell time slots. As a result, the rates are very low, and the breakeven can be easily met. In regard to why they are successful with consumers, IMC Perspective 14-1 provides very good insight as to what makes for a successful infomercial.

Direct marketers are very good at determining the effectiveness of their programs. Many direct marketers now measure the impact of the program on the consumer funnel. Explain how direct marketers measure effectiveness, and how they now use the consumer funnel for this purpose. (LO4) Direct marketing provides one of those rare instances where we can measure the impact of advertising on sales. By definition, direct response asks for an immediate behavioral action. Effectiveness is measured by sales, or as one expert put it "if you continue to see the ad on TV then it works". More specifically, the effectiveness is measured using a formula called cost per order (CPO), in which the advertiser calculates the cost per ad (production and medial costs), the return sought and a break even. As long as the ad continues to generate profit, it continues to run. Direct marketers have also been successful in isolating the effectiveness of certain elements of their programs. Through research, they have been able to show that in a specific market, one TV channel may be more effective than another, one model and/or one message may be more effective, etc. Direct marketers are constantly evaluating various print alternatives to test effectiveness. Some direct marketers understand the value of direct marketing in impacting the movement through the consumer funnel as well. Direct marketing can be used to create awareness and interest in the product or brand. It is also effective in helping the consumer to evaluate products and services and stimulate trial. Marketers know that it is not uncommon for a consumer to find out about a product or service through direct mail, or an infomercial, and then go to the store to find out more about it or make a purchase.

Chapter 14 - Direct Marketing

10.

As the Internet continues to grow in popularity, some marketers predict that the print catalogs will cease to exist, replaced by Internet catalogs. Others disagree. Explain some of the reasons why this situation may or may not occur. (LO1) (LO2) Years ago, some pundits predicted that the Internet would lead to the eventual demise of traditional media, including TV, newspapers, and direct marketing—including catalogs. The argument often made was that as the Internet grew, adopters would get almost everything they needed online. The convenience and time management capabilities were just a few of the reasons cited. While this has been true to some extent, we all know that the Internet has not replaced traditional media (not yet anyway!) Many of these same people believed that the industry likely to be hit hardest would be the direct marketing industry. It would be easier to use a catalog online than a hard copy, leading to more convenient shopping for the consumer. Not only that, but it would be much less expensive to just put the catalog online. Direct marketers disagreed, almost immediately embracing the Internet in their direct marketing efforts. The result is that the Internet has helped direct marketers, not hurt them, and traditional catalog distribution and sales continues to grow in popularity. While one might think that everyone wants everything online, this is not always true. Traditional catalogs are a good example of this. For one, the catalog arrives in the mail—solicited or unsolicited. Many consumers become aware of companies for the first time through this method—as opposed to surfing online. Secondly, many consumers find the traditional catalog to be more convenient than online. They can lie in bed and read them, browse through them while watching TV or other times, and discover new products they hadn’t even considered before. They often feel that the catalogs also give them a better picture of the product than they can get online. Many consumers use traditional catalogs to find products, and when placing an order, do so online for convenience. So long as this trend continues, traditional catalogs will not be replaced soon.

Additional Discussion Questions (not in text)

11. The number of telemarketing centers in the United States has decreased in the past few Why has this occurred? (LO3)

years.

To cut down on the intrusion of telemarketers, the FTC started a “do not call list” in which consumers could register to have telemarketers stop calling them. With all of its good intentions, not everyone is happy with the do not call list. The law allows consumers to place their name on a list that telemarketers, with some exceptions, may not call. Companies that call someone whose name is on the list faces penalties, including fines, for each occurrence. A “do not call” list for cell phones is also available for those who wish to avoid telemarketers. One for e-mails is currently under consideration. Politicians, political parties and most nonprofits are exempt. Over 148 million people have already signed up for the do not call list, and the cell phone list continues to grow. Telemarketers in violation have been prosecuted and fined—making many consumers happy. At the same time, many businesses and organizations alike are not pleased with the lists. They contend that lost sales, and the inability to call prospects will result in the loss 14-9 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 14 - Direct Marketing

of millions of jobs and revenues and that they would be driven out of business. As a result they filed a suit in court challenging the legality of the lists. As noted in the chapter, the legality of the system was upheld, as were the penalties doled out to those in violation. The net result of these actions is that the number of people employed in the telemarketing industry has declined significantly. Of course, so too has the number of call centers. As to what will happen to the telemarketing industry, it is too early to tell.

12.

Describe the various forms of direct response advertising. Discuss some of the reasons for the success of direct response advertising. (LO3) The text discusses the various direct response media. Without repeating this discussion here, a. Direct mail—everything from postcards to mailers for supermarkets detailing weekly sale items b. Catalogs—traditional print and online varieties c. Broadcast—direct response TV spots, infomercials, home shopping channels and radio ads d. Print—direct response ads in magazines, newspapers, etc. e. Telemarketing—direct response solicitations through the telephone f.

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

There are a number of reasons for the growth and success of direct response media, including: Consumer credit cards—the use of consumer credit cards continues to increase, reaching all time highs. The ease of use of these cards increases the ability to conduct direct marketing activities. So long as this use remains high, and there are no indications that it will change, direct marketing will continue to thrive. Syndicates—companies that specialize in direct marketing activities also continue to increase, particularly with the advent of the Internet. As these syndicates become more effective, direct marketing will reap the rewards. The changing structure of American society—Consumers are better off than perhaps any time in history. At the same time, they continue to be “time poor”. The combination of these factors is very positive for the continued growth of direct marketing. Technological advances—the Internet is an excellent example of how technology benefits direct marketing. Direct marketers are delighted that the Internet has come along, as it provides a new and very effective medium for direct marketing activities. Interactive TV will do the same. Miscellaneous factors—all of the miscellaneous factors discussed in the chapter continue to hold true in regard to their impact on direct marketing. No less important is the image of direct marketing itself. Unfortunately, the industry still has image problems, and the Internet has contributed to these problems through fraud and deception. 14-10 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 14 - Direct Marketing

13. Direct marketers are some of the most successful when it comes to measuring the effectiveness of their programs. Give reasons why this may be true. (LO4) Because most direct marketing seeks a behavioral response, it is easier for direct marketers to determine if their messages are working or not. Simply put, direct marketers figure out what it costs for the product, add in the commercial message cost and media and the put it in the marketplace. If the sale orders exceed the costs, the campaign has been successful. Many direct marketers test all aspects of their programs. They will track the response from different stations, different time slots and different spokespersons. They will also track the response to different offers to see which works best. Adjustments to the programs are constantly made to insure the optimal results. 14. What is the difference between direct marketing and direct selling? Describe the various forms of direct selling and some of the characteristics of the industry that make it unique.(LO3) Direct selling might best be considered as a form (or subset) of direct marketing. Both deal directly with the customer, seeking a response. However, direct marketing assumes a broader variety of media rather than just sales. (Keep in mind, direct sales people may still use promotions, leave behinds, etc.) Direct marketing includes direct mail, telemarketing, direct response print, etc. Direct selling deals specifically with the selling effort. There are three forms of direct selling including: Repetitive person-to-person selling—The salesperson visits the buyer’s home, job site or other location to sell frequently purchased products or services (for example, Amway). Non-repetitive person-to-person selling—The salesperson visits the buyer’s home, job site or other location to sell infrequently purchased products or services (for example, World Book Encyclopedia). Party plans—The salesperson offers products or services to groups of people through home or office parties and demonstrations (for example, Tupperware). The chapter reveals that the direct selling sales force is quite unique. Almost eighty percent of the sales force are females, almost 100% are independent contractors and for most of them it is not a full time job. Over one half of the direct selling sales force spends less than 10 hours a week at their job—treating it as an opportunity to earn extra money rather than a career. For them, it is as much a hobby as a job. 15. What are the characteristics of the infomercial watcher? In viewing this profile, does it surprise you? Explain why or why not. (LO1) Typically, when we think of the infomercial watcher, we think of someone with a lot of time on his or her hands, insomniacs, or very heavy TV watchers. Given the times of day infomercials are shown (early morning, very late at night, Sunday morning, etc.), this would seem to make sense. Interestingly, the infomercial buyer may be none of the above. Those who watch (and buy from) infomercials tend to be a bit more upscale, homeowner, and white-collar workers. They are most often female. Overall, the infomercial shopper represents a broad demographic base. This really should not come of much of a surprise. While it may be true that people who buy from infomercials watch TV more, the fact is that they are not necessarily couch potatoes or shut-ins. 14-11 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 14 - Direct Marketing

Many people who work find them selves “money rich and time poor”, and the infomercial is a means of learning about products and purchasing without having to go to the store. Secondly, many products advertised through this medium may not be available in stores, while still satisfying a need or want of the buyer. Finally, with the profile of the infomercial advertiser changing—with more large companies like Volvo, Mercedes, AT& T, etc., advertising this way, the infomercial has become a good medium for providing information to prospective buyers in the comfort of their living rooms. The infomercial has come a long way. Some advertisers claim that virtual ads are bad for the advertising industry in general. Explain some of the reasons they feel this way. Are these reasons valid?

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

AdForum Exercise: “Direct Marketers Use of Other IMC Media” (See Advertising and Promotion Playlist, Chapter 14) Some of the largest users of direct marketing also employ television commercials and other media to market their products. Go to the AdForum playlist and answer the following questions: 1. 2. 3. 4.

What is the objective(s) that the advertisement is trying to achieve? Does the advertisement support the direct marketing effort, or is it the supported by direct marketing? Is this ad an effective use of IMC? Explain why or why not. How could these media be combined with others to market the product?

Access to the chapter playlist is available through www.mcgrawhillconnect.com/

Chapter 15 - The Internet: Digital and Social Media

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

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

Chapter and Lecture Outline I.

DEFINING AND UNDERSTANDING THE INTERNET

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

Chapter 15 - The Internet: Digital and Social Media

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

Chapter 15 - The Internet: Digital and Social Media

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

Chapter 15 - The Internet: Digital and Social Media

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

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

•

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

•

Sales—the primary measure employed for e-commerce sites

•

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

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

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

Chapter 15 - The Internet: Digital and Social Media

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

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

Answers to Discussion Questions

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

Chapter 15 - The Internet: Digital and Social Media

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

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

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

Chapter 15 - The Internet: Digital and Social Media

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

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

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

Chapter 15 - The Internet: Digital and Social Media

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

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

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

Chapter 15 - The Internet: Digital and Social Media

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

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

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

Chapter 15 - The Internet: Digital and Social Media

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

10.

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

Additional Discussion Questions (not in text) 11.

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

Chapter 15 - The Internet: Digital and Social Media

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

12.

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

13.

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

Chapter 15 - The Internet: Digital and Social Media

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

14.

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

Chapter 15 - The Internet: Digital and Social Media

15.

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

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

Chapter 16 - Sales Promotion

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

Learning Objectives 1. To understand the role of sales promotion in a company’s integrated marketing communications program and to examine why it is increasingly important. 2. To examine the various objectives of sales promotion programs. 3. To examine the types of consumer and trade-oriented sales promotion tools and factors to consider in using them. 4. To understand how sales promotion is coordinated with advertising. 5. To consider potential problems and abuse by companies in their use of sales promotion.

Chapter 16 - Sales Promotion

Chapter and Lecture Outline I.

THE SCOPE AND ROLE OF SALES PROMOTION

For many years advertising constituted the major part of the promotional budget of most consumer product firms. Over the past decade, however, many marketers have come to the realization that advertising alone often is not enough to stimulate demand for their products and are increasingly turning to sales promotion methods targeted at both consumers and the trade. Many companies are developing fully integrated marketing programs that include consumer and trade promotions that are coordinated with advertising, publicity/public relations, and Internet marketing programs as well as sales force efforts. It is important to note these trends and emphasize to students the important role sales promotion plays in the marketing of most consumer products. As discussed in the opening vignette, sales promotion is an effective way to move the products of companies off store shelves and into the hands of consumers. The integration of well-planned sales promotion activities with other IMC tools can assist companies to encourage existing customers to try their new products, attract new converts, increase sales volume, and strengthen brand image. 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 several important aspects to sales promotion that should be noted: • • •

Sales promotion involves some type of inducement that provides an extra incentive to purchase the product or service Sales promotion is essentially an acceleration tool that is designed to speed up the selling process and maximize sales volume Sales promotion programs and activities can be targeted to different parties in the marketing channel including wholesalers, retailers and consumers.

Sales promotion can be broken into two major categories: •

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

•

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

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

Chapter 16 - Sales Promotion

II.

THE GROWTH OF SALES PROMOTION The role and importance of sales promotion in companies’ integrated marketing communications programs have increased dramatically over the past decade. In 2013 spending on various forms of sales promotion exceeded $300 billion while another $150 is spent each year on trade promotions targeted at retailers and wholesalers.

Reasons for the Shift in Marketing Dollars to Sales Promotion—Since the mid ‘80s the proportion of marketers’ promotional budgets allocated to both consumer and trade promotion has increased while the proportion allocated to media advertising has declined. Current estimates are that marketers spend between 60 to 75 percent of their promotional budgets on sales promotion, with the remainder going to media advertising. There are a number of reasons for the increases spending on sales promotion. These include: 1. The growing power of retailers—in recent years several developments have helped to transfer power from the manufacturers to the retailers. With the advent of optical checkout scanners and sophisticated in-store computer systems, retailers gained access to data concerning how quickly products turn over, which sales promotions are working and which products make money. Retailers use this information to analyze sales of manufacturers’ products and then demand discounts and other promotional support from manufacturers of lagging brands. Consolidation of the grocery store industry has also resulted in larger and more powerful retailers who can use their purchasing power to demand more trade promotion deals. We discuss how Wal-Mart has become such a powerful retailer and the challenges this creates for marketers who must often develop account specific promotions for the retailing giant. 2. Declining brand loyalty—consumers have become less brand loyal and are purchasing more on the basis of price, value, and convenience. They are also looking for more deals and will buy whatever brand is on sale or for which they can use a coupon. 3. Increased promotional sensitivity—the percentage of purchases made in conjunction with some sort of promotional offer has increased sharply over the past decade. The text discusses a national survey with interesting results and the reasons for consumers’ increasing sensitivity to sales promotion. This study found that 42 percent of the total unit volume of 12 packagedgood products was purchased with some type of incentive. 4. Brand proliferation—consumer product companies are launching nearly 20,000 new products each year, according to a study by Marketing Intelligence Service, compared with only 2,689 in 1980. Sales promotion tools such as samples and coupons are often used as part of the shaping process that leads consumers from trial to repeat purchase at full price. Supermarkets carry an average of 30,000 SKUs compared to 13,000 in the early ‘80s 5. Fragmentation of the consumer market—the consumer market is becoming more fragmented and traditional mass media advertising is being replaced by promotional tools that can target specific market segments. Sales promotion tools have become one of the primary vehicles for tailoring promotional efforts to specific regional markets as well as specific demographic and lifestyle segments.

Chapter 16 - Sales Promotion

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. Increased accountability—many companies are demanding to know what they are getting for their promotional expenditures. Many companies feel that sales promotion programs are more economically accountable than advertising since they often generate a quick and easily measured jump in sales. 8. Gaining a competitive advantage—many marketers are turning to sales promotion to gain or maintain a competitive advantage. A major development in recent years is the use of account-specific marketing (also referred to as comarketing) whereby a marketer collaborates with customizes promotions for individual retailers. Exhibit 16-6 provides an example of an account specific promotion used by WD-40. 9. Clutter—the increasing problem of advertising clutter has lead to the need to use consumer promotions as a way of attracting attention and interest to advertising. Sales promotion offers such as coupons, contests and sweepstakes are often used to attract attention to ads and increase consumers’ involvement with a marketer’s IMC program. 10. Growth of Digital Marketing – many marketers now use the various forms of digital marketing to implement sales promotion programs as well as measure their effectiveness. Promotional offers such as coupons and discounts as well as entry forms for contests and sweepstakes appear on marketers’ websites as well as their media pages. Discounts and promotional offers are important reasons why people follow brands on social media sites such as Facebook and Twitter. B.

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

Consumer Franchise-Building versus Nonfranchise-Building Promotions—It is important to make the distinction between consumer-franchise building sales promotions and non-franchise building efforts. Consumer-franchise-building promotions are designed to communicate distinctive brand attributes and contribute to the development and reinforcement of brand image and identity. IMC Perspective 16-1 discusses a sweepstakes that McDonald’s in Hong Kong used to promote its set meals in the form of the famous Monopoly game. Non-franchise-building promotions are designed to accelerate the purchase decision process and generate immediate increases in sales. They do very little, if any, to contribute to the brand identity and image. The chapter discusses concerns over marketers becoming too dependent upon sales promotion and how this is undermining their brand building efforts. The chapter 16-4

Chapter 16 - Sales Promotion

discusses how other companies such as Macy’s have found it difficult to cut back on the use of promotions. Professor Notes

Chapter 16 - Sales Promotion

III.

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

Objectives for consumer-oriented sales promotion— as the use of sales promotion techniques continues to increase, companies must 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 a number of different objectives the marketer might have for both new and established brands. These include: 1. Obtaining trial and repurchase 2. Increasing consumption of an established brand 3. Defending current customers 4. Targeting a specific market segment 5. Enhancing integrated marketing communications and building brand equity

IV.

CONSUMER-ORIENTED SALES PROMOTION TECHNIQUES

The various consumer-oriented sales promotion techniques used by marketers should be discussed along with their advantages and limitations and the role they play in meeting various promotional objectives. A.

Sampling—sampling involves a variety of procedures whereby consumers are given some quantity of a product for no charge to induce trial. Sampling is often used as a way of introducing a new brand to the market although it is also used for established products. 1. Benefits and limitations of sampling • Samples are an excellent way of inducing trial • Sampling allows consumers to experience a product directly and gain an appreciation for its benefits and characteristics • Costs of sampling programs can be very high • The benefits of a brand may be difficult to gauge from a sample 2. Sampling Methods—decisions must be made concerning the method by which the sample will be distributed. The sampling method is important not only in terms of costs, but also in terms of influencing the type of consumer who receives the sample. Some of the more widely used sampling methods include: • • • • •

Door-to-door sampling Sampling through the mail In-store sampling On-package sampling Event sampling

Chapter 16 - Sales Promotion

There are other sampling methods available such as inserts in magazines and newspapers, requesting samples by phone, and the use of specialized sample distribution services. The Internet is yet another way companies are making it possible for consumers to sample their products. There are several online sampling services such as StartSampling and MyTownOffers. B.

Couponing —Couponing is the oldest, yet most widely used and effective sales promotions tool. The number of coupons distributed to consumers in the United States has increased dramatically from 16 billion in 1968 to 332 billion in 2010. As the economy has recovered the number of coupons distributed declined to 305 billion in 2012 with 2.9 billion being redeemed. The average face value of coupons distributed was $1.27 in 2012. 1. Advantages and limitations of coupons Pros: • Coupons make it possible to offer a price reduction to those consumers who are price sensitive without having to reduce the price for everyone. • Coupons allow the offering of a price reduction without having to rely on retailers. • Couponing can be an effective promotional device for generating trial of a new brand. • Coupons can be used to encourage trial and increase consumption of established brands. Cons: • It can be difficult to estimate how many consumers will redeem a coupon and when they will do so. • Coupons targeted to attract new users of established brands are often redeemed by previous loyal users. • •

Couponing programs can be expensive. Problems of coupon misredemption and fraud exist.

2. Coupon Distribution—Coupons can be distributed in a variety of ways including: • media delivery in newspapers and magazines and as free-standing inserts (FSIs) • through direct mail • in or on packages • in stores and at points-of-purchase • over the Internet through online promotion sites • through mobile marketing by sending coupons directly to smartphones and other mobile devices Professor Notes

Chapter 16 - Sales Promotion

Couponing Trends—The increase in coupon use is primarily a result of the difficult economic times consumers are having as a result of the great recession. Some companies such as Procter & Gamble have tried to cut back on their use of coupons because of concerns over costs and effectiveness. Marketers continue to search for new and more effective couponing techniques to get around the problem of “coupon clutter.” In-store coupon distribution techniques are becoming more popular and many companies are attempting to more precisely target consumers when distributing their coupons. Several companies now offer online couponing services. Catalina Marketing offers Valupage.com where consumers can log onto a web site, type in their zip code and download manufacturer- and retailer-sponsored coupons. Cox Target Media also offers consumers the opportunity to access coupons for their local area online through its Valpak.com web site. A rapidly growing method of distribution is mobile couponing whereby coupons are sent directly to mobile phones. Digital and Social Media Perspective 16-1 discusses the growing popularity of daily deal sites which were popularized by Groupon and Living Social. It also discusses how Groupon has expanded its business model to move beyond daily deals and has been moving from a demand-fulfillment model to more of a demand-generation model.

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

Premiums can be a way of generating trade interest and support.

Cons: • Premiums can have high costs. • There may be restrictions on the use of premiums. • Redemption rates of mail in premiums are low. • Consumers may not perceive the premium offer as a value

Chapter 16 - Sales Promotion

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. Some advantages 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. • They can also be used to generate interest in or excitement over a brand and attract attention to advertising. • Contest and sweepstakes can be an effective way of dealing with specific marketing problems. • Well designed contests and sweepstakes can help build brand equity among specific target audiences 2. Problems with contests and sweepstakes • A contest or sweepstakes promotion may overwhelm the ad or brand and may do little to contribute to the brand franchise or image. • There are numerous legal problems and considerations that impact the design and administration of contests and sweepstakes. • The presence of professionals or hobbyists who submit large numbers of entries but have no interest in the product can detract from the effectiveness of contests and sweepstakes. There are many websites on the Internet that inform consumers of all the contest and sweepstakes being held, the entry dates, entry requirements, and other information needed to enter. IMC Perspective 16-2 discusses some of the problems marketers have encountered contests, games and other types of promotions. It also notes the tax consequences that consumers face when they win a contest or sweepstakes as the prizes are treated as income by the Internal Revenue Service.

Professor Notes

Chapter 16 - Sales Promotion

Refunds and Rebates—Refunds or rebates are offers to return some portion of the product purchase price after supplying some sort of proof or purchase. Consumers are generally responsive to refund or rebate offers, particularly as the size of the savings offer increases. Marketers are using rebates extensively, particularly in products categories such as consumer electronics. However as discussed in the chapter, many consumers have become frustrated with rebates and many marketers, as well as retailers, are taking steps to deal with consumer dissatisfaction and problem created by them. 1. Evaluating refunds and rebates—The advantages and disadvantages of refunds and rebates are: Pros: • Refunds and rebates can be effective sales promotional tools for creating new users and for encouraging brand switching • Refunds and rebates are often perceived as 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. Cons: • Many consumers do not like the delay and effort required to redeem refund and rebate offers. • The terms of some rebate offers are inconvenient or even unrealistic. • Consumers may have a negative perception of brands that use rebates. • Many retailers do not want to become involved with the administration of rebate programs.

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

Chapter 16 - Sales Promotion

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

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

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

Loyalty programs—loyalty programs (also referred to as continuity or frequency programs) are promotional programs that reward customers for continuing to purchase the same brand of a product or service over time. Loyalty programs have become commonplace in a number of product and service categories, particularly travel and hospitality, as well as among retailers. Many consumer packaged goods companies are also developing frequency programs that offer consumers to accumulate points for continuing to purchase their brands. The points can be redeemed for gifts such as merchandise or for discounts. Reasons for the popularity of loyalty programs include: • Marketers view these programs as ways of encouraging consumers to use their products or services on a continual basis and as a way of developing customer loyalty • Many companies are realizing the importance customer retention and frequency programs help them build relationships with customers • Frequency programs provide marketers with the opportunity to develop databases containing valuable information on their customers and which can be used for direct marketing purposes Challenges associated with frequency programs include: • Finding ways to make them true loyalty programs rather than just frequent-buyer programs • Using frequency programs to effectively differentiate a product, service or retail store, particularly when they are being used by competitors

Event Marketing—Event marketing is a form of promotion where a company or brand is linked to a specific event or a themed activity 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 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. Sponsorship of sporting events such as golf and tennis 16-11

Chapter 16 - Sales Promotion

tournaments and NASCAR races are common and many companies are sponsoring concert tours, exhibits, cultural events and other activities. Event sponsorship is discussed in Chapter 17.

Event marketing has become very popular in recent years for several reasons: • Events can be used as to create experiences for consumers and associate a company’s brand with certain lifestyles and activities • Events can be used to distribute samples as well as information about a marketer’s product or service or to actually let consumers experience the product • Events often provide marketers with access to large numbers of consumers at a relatively low cost and can be an effective part of a grass roots marketing program J.

Summary of Consumer-Oriented Promotions—the discussion of the various consumer-oriented promotion techniques shows that marketers use these tools to accomplish a variety of objectives. These techniques provide consumers with an extra incentive or reward for engaging in a certain form of behavior such as purchasing a brand. These incentives or rewards can be either immediate or delayed. Figure 16-5 in the text outlines which sales promotional tools can be used to accomplish various objectives of marketers (such as inducing trial, customer retention/loading, and supporting the IMC program and/or building brand equity) and whether the incentive is immediate or delayed. This chart is a useful way of summarizing the discussion of consumeroriented sales promotion tools.

Professor Notes

Chapter 16 - Sales Promotion

TRADE ORIENTED SALES PROMOTION

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

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

buying allowances—a deal or discount offered to resellers in the form of a price reduction on product ordered during a fixed time period promotional allowances - discounts provided to retailers for performing certain promotional or merchandising activities in support of a manufacturer’s brand slotting allowances - rather than a discount, these are special fees that retailers charge manufacturers for agreeing to handle a new product and providing a slot or position in their store to accommodate the new product.

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. 3. Displays and point-of-purchase materials—marketers use a variety of point-of-purchase materials including end-of-aisle displays, posters, banners, shelf cards, motion pieces, standup racks and other material. Point-of-purchase displays are an important promotional tool because they can help a manufacturer obtain more effective in-store merchandising of their products. Products often sell better when they are on display as they are more likely to be noticed by consumers and displays also are often accompanied by price deals. 16-13 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 16 - Sales Promotion

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

Chapter 16 - Sales Promotion

VI.

COORDINATING SALES PROMOTION AND ADVERTISING

Sales promotion techniques usually work best when used in conjunction with advertising. Conversely, a consumer sales promotion program can enhance the effectiveness of an ad campaign. When properly planned and executed to work together, sales promotion can provide a synergistic effect that is much greater than the response that would be generated from either promotional mix element used alone. Proper integration of advertising and sales promotion requires the coordination of several decision areas including: A.

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

Coordination of Advertising and Promotion Themes—to integrate the advertising and sales promotion programs successfully, the theme of consumer promotions should be tied in with the advertising and positioning themes wherever possible.

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

VI.

SALES PROMOTION ABUSE

The increasing use of sales promotion in the marketing program represents a change in IMC strategy regarding how companies market their products and services. However, the logic 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

In many situations there is the potential for companies to fall into a sales promotion trap or spiral whereby all competitors are making extensive use of promotions. Figure 16-8 shows this dilemma which is analogous to the “prisoner’s dilemma game” as the only way out of it is for both parties to cooperate by cutting back on promotions.

Chapter 16 - Sales Promotion

Teaching Suggestions In this chapter we examine the very important area of 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-oriented sales promotion very thoroughly. We strongly suggest that this material be covered over a two-class period. The first lecture can provide an overview of the sales promotion area, reasons for the shift in marketing dollars to sales promotion and consumer-oriented sales promotion. The second lecture can cover trade promotion, the coordination of sales promotion with advertising and other promotional mix elements, and the problems of sales promotion abuse. In covering sales promotion you may want to refer students back to Chapter 4 and the discussion of behavioral learning theory. The discussion of shaping procedures is particularly relevant to the use of sales promotion. You may want to review this material from Chapter 4 to show how sales promotion can be used in the introduction of a new product. A discussion of the shaping process is particularly helpful in showing how sales promotion techniques can be valuable in leading a consumer from trial of a new brand to regular purchase through the use of samples and coupons. It is very important to discuss the increasing emphasis many companies are placing on sales promotions targeted to both consumers and the trade and how it has come at the expense of media advertising. The instructor should point out the fact that sales promotion accounts for anywhere from 60 to 75 percent of the promotional budget of many consumer product companies. It is also helpful to review some of the reasons for the increase in sales promotion and discuss whether this trend will continue. The instructor should review the various consumer-and trade-oriented sales promotion techniques along with their advantages and limitations. Students should be encouraged to evaluate these techniques as strategic and tactical promotional tools and to consider the reasons why marketers use them. We also feel that it is very important to discuss how sales promotion can and should be coordinated with the advertising program. Figure 16-7 shows how the role of sales promotional agencies is changing and provides insight into how many firms are attempting to coordinate their advertising and promotional efforts. It is important to clarify the differences between event marketing and event sponsorship as the two are often confused. We discuss event marketing as a form of sales promotion while event sponsorships are discussed in Chapter 17 as part of the public relations program. You might also want to review the information in Figure 16-5 which shows how sales promotion tools can be used to accomplish various marketing objectives and whether the extra consumer reward or incentive is immediate or delayed. Some attention should be given to the problem of sale promotion abuse and the number of companies that are becoming over-reliant on sales promotion for a short-term “sales fix” rather than investing in the long term image of the brand. Time should also be given to discussing the sales promotional trap shown in Figure 16-8. To keep abreast of development in the sales promotion area you might refer to sources such as Promo, which is now part of Chief Marketer and can be accessed online at http://www.chiefmarketer.com/promotional-marketing. Another excellent source of information on promotion is the Brand Activation Association (formerly the Promotion Marketing Association) which is the world’s leading non-profit promotion marketing trade association. The BAA has an excellent web site which can be found at www.baalink.org. Also available on their web site is a link to the current years Reggie Awards winners which provide a detailed analysis of these award winning promotions including a marketing overview, objectives, strategy and tactics, results achieved, and a summary. They also contain examples of many of the ads and other types of promotional materials used in the promotion and thus are an excellent source of information. The link to the 2013 Reggie Award winners is: http://www.baalink.org/events/reggie-awards/2013-reggie-award-winners.

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Answers to Discussion Questions 1. The chapter opener discusses the wide use of sales promotion tools by Telford International Company Limited (Telford) to promote new products. Do you expect customers to react negatively if Telford stops using sales promotion for its products? Suggest two more sales promotion activities that can be undertaken by Telford. Do you think the sales promotion campaign for the Tao Ti Pak Gor Yuen drinks should continue to use social media channels to reach the target market? (L01) As the customers are accustomed to the sales promotion offered by the company, they may likely react negatively if the sales promotion benefits were eliminated. Since the target customers of the Tao Ti Pak Gor Yuen juice product line are youngsters, especially high school students, who spend more time online, especially social media, rather than the traditional magazines or newspapers. Telford already adopted sales promotion tools of free gifts, sweepstakes, and coupons, in order to provide fresh stimulation, other promotion tools such as contests, game and free samples can be considered. 2. Discuss the difference between consumer-oriented promotions and trade-oriented promotions and the role each plays in a marketers IMC program. What are the various objectives for each category of sales promotion? (L01,02,03) Consumer-oriented sales promotions are those targeted directly to consumers who are the ultimate buyers of products and services and are designed to provide them with an extra incentive to buy. Trade-oriented promotions are targeted at marketing channel members such as distributors and retailers and are designed to motivate them to stock, display, and promote a product. Both consumerand trade-oriented promotions are an important part of a firm’s IMC program. In a very competitive market, consumers must often be provided with an extra incentive such as a coupon, bonus pack, premium, or price reduction to encourage them to choose one brand over another. Consumer-oriented promotions, along with advertising, are a very important part of marketers’ “pull strategy” which creates demand for their brands. With the increasing amount of advertising clutter and many purchase decisions being made in the store, marketers must do more than just advertise to gain and hold market share. Trade-oriented promotions are also very important as marketers must give attention to getting the channel members to stock, display and promote their brands. Much of the power in channels of distribution has shifted to the retailer and competition as limited amounts of shelf space have intensified. Thus marketers must focus attention and effort on “pushing” their products through the channels of distribution. Trade-oriented promotions are an important part of this strategy. The text discusses objectives for both consumer and trade-oriented promotions and provides examples of specific sales promotion tools for achieving them. 3. What are some of the reasons brand managers are allocating more of their promotional budgets to sales promotion rather than media advertising? Do you agree with the critics who argue that the increased use of sale promotion is undermining brand equity for many once-powerful brands? (L01) There are many reasons why sales promotion has become so important and is receiving a great deal of marketers’ promotional budgets. These include the growing power of retailers; the decline in consumers’ brand loyalty and their increasing sensitivity to sale promotion offers; brand proliferation in the consumer market as many product categories have experienced a flurry of new brand introductions; fragmentation of the consumer market and trend toward increased market segmentation and regional marketing; pressure for increased accountability for promotional expenditures from companies and the resulting focus on short-term sales results; reliance on sales promotion as a way of gaining competitive advantage; and finally the increasing problem of advertising clutter which has led

Chapter 16 - Sales Promotion

many advertisers to turn to consumer promotions as a way of attracting attention and interest to their advertisements. Many brand managers are allocating more of their promotional budgets to sales promotion because they become enamored by the sales spike that often results from some type of promotion such as a sale, discount coupon or some other form of promotion. The impact of media advertising, on the other hand, is rarely immediate and plays out over a longer time period. Since many brand managers stay in their positions for a short time and often end up using promotional tactics that can have more of an immediate impact. Also, the investment community is very focused on short term results as publicly traded companies are judged on quarterly sales results. Thus it is easy for brand managers to turn to sales promotion tools that can generate a more immediate impact rather than patiently waiting for the long-term results that come from media advertising or other programs such as new product development or building channel stronger channel relations. Critics argue that a reliance on short-term sales promotion can undermine the equity of a brand as consumers will become dependent on these promotions and may decide that they will only purchase a brand if it is on sale, they have a coupon for it, or some other type of promotion is available. Consumers are much more price sensitive than they were years ago as they have come to recognize that many marketers will offer some type of promotion or discount for their brand and they will not purchase it until it becomes available. The temptation to look for the quick fix and sales spike that can be generated by using some form of sales promotion will always be there. However, marketing managers must be very careful with regard to the use of sales promotion tactics as it does not take long to find that the brand can no longer be sold at full price. Once brand equity has been lost through the overuse of sales promotion, it can be very difficult to regain. Marketers are also concerned that the large sums of money they are spending on trade promotions are not being passed through to consumers and thus they are attempting to cut back in this area. Some experts argue that the reallocation of marketing budgets from media advertising to sales promotion is reasonable as many companies are now using the various promotional tools in a more strategic way that contribute to brand equity. The allocation trend toward sales promotion is unlikely to go too much further as many marketers recognize that they are sacrificing brand equity by spending promotional dollars on sales promotion rather than advertising. It is unlikely, however, that we will see a return to the good old days when media advertising accounted for the largest portion of the promotional budget. The sales promotion area is becoming 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. 4. Discuss how the Internet and the growing popularity of social media such as Facebook and Twitter are impacting marketers’ use of sales promotion. (L01, L02) 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, as well as through their Facebook and Twitter pages, and consumers can enter them online. These companies promote their contests and sweepstakes offline through traditional media and encourage consumers to visit their web sites or social media pages 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. There are several online sampling services such as StartSampling, and MyTownOffers as well as companies that offer fulfillment services for marketers that want to provide samples, coupons and premiums on their

Chapter 16 - Sales Promotion

own web sites. Most companies run their contests and sweepstakes online because of the cost, immediate data collection capabilities and ability to keep consumers engaged with the company and/or brand when they visit a web site or social media page to enter a promotion. Also, many consumers are now online on a regular basis and would prefer to enter a contest or sweepstakes online rather than completing and mailing an entry form. Sales promotion offers are also used by marketers as a way to encourage consumers to like their company and/or brands on Facebook or follow them on Twitter. Studies have shown that a high percentage of consumers like a company or brand on Facebook or follow them on Twitter to receive discounts and promotions. Mobile marketing also relies heavily on sales promotion by providing consumers with discounts or deals based on their location. 5. What is the difference between a consumer-franchise-building and non-franchise-building promotion? Find an example of a promotional offer you believe contributes to the equity of a brand and explain how it does so. (L02) 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. Sales promotion has traditionally been thought of an IMC tool that could be used to generate shortterm sales increases, while brand building was viewed as the exclusive domain of media advertising. In fact, sales promotion was often criticized as undermining brand-building efforts as various tools such as coupons, price-off deals, and refunds or rebates were seen as encouraging consumers to buy on the basis of price. Moreover, many marketers shifted their marketing dollars from media advertising to trade promotion over the past two decades. Much of these trade promotion discounts and allowances were never passed on to consumers while those that did were generally in the form of lower prices or special deals that again encouraged them to buy on the basis of price rather than brand equity. Marketers have been changing the way they view sales promotion and realize that various forms of consumer promotion in particular can be used as a part of their brand-building efforts. As more marketers approach brand building from an IMC perspective, they are recognizing that sales promotion techniques can be used to help create and maintain brand equity. Marketers are developing contests and sweepstakes with themes that are consistent with the image of the brand. Premium offers are now designed to tie into the theme of an advertising campaign and the positioning strategy for a brand. For example, Marlboro cigarettes offers Western wear and gear through its Marlboro country catalog which reinforces the brand’s positioning theme. Many marketers are now using frequency or loyalty programs that encourage repeat purchase but also provide opportunities to develop long-term relationships with customers. Event marketing is another form of promotion that has become very popular and provides marketers with the opportunity to associate their brands with certain lifestyle, activities and experiences. As noted in the chapter, sales promotion specialists are now becoming an integral part of the brand-building team to work alongside of the advertising rather than being brought into the process after key strategic branding decisions have already been made. 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

Chapter 16 - Sales Promotion

a contest or sweepstakes that helps develop and strengthen a brand’s image or position or promotional programs that encourage repeat purchase. 6. IMC Perspective 16–1 discusses the Monopoly game contest McDonald’s has adopted to promote its set meals in Hong Kong. Evaluate the effectiveness of this game as a consumer franchise-building promotion for McDonald’s. (L02) Consumer franchise-building (CFB) promotion refers to activities that a company communicates specific features and benefits and contributes to the development of a favorable brand image. Rather than depending on a one-time offer, CFB promotions are designed to build long-term brand preference. McDonald’s in Hong Kong adopts the Monopoly game each year starting from 2010. It is able to build up the image of fun and excitements through the game and thus it is one example of successful CFB promotions. 7. Evaluate the effectiveness of coupons as a sales promotion tool. How would you respond to critics who argue that they are inefficient since less than 2 percent of coupons are redeemed? (L03) Coupons are one of the most popular and most effective sales promotion tools used by marketers However, their efficiency is often criticized as the redemption rates for coupons is very low and there are significant costs associated with their use. There are a number of reasons why marketers have been questioning the economic feasibility of coupons. Coupons have become very expensive to print, distribute and process and a number of marketers have begun taking a very close look at their efficiency. As shown in Figure 16-3, the costs of a couponing program is very high as it may cost as much as $1.90 per product moved. Many marketers also feel that consumers are less willing to take time to clip and save coupons and during good economic times they are even less likely to use them. Many companies only use coupons because their competitors do so. Companies may continue to cut back on coupons as their competitors do the same. Another important factor is the reactions of the trade. Many supermarkets are on board with companies who are cutting back on the use of coupons and are interested in eliminating the costly operational aspect of processing coupons in exchange for other types of programs that better meet their needs. Many marketers feel they can compete without coupons by shifting their promotional dollars to other areas such as sampling or in-store distribution or by offering consumers every day lower prices. It is unlikely that marketers will totally eliminate their use of coupons, as they are still very important in generating new-product trial and brand conversion. In fact, during the recent recession coupons became very popular with consumers as 332 billion were distributed and 3.3 billion redeemed in 2009, which represented a 27 percent increase over 200. The number of coupons distributed and redeemed has declined with the economic recovery as in 2012 305 billion were distributed and consumers redeemed 2.9 billion. However, there is still a large segment of consumers who are regular coupon users and might switch to another brand that offers coupons. Marketers must continue to strive to improve the efficiency of their couponing programs by using techniques such as universal coupons, shorter expiration periods and more effective targeting when distributing coupons. They are also likely to use coupons more as part of account specific marketing programs developed in conjunction with a particular retailer. 8. Discuss the type of company that would be likely to offer discounts to consumers using Groupon.com. What are the pros and cons of a company using this type of promotional offer? (L03)

Chapter 16 - Sales Promotion

As discussed in Digital and Social Media Perspective 16-1, the basis of Groupon’s business model is that it uses collective buying power to offer deep discounts and provide benefits for both consumers and businesses. Consumers save money by shopping in mass and encouraging friends and associates to take advantage of the steep discounts, which can range from 30 to 50 percent. The model is particularly popular among local businesses as it provides an incentive to consumers who might not otherwise purchase from them. Companies that have high profit margins can still make money as long as they cover the variable costs associated with the offer. Local retailers, restaurants, health and beauty clubs and services, and entertainment companies can benefit from using Groupon as it can help drive traffic to a business and many of these customers will make additional purchases (such as alcoholic beverages in a restaurant). The downside of using Groupon is that it is expensive as businesses that participate in the program must pay a percentage of their sales generated by the promotional deal, which can range from 30 to 50 percent. Many businesses use Groupon and other services such as Living Social as a way to attract first time customers in hope that they will return and become loyal customers who purchase at full price. For a deal to be profitable for a business it must result in additional spending by consumers or repeat business and/or referrals. It should be noted that Groupon is moving from a demand fulfillment model, such as where it might try to increase a low level of demand for a product or service by pushing deals to consumers, to a demand-generation model where consumers go to its website, Facebook page or mobile app to search for deals. 9. Discuss what marketers can do to avoid some of the promotional problems discussed in IMC Perspective 16-2. Do you think the problems that KFC experienced with their promotion in China could have been avoided? (L03) IMC Perspective 16-2 provides examples of major promotional blunders that have occurred both in the U.S. and abroad in recent years and resulted in major embarrassment and financial losses for companies such as, PepsiCo., Kraft Foods, Harrah’s Entertainment, Pernod Ricar (Malibu Caribbean Rum), and Frito-Lay. Some of these botched promotions are the result of poor planning by the companies as they did not accurately forecast the demand that the promotions might generate or take some measures to limit the availability of the promotional offer (such as enforcing eligibility periods or expiration dates). Marketing research might have been used to test consumers’ reactions to the promotional offers and develop a reliable forecast of the demand that the promotions would generate. In the case of the Kraft, Pepsi and Harrah’s promotions, printing errors and computer glitches rather than poor planning caused the problems. However, these errors might have been avoided if the companies had checked and double-checked all aspects of their promotions. To avoid these mistakes marketers need to plan their promotions very carefully and have them reviewed carefully by outside parties such as promotion agencies and attorneys who specialize in promotions. They must make sure they are not offering prizes that cannot be delivered. Careful proofreading of terms and conditions of promotional offers will help but the best way to avoid these problems is through careful planning and execution of promotional programs. The problem McDonald’s experienced with its Monopoly game was the result of an elaborate conspiracy by individuals working for the Simon Marketing promotion agency and was really not the result of anything that the company did wrong. The scandal surrounding McDonald’s Monopoly game generated a great deal of negative publicity and has probably undermined consumer trust and confidence in this promotion as well as others that the company might run. However, McDonald’s was able to use the Monopoly game promotion again. After a few years, the average consumer probably had forgotten about the conspiracy that occurred with the Monopoly promotion. The company has taken a number of steps to safeguard its promotion efforts such as rotating the person who seeds the winning game pieces, more closely supervising the seeding of the game to avoid any collusion, and conducting independent background checks on the agency personnel administering

Chapter 16 - Sales Promotion

prizes for games, and having in-house people work with the promotion agency to evaluate the administration of the game. Pernod Ricar might have avoided the allegations that its contest was rigged by being more transparent with the procedure used to select the winners and announcing the names of the finalists. Frito-Lay’s problems with the entry to its “Crash the Super Bowl” contest which showed a priest substituting Doritos for the Holy Eucharist during communion could have been avoided by using more vigilant screening of the entries and dismissing any that dealt with sensitive issues such as religion, politics, ethnicity and other factors. The problem KFC encountered with its promotional offer for a 50 percent discount on three different menu items is another example of the perils of promotions. KFC planned to offer the discount coupons through its online store on Taobao.com, China’s largest e-commerce site. However, word leaked out about the promotion and the discount coupons were circulated around the Internet and published on other sites. KFC might have recognized that a 50 percent discount offer would attract a great deal of attention, particularly in China where the per capita income is still quite low. Thus, the company should have considered using a smaller discount that could have still been effective and attracted less attention. The company also might have reacted more quickly and developed a consistent policy across all stores rather than having different policies. Honoring all of the fraudulent coupons could have been very costly and KFC might have considered offering a reduced discount as a way of handling the problem. 10. A recent report by a rebate fulfillment service showed that the average redemption rate for a $50 rebate on a product that costs $200 is only 35 percent. Why do you think redemption rates are so low? How might these low redemption rates affect a marketer’s decision regarding the use of rebates as a promotional tool? (L03) Redemption rates for rebates are low for a number of reasons. The primary reason is that many consumers simply do not submit the rebate forms as they view the process as a hassle. Most rebates require consumers to submit UPC codes printed on the packaging along with receipts (sometimes originals) by a certain time period. Consumers may lose their receipts, toss out the package with the UPC code or forget about the rebate. Some consumers simply decide they do not want to through the process of filing for a rebate, even when the amount is large. In some situations consumer rebate applications may be denied because the forms were not filled out properly or there are problems with the receipt or UPC code. Rather continuing to pursue the rebate, they give up and do apply for it again. Finally, many rebate checks are never cashed as they may be lost or mistaken for junk mail and never opened. The low redemption rates for rebates is encouraging more marketers to use them as they recognize that they can get consumers to focus on the discounted price for a product, but pay the full price. Since a high percentage of rebates are not redeemed, this is essentially free money for the marketers. Marketers recognize that many consumers never file for rebates and many rebate checks will not be cashed. Thus, a marketer who offers a $50 rebate for which the redemption rate is only 35 percent can achieve this price reduction for only $17.50 with the remaining $32.50 being extra profit. Marketers are now working with rebate fulfillment companies to estimate redemption rates and taking them into consideration in pricing their products and determining the amount of rebate offers. An excellent article on rebates, “The Great Rebate Runaround,” appeared in the December 5, 2005 issue of BusinessWeek which might be reviewed and/or assigned for outside reading. 11. Discuss the various types of trade promotions used by marketers giving attention to the objectives as well as the pros and cons of each. (L03)

Chapter 16 - Sales Promotion

Marketers use a variety of trade promotion tools to encourage channel members to carry and promote their products. These include contests and incentives, trade allowances, in-store and point-of-purchase displays, sales training programs, trade shows and cooperative advertising programs. The use of the various types of trade promotions will depend on the objectives of the marketer which might include obtaining distribution for new products, maintaining distribution and trade support for established brands, encouraging retailers to display their brands at the retail level through in-store and point-ofpurchase displays, and building wholesaler and retailer inventories which will encourage them to promote or push a brand to reduce inventory levels. The chapter discusses how the various trade promotion tools can be used to achieve these objectives. 12. What is meant by a sales promotion trap or spiral? Evaluate the promotional war that has developed in the fast-food industry as various competitors promote their 99 cents or dollar menus. What are the options for companies in deciding to participate in the promotional wars? (L05) A sales promotion trap or spiral occurs when competitors in an industry are making extensive use of sales promotions and an individual firm receives no differential advantage from doing so, but cannot stop because its competitive position will be affected. When firms are caught in a sales promotional trap, no one company gains from the use of promotions but the sales of an individual firm may decline if it does not continue to offer the promotional incentive. The fast food industry is a good example of an industry where promotional wars often occur. Nearly all fast-food chains now have dollar menus or 99 cent specials on items such as Whoppers (Burger King), Double Cheeseburgers or Chicken Sandwiches, (McDonald’s), Jumbo Jacks (Jack in the Box) and tacos (Taco Bell). Since the fast-food chains have lowered their prices on these items they have found it difficult to raise them back to normal levels. One of the competitors is always trying to use low priced specialty items as a draw for customers and as a way to increase market share. Companies involved in a sales promotion trap have two basic options—cut back on promotions or maintain them. As shown in the matrix in Figure 16-8, if the company cuts back on promotions and other firms follow, the result should be higher profits for all. However, if the company cuts back on promotions and competitors maintain them, the company risks losing sales and market share to the other firms. If the company maintains promotions and other companies cut back, it may see a gain in sales or market share (assuming the market is promotionally sensitive). If all competitors maintain their promotions, market shares should stay constant and profits may be negatively impacted by the costs all companies are incurring to offer the promotional incentive.

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Additional Discussion Questions (not discussed in text)

13. Discuss how sales promotion can be used as an acceleration tool to speed up the selling and/or purchasing process and maximize a company’s sales volume. (L01) There are several ways sales promotion can be used as an acceleration tool to speed up the sales process and maximize sales volume. Consumer promotion tools such as premiums, bonus packs, and price-off deals provide an extra incentive that may motivate consumers to take more immediate action. Coupons usually have expiration dates that require consumers to use them during a specific time period, which is another way of accelerating the purchase process. Marketers often use techniques such as in-store sampling programs that may be accompanied by a discount coupon and thus encourage immediate purchase. Trade promotions can also accelerate the selling process with retailers. For example, retailers who take advantage of an off-invoice allowance often pass the savings on to consumers in the form of a price reduction, which encourages them to purchase the brand. Promotional allowances are given to retailers for performing certain promotional or merchandising activities such as providing special displays, running in-store promotional programs or including the marketer’s brand in an ad. These activities will help generate sales volume and encourage immediate purchases by consumers. 14. Discuss how samples and coupons can be used to generate trial of a new product or increase consumption of an established brand. (L03) Both samples and coupons are very effective for generating trial of a new brand of a product or service. Samples are obviously effective as the majority of consumers who receive a sample either use it immediately or save it to use sometime later. Samples of a new brand provide consumers a risk-free opportunity to use and experience the benefits and outcomes of the product. This can be very important when product’s features and benefits are difficult to describe through advertising. Coupons are also an effective way to generate trial of a new brand and are second only to sampling for this purpose. Coupons are effective because they lower the price of a product, thus reducing the consumers’ perceived risk associated with trial of the product. Samples and coupons are often used together to encourage trial and repeat purchase as coupons are often included with samples delivered to consumers. The free sample provides consumers with an opportunity to try a brand with no obligation while a coupon encourages them to purchase the brand at a reduced cost which provides even more opportunity to experience the benefits associated with it. Samples can also be a way to increase consumption of an established brand. Marketers are often interested in attracting nonusers or users of a competitive brand and getting them to try their products. This is often done if a significant modification and/or improvement is made to the brand such as improving its taste, performance, efficacy and the like. Samples are an effective way of getting consumers to try a brand and compare it against the one they currently use. Coupons can also be a way to increase consumption of an established brand. They can be used to encourage nonusers to tray a brand, encourage repeat purchase among current users, and get consumer to try an improved version of a brand. They can also be an effective way to encourage consumers to trade up to more expensive brands.

15. What is a slotting allowance or fee? Evaluate the arguments for and against retailers charging slotting fees to manufacturers. (L03)

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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 an article by Paul N. Bloom, Gregory T. Gundlach and Joseph P. Cannon in the Journal of Marketing, Vol. 64 (April 2000) pp. 92-108. 16. Describe the various forms of cooperative advertising and the reasons they are used by marketers. (L03) There are three types of cooperative advertising. Horizontal cooperative advertising is advertising sponsored by a common group of retailers or other organizations providing products or services to the market. For example, automobile dealers who are all located in an auto park may allocate some of their ad budget to a cooperative fund that will encourage consumers to come to the park to shop. This form of cooperative advertising is used to achieve economies of scale in advertising as the retailers or companies can share the costs of advertising and encourage consumers to come to their market area. A second form is ingredient-sponsored cooperative advertising which is supported by a company that makes a component or raw materials that go into a final product. The objective of this form of coop advertising is to help promote end products that include the company’s components or ingredients. For example DuPont provides cooperative ad funds to companies who use many of its materials in their end products such as Teflon and Kevlar. Qualcomm also provides cooperative advertising funds to manufacturers of smartphones to encourage them to encourage them to use its Snapdragon processor as well as to wireless companies such as AT&T, T-Mobile, and Verizon to get them to promote it. The third form is vertical cooperative advertising whereby a manufacturer pays for a portion of the advertising a retailer does to promote the manufacturer’s product at the retail level. This form of cooperative advertising has many advantages for manufacturers. It gives them the capability of extending their advertising resources through the purchase of newspaper advertising at local rates. It also allows them to tailor their advertising to local market conditions and to indicate to consumers where their products can be purchased. Cooperative advertising can also enhance the manufacturer’s position with retailers and help get their product promoted at the local level (and often on sale or special). Cooperative advertising can also stretch a company’s promotional 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 wellknown 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.

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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, free standing inserts (FSIs) in the Sunday 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.

Chapter 17 - Public Relations, Publicity, and Corporate Advertising

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

Learning Objectives 1. To recognize the roles of public relations, publicity, and corporate advertising in the promotional mix. 2. To know the difference between public relations and publicity and to demonstrate the advantages and disadvantages of each. 3. To understand the reasons for corporate advertising and its advantages and disadvantages. 4. To know the methods for measuring the effects of public relations, publicity and corporate advertising. 5. To understand the different forms of corporate advertising.

Chapter and Lecture Outline I.

PUBLIC RELATIONS A.

The Traditional Definition of PR—The chapter begins by differentiating between the traditional role of public relations and the new role. The traditional role (as defined on page 579) reflects a management function that has as its primary responsibility the goal of communicating and the gaining acceptance of the organization’s policies and programs within its various communities. The New Role of PR—The new role assumes a much broader, and more marketing-oriented, perspective. In the new orientation, the public relations department operates in close communication with the marketing department (rather than as separate entities) to develop programs and policies. Integrating PR into the Promotional Mix—The chapter takes the position that the activities of the public relations department must be coordinated with marketing, and integrated into the overall promotional mix. Marketing Public Relations (MPR) Functions—Public relations activities designed to support marketing objectives are called marketing public relations functions. The text discusses the numerous ways that MPR adds value to the integrated marketing program. 17-1

Chapter 17 - Public Relations, Publicity, and Corporate Advertising

II.

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

Implementing the public relations program—Once the target audience has been established, and objectives established, a number of tools may be used for implementation or delivery including: • press releases • press conferences • exclusives • interviews

Professor’s Notes

Chapter 17 - Public Relations, Publicity, and Corporate Advertising

D. Advantages and Disadvantages of Public Relations—Pages 588-589 of the text list a number of advantages and disadvantages associated with the use of public relations. Advantages include: • credibility • low cost • less clutter • lead generation • ability to reach specific groups • image building The primary disadvantages result more from improper implementation of the programs than with public relations in and of itself. These include: • not completing the communication process • redundancies with the marketing effort E. Measuring the Effectiveness of Public Relations—Figure 17-5 lists a variety of criteria that might be used as dependent variables in the measurement of the PR program. In addition, the text lists a number of methods that might be employed in this process including • personal observation and reaction • matching objectives and results • the team approach • public opinions and surveys • management by objectives • audits Professor’s Notes

Chapter 17 - Public Relations, Publicity, and Corporate Advertising

III.

PUBLICITY The text provides a definition of publicity and notes that the distinction between publicity and public relations is not always clear. The dissemination of publicity is a task that is the responsibility of the public relations department, as is the development of programs to deal with publicity originating from other sources. At the same time, public relations activities are under the control of the firm. The same cannot always be said for publicity. A. The Power of Publicity—the text provides information for discussion of how companies handle negative publicity. Simply put, publicity is powerful enough to make or break a firm. Products such as aspirin and red wines are testimonials as to the way that companies can benefit from this power. In addition to those stated above, products such as Lululemon, Mt. Dew and Walmart have all felt the negative impact of this communication form. Given this power, the firm must have programs in place to capitalize on or control and minimize the effects of these messages. B. The Control and Dissemination of Publicity—While the marketer may not be able to control all publicity, it is possible to impact these communications in a number of ways. For example, press releases, or “leaks” may be used to make sure that the information gets out. Publicity can also be managed or turned around to be used as an advantage. C. Advantages and Disadvantages of Publicity—The text notes (p.561 that publicity offers the advantages of (1) credibility; (2) news value; (3) high word-of-mouth communications; and (4) perceived endorsement by the media. Disadvantages include possible problems with respect to: (1) timeliness and (2) accuracy. D. Measuring the Effectiveness of Publicity—The measures employed in assessment of the public relations program can also be used here.

Professor’s Notes

Chapter 17 - Public Relations, Publicity, and Corporate Advertising

IV.

CORPORATE ADVERTISING A firm’s advertising is not always designed to promote a specific product or service. Corporate advertising is designed to promote the firm overall—either by enhancing its image, assuming a position on a social issue or cause, or seeking direct involvement from the market. As noted in the text, this form of advertising is often considered controversial and/or of dubious benefit to the firm. A. Objectives of Corporate Advertising—Two specific objectives for using corporate advertising have been provided: (1) creating a positive image for the firm and (2) communication of the organization’s views on social, business and environmental issues. In addition, three more specific applications are listed including: • boosting employee morale and improving relations • providing answers to investors and reducing uncertainty • helping diversified companies establish an identity B. Types of Corporate Advertising—Various types of corporate advertising are described. • Image advertising—Advertising designed to promote the organization’s overall image may include: - general image or positioning ads - sponsorships - recruiting - generating financial support • Advocacy advertising—This form of advertising is designed to promote the organization through the taking of a position on an issue rather than through the promotion of the firm directly. Exhibit 17-18 and the Bell Telephone ad in Exhibit 17-20 are examples of the use of this form of advertising. • Issue Advertising— Another form of advocacy advertising, issue advertising, is designed to bring attention to a specific issue (Exhibit 17-19). • Cause-related marketing—A company links with a charity or non-profit organization as a contributing sponsor. C. Advantages and Disadvantages of Corporate Advertising—As noted, corporate advertising is not considered to be of value by all advertisers. Those citing advantages of this form of advertising argue that it offers an excellent means for positioning the firm and a way of reaching target markets not reached through other forms of advertising, and takes advantage of the efforts of public relations. Critics charge that it is of questionable effectiveness, and that it may be ethically wrong. D. Measuring the Effectiveness of Corporate Advertising—The effectiveness of corporate advertising may be measured through the employment of some of the methods discussed earlier in the chapter. In addition, attitude surveys, studies relating corporate advertising and stock prices, and focus group research may also be employed in this regard.

Professor’s Notes

Chapter 17 - Public Relations, Publicity, and Corporate Advertising

Teaching Suggestions As in the previous chapter, this chapter can be supplemented and developed in more detail according to the needs of the instructor. A number of good public relations texts are available. In addition to lecturing on the three topics, it is possible to generate a great deal of class discussion. A multitude of public relations and corporate advertising examples can be found, and the discussion of the impact (and examples) of publicity can also stimulate a great deal of student interest. We have found that the issue of corporate advertising, particularly advocacy advertising, provides a great topic for debate. Students might be encouraged to take one position or another and discuss the issues, providing examples to support their arguments. Finally, some time should be spent on the discussion of the new role of public relations. While there has been more and more emphasis on this IMC program element, is it as powerful a tool as many contend? A good discussion of the Ries and Ries book “The Fall of Advertising and the Rise of PR” could follow.

Answers to Discussion Questions 1. As described in the chapter lead-in, Hoi Tin Tong suffered as a result of the negative publicity it received for its main product, guilinggao. Discuss what Hoi Tin Tong had done right and wrong to ward off the negative impact of bad press. (LO2) The most effective response to negative publicity (or crisis) is providing the company’s own story. Key success factors are speed, accuracy and openness. In short, a company needs to build up trust. Speediness means that a company needs to respond to negative publicity through suitable media very fast. Accuracy means that the information provided by the company to the media consistently and the information is correct. Openness means that the company is willing to provide any information when the media request. Hoi Tin Tong’s response to the crisis was very fast, one day after the explosion of the negative report. Moreover, it did show cooperation with the media. Unluckily, the information provided was not consistent, for example, at first denying using plastic cups while later admitting. Even though the test report from the Government and Hoi Tin Tong’s own research did not show any mould in Guilingguo, Hoi Tin tong’s image was hurt. The later change of the main ingredient in Guilingguo even puts more negative effects on Hoi Tin Tong. 2. Research studies have indicated that cause marketing can actually lead to an increased intention to purchase a brand. Explain why this is the case and provide examples that you feel may pertain. (LO5) Cause marketing can be a win-win situation for the supporter and the recipient. For the receiver, much needed assistance in the form of monies, etc. will help the cause. For the supporter , consumers may take a positive attitude toward the actions, with the goodwill carrying over to the brand an/or organization. For example, in February, 2014 CVS pharmacies announced they would no longer sell cigarettes in their stores. The positive publicity led to enormous exposure on local and national news. Consumers texted and tweeted their praise for taking this position, and much goodwill was created for CVS. Other companies that have been supporters of various causes, like Tom’s Shoes, P&G and Nika Water, among many others have directly benefited by their support of causes that consumers identified with.

Chapter 17 - Public Relations, Publicity, and Corporate Advertising

3. Putting one’s name on a stadium can be an expensive proposition, and the prices continue to increase. Discuss whether this would be a good investment for a company, and why or why not. Give examples of companies for which this would be a good investment. (LO3). The following chart shows some of the costs of naming rights for stadiums. As you can see, these costs can be extensive, yet it seems there is no shortage of companies lining up to put their names out there.

Naming rights deals | Largest naming-rights deals Top 20 major league stadium deals Stadium

City

Sponsor

Price

No. of years Avg. annual value

Expiration year

Farmers Field*

Los Angeles

Farmers Insurance

$600 million

TBD

MetLife Stadium

East Rutherford, N.J. Metropolitan Life Insurance $425 million-$625 million 25

$17 million-$20 million 2036

Citi Field

Queens, N.Y.

Citigroup

$400 million

$20.0 million

2028

Reliant Stadium**

Houston

Reliant Energy

$310 million

$10.0 million

2032

Gillette Stadium^

Foxboro, Mass.

Gillette

$240 million

$8.0 million

2031

FedEx Field

Landover, Md.

FedEx

$205 million

$7.59 million

2025

Minute Maid Park

Houston

Coca-Cola Co.

$178 million

$6.36 million

2029

University of Phoenix Stadium

Glendale, Ariz.

Apollo Group

$154.5 million

$7.72 million

2026

Bank of America Stadium

Charlotte

Bank of America

$140 million

$7.0 million

2023

Lincoln Financial Field

Philadelphia

Lincoln National

$139.6 million

$6.98 million

2022

Lucas Oil Stadium

Indianapolis

Lucas Oil Products

$121.5 million

$6.07 million

2027

Citizens Bank Park

Philadelphia

Citizens Bank

$95 million

$3.8 million

2029

M&T Bank Field

Baltimore

M&T Bank

$79 million

$5.0 million

2017

Great American Ball Park

Cincinnati

Great American Insurance

$75 million

$2.5 million

2032

Home Depot Center

Carson, Calif.

Home Depot

$70 million

$7.0 million

2013

U.S. Cellular Field

Chicago

U.S. Cellular

$68 million

$2.96 million

2025

Chase Field

Phoenix

JPMorgan Chase

$66.4 million

$2.2 million

2028

Comerica Park

Detroit

Comerica Bank

$66 million

$2.2 million

2030

Petco Park

San Diego

Petco

$60 million

$2.73 million

2025

Sports Authority Field at Mile High Denver

Sports Authority

$60 million

$6.0 million

2035

CenturyLink Field

CenturyLink

$60 million-$100 million 15-20

Seattle

$20.0 million

$4.0 million-$5.0 million 2019-2024

For some companies, the exposure, recognition and repetition of the brand name makes this a good deal. For example, when Qualcomm signed on to be the name for San Diego’s sports teams (Padres, Chargers, Aztecs) many thought the $18 million was a waste of money. However, the contract ran for twenty years (1997-2017). Think of the national exposure created each time one of these teams (and two NCAA bowl games/year) were on TV. The signage can be seen from two major freeways, a trolley, and on incoming airplane flights. Clearly this was a great deal! Naming rights don’t always work out. Many stadiums have had their names change as companies changed their names, went out of business or just withdrew their support. In this case no one wins. If you look at the names in the above chart, it would seem that the keys to success may be to have brands that are purchased by many segments, good exposure and visibility and brand recognition.

4. The chapter discusses cause marketing, advocacy advertising and issue ads. Explain the differences between these forms of communication and give examples of each. (LO5) All of these forms of communication fall under the rubric of corporate advertising. While each is similar in that the ads are not designed to sell products or services, but rather support causes, there are differences in intent: 17-7 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 17 - Public Relations, Publicity, and Corporate Advertising

Advocacy ads—as noted on p. 598, advocacy advertising “is concerned with propagating, ideas and elucidating controversial social issues of public importance in a manner that supports the interests of the sponsor”. The sponsor may advocate a position such as supporting the Obama health care program , saving water, environmental concerns, etc. While the sponsor may not have a direct link, they usually do. Issue ads—while essentially a form of advocacy ads, issue ads like those shown in Exhibit 17-19 usually do not identify the sponsor, and may be paid for by unions, social and or political groups, etc. Their purpose for sponsoring these ads is to bring pubic attention to an issue they consider important or have a stake in. Cause-related advertising—the least controversial of the three, cause-related ads show a company, organization or group’s support for a cause—no reciprocity involved. Exhibit 17-21 provides an excellent example of a cause-related ad. Others include support for the Leukemia Society, American Cancer Society, Make-a Wish Foundation, etc.

5. Social media have had a profound impact on the power of publicity. Explain what this means and whether you believe it to be true or not. Provide examples to support your position. (LO2) Social media is like word of mouth on steroids. Regardless of whether it is positive or negative, when something goes viral on social media, millions of people are exposed. Brands have become successful almost entirely on the basis of going viral. Brands and people have suffered from both positive (Gangham Style) and negative (Lindsey Lohan, Justin Beiber) publicity through social media. In the chapter we discuss the incredible power of publicity, both positive and negative. Clearly marketers would love to be able to capitalize on positive publicity, and control negative postings. Unfortunately for them they cannot. There are numerous examples of persons, brands and companies brought down and succeeding through traditional pr channels. The advent of social media and the extreme speed and size of the market reached just magnifies this exposure. Just ask Tiger Woods or Lance Armstrong.

6. Describe the conflict between traditional PR agencies and those that see PR as more of a marketing function. Cite reasons why each of these groups holds the position it does. Who is right? (LO1) 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 some of the reasons both supporting and opposing this position: •

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, as demonstrated by numerous examples in the book. 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. The success of the examples cited are evidence that PR is now more important.

Chapter 17 - Public Relations, Publicity, and Corporate Advertising

•

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. For example, Heinz received $10 million worth of free publicity about their introduction of green ketchup, but two months too early, before they were ready for it. Perhaps more importantly, the message was not what they had intended to promote. While Heinz was fortunate, the publicity could have been a disaster. Further, publicity can be a tool for mature brands beyond the introductory stage, and there is no reason to focus on this aspect only. The Pillsbury example in the text reflects this well. Finally, almost eight times as much 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. Therefore, no one is right or wrong, the two must work together.

7. Some marketers consider corporate advertising a waste of time and money. What are some of the reasons they feel this way? Take a position pro or con corporate advertising and defend it. (LO3) Because corporate image advertising does not specifically promote a product or service, critics contend that it is a waste of time and money. They argue that the company must be having problems that need to be addressed, or that it is a self-indulgence designed to satisfy the egos of top management. They further contend that consumers are not interested in this form of advertising, and the monies would be better spent on ads that might generate sales. Opponents cite studies showing that corporate ads are of less interest to consumers than other forms of advertising. Corporate image advertising is used for a variety of purposes. Besides general image ads and sponsorships, companies use corporate image ads to appeal to stock holders and investors, recruit and inform the public as to their actions. In addition, advocacy and issue ads are used to address issues that might directly impact the organization in a potentially negative way. There is a role for corporate image advertising, just as there is a role for other forms of image advertising. Marketers need to create a positive image of their organizations in the minds of consumers, and this form of advertising is effective in doing so.

8. Explain how social networks can both help and hurt companies in regard to publicity. (LO1) Do to their viral nature, social networks can spread both positive and negative publicity even faster than the traditional channels themselves can. Consider a situation in which something negative happens to you. You go on Facebook and let all of your friends know, they, in turn let their friends know, and the momentum builds. Particularly in the case of negative publicity, information is passed along to many others and quickly. Twitter also allows for rapid dissemination of information. Companies monitor Twitter daily, knowing that if someone Tweets negative things about them, it will lead to multiple exposures which may be harmful to the organization. An example is the case where one airline passenger Tweeted management to complain, and a competitor, seeing the Tweet offered the consumer the opportunity to try their airline as a substitute.

Chapter 17 - Public Relations, Publicity, and Corporate Advertising

There have also been videos uploaded to You Tube and other sites mocking companies, or passing along the negative publicity they have encountered to others. Of course, the same holds true for positive publicity, which social networks can pass on as well. However, like the song goes “everyone likes dirty laundry”, and the likelihood that the information will go viral has less of a chance, unless it is very unique.

9. Discuss some of the advantages and disadvantages of public relations. Now do the same for MPR’s. (LO3). Pages 588-589 list the advantages and disadvantages of public relations. Advantages include: a.

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

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

Lead generation—pr, if effectively targeted, can generate leads ranging from financial investments to sales to participation in or support of the cause

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 public relations are the lack of control over the message and guarantee that it will appear in the media at all. Thus, the intended communication never takes place. 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. Reasons in support of MPR’s 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.

•

Credibility—as noted in the previous advantage, MPR’s may result in higher credibility than marketing efforts

Chapter 17 - Public Relations, Publicity, and Corporate Advertising

•

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

•

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

Reasons for not using MPR’s 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

•

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.

10. Why do companies get involved in event sponsorships? Is this an effective strategy? Give examples of event sponsorships that were successful and some that were not. (LO5 One of the fastest growing public relation activities is that of event sponsorship. While event sponsorships may take on a variety of forms, the sponsoring of sports events is by far the most commonly employed. Companies like to engage in these sponsorships because it gets their name in front of the right target audience. Association with the event may also reflect favorably on the company. Think for a minute about the Susan G Komen Foundation—a charity supporting women with breast cancer. The “Race for the Cure” event is sponsored by Yoplait, Whirlpool, Ford, American Airlines and dozens more—all of whom support the cause, but also want to create a favorable image with women. Also, depending on the event type, it can lead to many more exposures than they are paying for. Consider these other examples of event sponsorships: • • • • •

Sports—sponsoring tennis tournaments, college bowl games, having one’s name placed on a stadium or arena, etc. Entertainment tours and attractions—Verizons’ sponsoring of music tours Festivals, fairs, and events—local event sponsorship is common Causes—the Autism Speaks Organization’s cause for autism Arts—many companies sponsor the arts—particularly those with upscale brands.

Chapter 17 - Public Relations, Publicity, and Corporate Advertising

Additional Discussion Questions (not in text) 11. The chapter discusses the lack of coordination that often exists between marketing and public relations departments. Discuss some of the reasons this might occur. What can be done to reduce this conflict to achieve greater coordination? (LO1) One of the difficulties in implementing an IMC program is the fact that many of the communications functions operate as silos rather than in an integrated manner. Perhaps the best example of this is the marketing-public relations divide. Marketers are trained in business schools, PR people in Journalism and/or Communications schools. They do not always perceive the world the same. Not only that but they have been educated to do different jobs. PR people (rightfully) do not see their responsibilities as including marketing products. A problem associated with MPR’s is that it dilutes the credibility of PR, or at least has the potential to do so. Therefore, many would argue that marketing and public relations should remain separate. While there are good arguments on both sides, the bottom line is what is best for the organization or corporation. In a well functioning organization, PR needs to understand the role of marketing and vice versa. Both must recognize that working together is for the betterment of the organization. Thus by getting both parties to understand what the others do and why, many of the barriers to effective communications will be eliminated.

12. Examine a number of examples of different types of sponsorships corporations are currently engaging. Analyze the reason for the sponsorship, and evaluate whether it employs a wise strategy or not. (LO3) Sponsorships are clearly on the increase—particularly in sports and entertainment. Many companies sponsor NASCAR. Others sponsor NCAA college football games (Tostida Fiesta Bowl, Capital One Bowl, Advocare Bowl). Buick sponsors golf tournaments and Verizon sponsors concerts. The list goes on. Thinking about reasons why companies sponsor these events, it becomes evident that they believe their target markets will recognize these associations and they will gain value from this association. Sometimes the sponsorships are to gain awareness and/or recognition (for example, NASCAR), other times there are even more involved marketing strategies – Cadillac promotes rock concerts in an attempt to make their cars more attractive to younger people. Buick attempted the same positioning using Tiger Woods to appeal younger audience (before his scandal), and is now using Peyton Manning. NCAA football sponsors do the same thing. They reach a desirable audience demographically and socio-economically, building up goodwill along the way. Verizon’s sponsorship of rock concerts also seems obvious. Who attends rock concerts—young people. Who does Verizon most want to reach—all those young cell phone users. Take a look at any sponsorship (RockStar energy drink and The X Games) and you will see a similar pattern.

13. There is a saying that “any publicity is good publicity”. Discuss what you think about this statement.(LO2)

Chapter 17 - Public Relations, Publicity, and Corporate Advertising

This often heard statement obviously seems to reflect a misunderstanding of the power of publicity. One would certainly get a strong argument against this statement from Audi, Tylenol, Texaco, Wendy’s and Wal-Mart, to name a few of the companies that have suffered the consequences of negative publicity. Publicity is a very powerful tool, and while some companies have benefited from the power of positive publicity, numerous others have lost sales or even been driven from business by negative publicity. Any publicity is definitely not necessarily good publicity. Measuring effectiveness— the measures used to determine the effectiveness by marketing standards may be more difficult to employ. Traditional pr measures may not be as useful. Many companies have experienced the impact of negative publicity over the past few years as a result of product recalls, marketing blunders, etc. Give some example of some instances where companies experienced negative publicity and how they handled it. Evaluate their means of dealing with negative publicity. The power of publicity emanates directly from its high credibility. Because the source of the communication is generally perceived as being objective, or at least as not having a vested interest, the information is often treated differently than that of advertising and/or promotions. As a result this information is passed on more readily, and in general is considered more believable. A contributing factor is the way that the media handle publicity. Unfortunately for many firms, negative publicity often receives more attention than does that of a positive nature. Audi for example, experienced negative publicity on the TV show Sixty Minutes regarding its Audi 5000 and accelerator sticking problems. While Audi won a subsequent court battle, the brand image was tarnished and the 5000 never recovered. as well as those of Jack-in-the Box and Suzuki have also experienced strong negative impact of negative publicity. Texaco, Firestone, Mattel, and many other companies have been hurt by bad publicity, each attacking the problem in a different manner, and with different outcomes Examples of the power of publicity are common in both regards. BP, Toyota, Tylenol, and Odwalla are all examples of the power of negative publicity. On the other hand, Aspirin and red wine are examples that demonstrate the impact of how publicity can be used positively. While there are many ways to deal with negative publicity, one thing is certain—the company must face up to it and deal with it. It will not go away. 14. Many accuse companies like GoDaddy.com of exploitation of the media. They contend that events like NFL’s refusal to show GoDaddy’s and Soda Streams commercials are designed strategies to gain publicity. Discuss whether you feel these are designed strategies and whether they are likely to be effective. Cite other examples of such efforts. (LO2) The NFL’s refusal to air a GoDaddy commercial because it was too sexy, and a Soda Stream ad that attacked Pepsi and Coke are seen by many to have been staged attempts to generate free publicity. Both of these events generated a great deal of publicity. The Soda Stream commercial was shown with out the mention of Coke and Pepsi and with no fanfare. The impact of the GoDaddy incident had a very different outcome. As the evidence shows, GoDaddy (after the publicity and showing of one of the spots) led to an almost doubling of revenues, and movement from an almost unheard of domain provider to number one. Clearly, the outcome for GoDaddy was positive. An effort by retail clothing store Clothestime, Inc. a few years back to generate publicity by producing sexy ads that some media refused to air was not so successful. The effort seemed so blatant that when the media refused to show it, no on took up the cause. 17-13 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 17 - Public Relations, Publicity, and Corporate Advertising

It is hard to say with certainty whether or not these incidences were planned or not. Certainly, in the latter case, given that one ad did air, one might argue that the intent was to have the commercials shown, and the publicity was generated by the NFL, not GoDaddy. A similar incident occurred with the “What Happens in Vegas Stays in Vegas” campaign when they wanted to air a Super Bowl spot. The NFL’s opposition to the ad led to enormous publicity, and probably benefited the campaign more so that the commercials could ever have done. There is little doubt that companies try to generate free publicity whenever they can (consider it a form of guerilla marketing). Sometimes these efforts are successful, other times they are not as the public recognizes their true intent. Nevertheless, the efforts continue, and are likely to do so in the future.

15. Describe some of the criteria used by companies to measure effectiveness of the public relations program. Provide examples. (LO4) The text discusses a number of criteria for measuring effectiveness of PR programs. Among others, these include: • • • • • • • • •

Total number of impressions over time Total number of impressions on the target audience Total number of impressions on specific target audiences Percentage of positive articles over time Percentage of negative articles over time Ratio of positive to negative articles Percentage of positive/negative articles by subject Percentage of positive/negative articles by publication or reporter Percentage of positive/negative articles by target audience

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

• • • •

Personal observation and reaction-- personal observation and evaluation by one’s superiors should occur at all levels of the organization Matching objectives and results--specific objectives designed to attain the overall communications objective should be related to actions, activities, or media coverage. For example, placing a feature story in a specific number of media is an objective, quantitative, and measurable goal. The team approach--whereby evaluators are actually involved in the campaign. By working together the team develops and accomplishes their goals. Management by objectives--executives and their managers act together to identify goals to be attained and the responsibilities of the managers. These goals are then used as a standard to measure accomplishments. Public opinion and surveys--research in the form of public opinion surveys may be used to gather data to evaluate program goal attainment. Audits--internal audits involve evaluation by superiors or peers. External audits include those that are conducted by consultants, the client, or other parties outside the organization.The growth of video news releases, (VNR’s) has increased significantly. The Bush administration and Governor Schwarzenegger of California have both employed this strategy. Describe what a VNR is, and discuss some of the ethical issues 17-14

Chapter 17 - Public Relations, Publicity, and Corporate Advertising

surrounding their use. Should VNRs have to carry a message noting that they are VNRs? (LO1)

IMC EXERCISE Instruct students to find examples of various types of public relations activities engaged in by organizations. These include both traditional and nontraditional methods of public relations. Also, have them find an example of a company engaged in sponsorship of an event such as a music concert tour or sporting event. They should be asked to evaluate the company’s sponsorship of the event with regard to issues such as the target audience they are trying to reach and how they might benefit from the sponsorship of the event.

Chapter 18 - Measuring the Effectiveness of the Promotional Program

CHAPTER 18 MEASURING THE EFFECTIVENESS OF THE PROMOTIONAL PROGRAM Chapter Overview This chapter discusses one of the most critical—yet controversial—issues in all of advertising. While it seems perfectly logical that managers on both the advertising and client side would like to know whether the programs they have implemented are effective, in reality the majority of advertising and promotional programs go untested. Compounding this is the fact that many of those programs that are evaluated use inadequate or inappropriate measures in making this determination. The purpose of this chapter is to discuss why organizations need to measure the effectiveness of their programs, and when, where and how such measures should be used. The chapter begins with a discussion of the reasons why advertising effectiveness measures should be taken and why they commonly are not. How, when, what, and where such measures should be used follows, with a description of many of the techniques commonly used. The chapter concludes with a discussion of some of the problems involved in measuring the effectiveness of these programs and establishes some of the essentials for proper testing.

Learning Objectives 1. To understand reasons for measuring advertising effectiveness. 2. To know the various dependent measures that is used in assessing advertising effectiveness. 3. To understand the requirements for conducting proper effectiveness research. 4. To evaluate alternative methods for conducting measures of advertising effectiveness.

Chapter and Lecture Outline I.

ARGUMENTS FOR AND AGAINST MEASURING EFFECTIVENESS

As noted in the beginning of this chapter, it seems logical that research on the effectiveness of the promotional program would be conducted. Yet we also find that this is not always the case. Reasons why research should be conducted and reasons why it is not are presented. A.

Reasons for Measuring Effectiveness—three major reasons are offered for why measures of effectiveness should be taken. These include: 1. To avoid costly mistakes 2. To evaluate alternative strategies 3. To increase the efficiency of advertising in general

Chapter 18 - Measuring the Effectiveness of the Promotional Program

In addition, it should be noted that these results serve as input into the situation analysis of the next planning period. B.

Reasons Not to Measure Effectiveness—a variety of reasons (and excuses) are offered to explain why the effectiveness of the advertising/promotional campaign is not taken. Perhaps the most common of these are: 1. The high cost of conducting research 2. Problems with research measures used 3. Disagreement as to what to test 4. Objections from the creative department While some of these arguments have merit, others result from excuse making, politics, or a lack of understanding of the value associated with conducting such research.

Professor’s Notes

II.

CONDUCTING RESEARCH TO MEASURE EFFECTIVENESS

This section discusses how research to measure effectiveness should be conducted. More specifically, it addresses the issues of what to test, as well as where and how such evaluations should take place. A.

What to Test—each of the elements of the promotional program should be examined. Research should be designed to determine the effectiveness of: 1. Source factors—an important question is whether the spokesperson being used is effective and how the target market will respond to him or her. 2. Message variables—A number of factors regarding the message and its delivery may have an impact on its effectiveness, including the headline, illustrations, text, and layout. 3. Media strategies—Research may be designed to determine which media class (broadcast vs. print) generate the most effective results, the location within a particular medium (front page or back page) and size or length of time the ad or commercial runs. Another factor is the vehicle option source effect—the differential impact that the advertising exposure will have on the same audience member if the exposure occurs in one media option rather than another. 4. Budgeting decisions—the relationship between the ad budget and sales is often hard to determine because using sales as an indicator of effectiveness ignores the impact of other marketing mix elements. 5.

When to Test—Effectiveness testing can generally be classified as: Pretests—Pretests are those that occur prior to the implementation of the campaign. Posttests. Posttests are those that are taken once the program has been implemented.

Chapter 18 - Measuring the Effectiveness of the Promotional Program

Figure 18-2 lists some of the many types of tests that fall into each category. B.

Where to Test—there are certain advantages and disadvantages associated with where effectiveness tests take place. Again, two different testing environments are discussed. 1. Laboratory tests—those tests conducted in a specific location to which consumers are brought—for example, testing labs, theaters, etc. The major advantage is control. The major disadvantage is a lack of realism and the potential for testing bias. 2. Field tests—those tests taken under more natural viewing situations, such as phone surveys, inquiry tests, etc. The major advantage is that they offer a more realistic viewing situation. At the same time, a lack of control and a number of other distracting conditions are disadvantages associated with these methods.

How to Test—Figure 18- lists 9 principles of advertising testing that have been endorsed by the nation’s largest advertising agencies. PACT, or Positioning Advertising Copy Testing, principles were developed by advertisers and their agencies to provide guidelines on conducting appropriate advertising effectiveness studies.

Professor’s Notes

III.

THE TESTING PROCESS

The actual testing of ads may take place throughout the campaign. Four types of tests are discussed. A.

Concept Generation and Testing—Figure 18-4 describes the process involved in concept testing. As noted, concept testing takes place very early on in the development of the campaign, and is designed to explore consumers' responses to ads and/or campaigns being considered. Focus groups and mall intercepts are commonly employed methods at this stage.

Rough Art, Copy and Commercial Testing—Because of the high costs associated with testing, completed advertisements and commercials, many advertisers (or their agencies) conduct such tests prior to the completion of the final product. Figure 18-6 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.

Pre-testing Finished Ads—many advertisers prefer to test the ad in its finished form. A variety of both print and broadcast measures may be used. 1. Pre-testing finished print messages—a number of methods for pretesting print messages are provided. Some of the more common of these are: a. portfolio tests b. readability tests c. dummy advertising vehicles 18-3

Chapter 18 - Measuring the Effectiveness of the Promotional Program

2. Pre-testing finished broadcast ads—some of the more popular methods for pre-testing broadcast ads are: a. theater tests—one of the most popular lab methods for pretesting finished commercials. b. on-air tests—often includes single-source ad research. c. physiological measures include:

•

pupillometrics

•

electrodermal response

•

eye tracking

•

brain wave research.

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 various print media. b. recognition tests c. recall tests—these attempt to measure recall of specific ads. 2. Posttests of broadcast commercials a. comprehensive tests—The chapter discusses one of the more commonly employed posttest measures of broadcast commercials. The Ipsos-ASI Next *TV test replaced the Burke Test which had often been the topic of debate in respect to its value and validity. b. test marketing of broadcast ads—many companies conduct tests designed to measure their advertising effects in specific test markets before releasing them nationally. c. single source tracking studies—these track the behaviors of consumers from the television set to the supermarket checkout counter. d. tracking print/broadcast ads—tracking studies have been used to measure the effect of advertising on awareness, recall, interest, and attitudes toward the ad and/or brand as well as purchase intentions.

Professor’s Notes

Chapter 18 - Measuring the Effectiveness of the Promotional Program

IV.

ESTABLISHING A PROGRAM FOR MEASURING ADVERTISING EFFECTS

To this point in the chapter, a number of methods of testing the effectiveness of print and broadcast ads have been presented. In each case, these measures were discussed in respect to their contributions as well as their limitations. In this final section, the chapter discusses how the marketer might establish a sound program for conducting effectiveness research. This final section focuses on two distinct areas; (1) problems with current research methods and (2) essentials of effective testing. A.

Problems with Current Research Methods—A number of problems with existing research methods are discussed, with the PACT program discussed earlier used as a standard against which to measure these methods. In this section, each of the PACT principles are discussed, with suggestions as to how each principle might be met.

Essentials of Effective Testing—Again referring to the PACT program, four suggestions are offered that we believe will improve the effectiveness of the evaluation program. These include: •

establishing communications objectives

•

employment of a consumer response model

•

utilization of both pre and posttests

•

use multiple measures

•

understanding proper research methodologies

Professor’s Notes

V. MEASURING THE EFFECTIVENESS OF OTHER PROGRAM ELEMENTS The majority of this chapter has focused on the measurement of advertising effectiveness. Obviously, measuring the effectiveness of other program elements is important as well. The final section of this chapter discusses the measurement of effectiveness of sales promotions programs, sponsorships and nontraditional media. A. Measuring the Effectiveness of Sales Promotion—A number of organizations measure sales promotions. Pages 636-637 discuss some of the methods employed. B. Measuring the Effectiveness of Support Media—Some progress has been made in the measurement of the media discussed in chapter 13. •

The effects of shopping cart signage—This study used personal interviews in grocery stores to measure awareness of, attention to, and influence of this medium.

•

The effectiveness of ski-resort-based media—The Traffic Audit Bureau is tracking the effectiveness of this form of advertising to give advertisers more reliable criteria on which to base purchase decisions. 18-5

Chapter 18 - Measuring the Effectiveness of the Promotional Program

C. Measuring the Effectiveness of Sponsorships—A number of companies now measure sports sponsorship. D. Measuring the Effectiveness of other IMC Program Elements—Page 638 mentions a few examples of research services that measure the effectiveness of other promotional program elements. E. Attempts to Measure the Combined Effects of IMC Media—A number of studies have been conducted in an attempt to measure the combined effects of combining IMC elements. These studies continue to increase in scope and methodology employed.

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 communications objectives. As in some of the previous chapters, this subject matter can be presented in a very interesting fashion. The media frequently provide information that can be used to keep the student current, and to provide “real world” applications. Sources such as Ad Age, AdWeek, and the Wall Street Journal often have articles relating to this subject matter as does the online site eMarketer. In addition, the single-source systems are often in the news. We have found through our experiences that academics seem to place more emphasis on the importance of measuring effectiveness than do practitioners. We believe that this may be one of the more important elements of the entire decision sequence model of promotional planning and suggest that this importance be stressed to students as they will soon be the practitioners.

Answers to Discussion Questions 1. Most managers believe that they should be measuring the effectiveness of their advertising programs. However, studies have shown that they usually do not do so. Cite some of the reasons managers should measure effectiveness, and why they do not. (LO1) The chapter cites a number of reasons why advertising effectiveness measures are not taken. Each of these is discussed in the text, but a short review is also provided here. Cost—One of the most commonly cited reasons is the belief that conducting these measures is too costly, or that the moneys are better spent elsewhere. Many advertisers feel that they would rather spend the money to purchase more media, improve production, etc. In addition, they cite the time costs that are involved. Research Problems—Because many advertisers attempt to directly measure the effect of advertising on sales, research problems develop. When the problems associated with isolating the effects of advertising on sales are pointed out, they opt not to conduct research at all. Disagreements on what to Test—As noted, different persons within the organization will have different motivations for conducting effectiveness research, and different needs to be satisfied.

Chapter 18 - Measuring the Effectiveness of the Promotional Program

Sometimes there is an inability to come to agreement what should be tested, and the testing never gets done. The Objections of Creative—Many agencies are dominated by top managers who have moved through the ranks on the creative side. Many creatives feel that to attempt to measure the effects of their ads would stifle their creativity, and would structure the way that they design their campaigns. As a result they argue against effectiveness measures. If their relationship with the client is a strong one, they are too often successful. A variety of reasons can be offered as to why effectiveness measures should be taken: To Avoid Costly Mistakes—If the ad or commercial is developed is unsuccessful, a great deal of cost will be incurred by the company. These costs include the actual costs associated with the development and implementation of the campaign, as well as the opportunity cost. Evaluating Alternative Strategies—Research can be used to evaluate the effectiveness of various strategies under consideration. These strategies may be tested as early as the concept generation stage or after implementation. Increasing the Efficiency of Advertising—Testing can assist the advertiser in “fine tuning” the ad. Such tests can eliminate mistakes that may result from improper identification of needs and wants of the target market, the use of terms that the receiver does not understand, etc. In reality, there is really no strong argument for not testing, as the benefits will outweigh the costs. This argument is particularly strong when the marketer realizes that the results of the current program will serve as input into the next period’s planning process. If these measures are not taken, the planning process will be restricted.

2. Marketers have turned to physiological measures in an attempt to determine the effectiveness of their advertising. Discuss some of the methods being used, and the advantages and disadvantages of each. (LO3) Pages 624-626 discuss the use of physiological measures used to determine the effectiveness of advertising. These measures indicate the receiver’s involuntary response to the ad, theoretically eliminating biases associated with the voluntary measures reviewed to this point. (Involuntary responses are those over which the individual has no control, such as heartbeat and reflexes.) Physiological measures used to test both print and broadcast ads include pupil dilation, galvanic skin response, eye tracking, and brain waves (among others): Pupil dilation. Research in pupillometrics is designed to measure dilation and constriction of the pupils of the eyes in response to stimuli. Dilation is associated with action; constriction involves the body’s conservation of energy. Advertisers have used pupillometrics to evaluate product and package design as well as to test ads. Pupil dilation suggests a stronger interest in (or preference for) an ad or implies arousal or attention-getting capabilities. Because of high costs and some methodological problems, the use of pupillometrics has waned over the past decade. But it can be useful in evaluating certain aspects of advertising.

Chapter 18 - Measuring the Effectiveness of the Promotional Program

Galvanic skin response (GSR). Also known as electrodermal response (EDR) , GSR/EDR measures the skin’s resistance or conductance to a small amount of current passed between two electrodes. Response to a stimulus activates sweat glands, which in turn increases the conductance of the electrical current. Thus, GSR/EDR activity might reflect a reaction to advertising. While there is evidence that GSR/EDR may be useful to determine the effectiveness of ads, difficulties associated with this testing method have resulted in its infrequent use at this time. Eye tracking. As seen in the lead-in to this chapter, a methodology that is more commonly employed is eye tracking (see page 626), in which viewers are asked to view an ad while a sensor aims a beam of infrared light at the eye. Eye tracking can identify strengths and weaknesses in an ad. For example, attractive models or background action may distract the viewer’s attention away from the brand or product being advertised. Eye tracking has increasingly been used to measure the effectiveness of websites and online ads and, as noted earlier, e-mails. Brain waves. Electroencephalographic (EEG) measures can be taken from the skull to determine electrical frequencies in the brain. These electrical impulses are used in two areas of research, alpha waves and hemispheric lateralization. (see p. 625)

3. How have marketers employed the methodology of eye tracking? Give examples of companies that have employed this methodology. When does eye tracking seem to be most useful? (LO3)

Eye tracking has been used to observe viewer’s eyes to see where they go in watching a commercial or print ad, and where they focus and how much time is spent there. This form of tracking has been used for quite some time has been proven to offer valuable insights. The methodology has now been extended to other areas of communications research. Package designers have experimented with various label designs to determine which will stand out on store shelves. Print researchers have examined the movement of the eye when one is reading a newspaper or magazine. A popular use of this methodology now is to see where ones’ eyes go when viewing a website, and how long certain aspects of a site attract attention. Results show that viewers start at the top left (consistent with previous research) and then proceed through the rest of the site. Different banner or ad types will hold the eye’s attention, etc. Again, as a physiological measure, eye tracking provides some insights as to effectiveness— particularly attention. And, again, this measure needs to be combined with others to determine the “why” of such movements.

Chapter 18 - Measuring the Effectiveness of the Promotional Program

Describe the Starch Ad Readership Report and the measures provided therein. Discuss how Starch has had to adapt this report due to changing market conditions, and the new metrics now provided. (LO2) Figure 18-12 on page 629 shows the measures taken in the GFK Starch Ad Readership Report. The Starch report has been relied upon for decades as a standard for testing print ads. The measures taken include the noting score, brand associated score and the read most score. These scores have been employed since the reports started. Recently, Starch has added additional measures. These include: brand disposition, purchase behavior or intention, actions taken, and publication and advertising engagement. Like many other companies that have measured traditional media advertising effectiveness, Starch has had to adapt their methodology and measures provided to adapt the their changing media environment. As an example, is the addition of the measure of advertising engagement. As noted in the text, engagement is the new “hot” measure. Even though there are a number of problems associated with this measure, clients nevertheless demand it. Should Starch not offer this (or other measures) clients demand, the company runs the risk of being considered outdated and business will move elsewhere.

Explain why different metrics may be more useful to marketers in determining the effectiveness of their advertising at different times. Give examples of which metrics may be useful as consumers go through the purchase decision process. (LO4).

Chapter 7 discussed advertisers’ use of consumer funnels to understand the consumer decision making process and to establish communications objectives. Using these traditional funnels or some of the newer decision making scenarios proposed requires an advertiser attempting to measure the effectiveness of his/her campaign to employ different media at various stages of the decision making process. Using different media requires the use of different metrics to determine their effectiveness. For example, at the top of the funnel, where awareness is important, the advertiser may want to use TV. Recall of the ad would perhaps be the most effective measure. Further down the funnel, comprehension would be a critical measure. Tests that measure recognition, and comprehension of the message may be more important at this point. To measure the ability of the ad or website to gain attention, the marketer may wish to use eye tracking. To get the best measure of the campaign’s effectiveness, tracking methods may be the most valuable metric.

Chapter 18 - Measuring the Effectiveness of the Promotional Program

6. Explain why it is so difficult to measure the effectiveness of an IMC program that uses multiple program elements. (LO3) Think about the argument used to describe why it is so hard to measure the effectiveness of an IMC program using sales as the dependent measure. Other marketing program elements also contribute to the sales result, and it is often difficult to parcel out this effect. The same is true when one uses multiple program elements. It is difficult to separate out the impact of advertising, the Internet, direct marketing, etc., as consumers are not always aware of where they heard the message, they may have been exposed in multiple mediums, etc. The lack of control of the environment makes it difficult to determine if and when consumers were exposed. Some attempts at making these measures have taken place. The XMOS studies of a few years back is one example. More recent studies have examined the fact that traditional media like TV and magazines are effective in driving consumers to the Internet, and that direct marketing and mass advertising often support each other. However, conclusive results of the overall impact of IMC is still a way off. 7. Discuss the various types of pretests that advertisers employ. Why do marketers pretest ads? What are some reasons why marketers may not pretest? (LO2) 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. Figure 18-3 shows that there are a variety of pretests available, including both lab and field tests. Examples of pretests include focus groups, consumer juries, physiological measures, in-home tests, and theater tests. Marketers pretest ads so that they can avoid mistakes and fine tune them before they are exposed to the public at large. Before spending great deals of money for an ad that doesn’t work, they will get some idea of their potential effectiveness prior to going to the market. If there are specific elements of the ad that are not working, corrections can be made. The reasons cited for not pre-testing include cost and time factors. Many marketers do not want to spend the additional dollars required to test. This can be a risky strategy, and the costs of making a mistake may exceed those of testing. Others feel that the cost is not warranted, as the ad has no elements of controversy, is simple, etc. Some marketers skip the pretest phase as they have only a short window of opportunity, and do not have time to pretest.

8. What are some of the problems with existing effectiveness measures? Discuss the essentials of effective testing methods. (LO3) Many measures of effectiveness that are used are not truly measuring outputs, but rather they are testing inputs. For example, marketers talk about the number of people reached, eyeballs, impressions, etc., which do not really test the impact of the ad, but measure exposure or potential exposures. To be a measure of effectiveness the test must reveal the impact of the ad, not just that people see it. This is particularly common in internet advertising, where visitors, clicks, etc. provide some insights, but not enough indication of the impact of the ad.

Chapter 18 - Measuring the Effectiveness of the Promotional Program

Other measures just don’t go far enough. Take recall for example. It measures if the ad is recalled, but not any other impact factors. Was it liked? Was it hated? Why? What is needed is more insight as to the effect of the ad. Many other measures are just not of much use. Media equivalencies is one such example. Comparing the amount of time a logo is exposed (for example) is not the same as seeing a commercial for the same period of time. There are no words spoken, no reasons to buy or other persuasive aspects that may take place in an ad. In the chapter on pages 635-636 we discuss the essentials for effective measurement, including using communications objectives, using a consumer response model, using pretests and posttests, using multiple measures, and understanding proper research methodologies. More detail is provided therein.

9. The Ogilvy Awards are given to companies and their agencies that have successfully employed research to develop and measure the effectiveness of their campaigns. Google the Ogilvy Awards , pick any of the award winners and discuss why that program was successful. (LO1) By going to the website www.thearf.org/assets/ogilvy, and viewing award winners, you can download the case studies. When reviewing any of these case studies, you will see a number of criteria used to evaluate the program’s success. You many also see some criteria that may not be used as properly as it should. Can we really attribute sales and market share gains directly to the IMC program. Students should be asked to evaluate the metrics used in the cases, and at the same discuss whether all of these used are appropriate. They should also compare the effectiveness programs used to those criteria in the book that determine essentials for proper measurement (pp. 635-636).

10. Cite examples where advertisers may be able to develop successful ads without the benefit of pretesting. Why would an advertiser decide to make the decision not to pretest?(LO2) Many (if not most) ads are not pre-tested. Your everyday retail ads, ads that are straight forward and non-controversial will seldom be pre-tested but still can be effective. For most advertisers, pre-testing occurs when there is some doubt or uncertainty about the ad or commercial. For example, issue ads, advocacy ads, etc. may warrant testing, whereas automobile ads that are similar to those employed before may not be as critical to test. The reasons cited for not pre-testing include cost and time factors. Many marketers do not want to spend the additional dollars required to test. This can be a risky strategy, and the costs of making a mistake may exceed those of testing. Others feel that the cost is not warranted, as the ad has no elements of controversy, is simple, etc. Some marketers skip the pretest phase as they have only a short window of opportunity, and do not have time to pretest. In other case, they may have run similar ads or commercials, or the stakes are not that high.

Chapter 18 - Measuring the Effectiveness of the Promotional Program

Additional Discussion Questions (not in text) 11. The chapter discusses the use of neurosciences to assess viewers’ evaluation of commercials. What are the pros and cons associated with these methods? When should advertisers use them? (LO3) The chapter discusses the use of this research methodology and the pros and cons associated with it. As noted in the text, it often requires that multiple measures of effectiveness be taken to truly evaluate the effectiveness of an ad. Proponents of neurosciences like the fact that it yields an autonomic response and that it is not subject to socially desirable response issues. They also like the fact that the commercials often correlate highly with other measures such as recall. Like medicine, they claim, the more about how we understand the impact of commercials on the brain, the more we will learn about consumers. Those less enthralled with these measures have cited a number of problems, some even going so far as to call them “junk science”. They contend the measures contribute nothing and are less valuable than focus groups in providing insights. One of the limitations of physiological measures is that the research provides an indication as to what the reaction is, but not necessarily why. In other words, I know your response, and the degree of your response, but have little or no insights as to why. As noted, the best solution is to combine these measures with additional measures. Neuroscience clearly makes a contribution to our understanding, but will provide even more insights if combined with other methodologies.

12. Some companies test their commercials in rough formats described in the chapter. Others only test the commercials in finished form. Discuss some of the advantages and disadvantages of conducting tests at both stages. (LO2) The clear advantage of rough testing is the cost savings. Given that roughs correlate so highly with finished ads , many advertisers will use them to explore the potential effectiveness of them before too much money has been spent. For some types of commercials—particularly those involving emotion—roughs may not be as effective. Cartoon versions may not capture the emotions the message intends to communicate. For this reason, advertisers will test finished ads. The major problem with testing finished ads comes from the fact that as more money is spent to produce the commercial, more pressure will follow to use it, given the investment. Thus, commercials my be used when they test less than effective, rather than going back and starting over. One might speculate that testing all commercials in rough form might provide some insights into whether it makes sense to proceed.

Chapter 18 - Measuring the Effectiveness of the Promotional Program

13. Most of this chapter focuses attention on the measurement of traditional forms of advertising. How are companies measuring nontraditional advertising forms? (LO2) As noted in earlier chapters, there have not been a lot of new methodologies provided to measure the impact of the newer media options. Of course, the Internet has its measurement criteria, some of which are unique to the medium (and some of which have questionable validity and reliability), while others are traditional (tracking, recall, etc.) For most of the other media—particularly those discussed in chapter 13 under branded entertainment, few new measures have been developed. Most of the determination is made by looking at impressions or potential impressions likely to be generated by placements, etc. As you know, impressions are not true measures of effectiveness. As also noted, many of those using branded entertainment don’t seem to be concerned about effectiveness. Of those who attempt to determine the impact of the placements, integrations, etc., they continue to hold out for the Holy Grail—sales. Still others track the number of hits to their website after the placement has occurred—perhaps a more revealing metric than sales. Partly because of management attitude, and partly because of the novelty of these new media, there are not a lot of measures of effectiveness in place. Hopefully, as the media mature, these measures will follow.

14. Explain why it is so difficult to measure the effectiveness of an IMC program that uses multiple program elements. (LO3) One of the arguments for not using sales as an indicator of advertising success is the fact that other marketing factors—price, product and distribution as well as external factors will contribute to the sales of a product. A similar argument exists for measuring the contribution of IMC elements. One of the benefits to be derived from an IMC program is the cumulative impact that occurs through multiple media, points of contact, etc. that likely results in a Gestalt effect—that is, the whole is greater than the sum of its parts. As marketers have discovered, it if very difficult to separate the individual contributions that each medium makes in such a program. One of the reasons for this problem is that consumers may not know or remember where they have seen a communication. In tracking advertising for 17 years for a bank, we often found misreporting of media sources—that is people saying they recall an ad from TV, when there were not TV commercials being run, etc. Consumers just aren’t that attuned to where they see messages. Another factor is that while one might be able to recall which medium the message appeared in, it is much more difficult to determine the degree of impact of that medium. In addition, message factors, and source factors—just like price and product will also confound the studies.

Chapter 18 - Measuring the Effectiveness of the Promotional Program

15. Studies indicate that the combined effects of advertising in various media may lead to more effectiveness than just using one medium. Explain why you think this might occur, using some of the examples cited in the chapter. (LO1) Various elements of the IMC program each make their own contributions to the overall impact of the campaign. A combination of the program elements is likely to have a greater impact than the effect of the element used alone. Some examples cited in the text: The Online Publishers Association’s study showed that combining Internet and television lead to higher recall than using each alone. The test was designed to test recall and memorability of an ad. Using an advertisement for the US Air force, three different groups were exposed to the ad: (1) those visiting a web page; (2) those watching the TV program Who Wants to Be a Millionaire; and (3) those watching the TV program and visiting the website. The results indicated that brand awareness was higher and day after recall was more than double that of a control group with no exposure; online ads were more likely to be seen than TV advertising; and the people exposed to both ads were more likely to recall the TV commercial. The overall study concluded that there was a synergistic effect when TV and online are used in combination leading to a 9% higher recall and 48% increase in recognition of the online ads. An MSN online study also examined the effect when online ads are used in conjunction with traditional advertising. Aided and unaided awareness, brand associations, and purchase intent were measured for Dove and Dove Nutrium soaps using individual media and combinations of online with TV and print. The results indicated that increasing the frequency of online advertising efficiently improved branding results and that combining online advertising with the more traditional TV and print media increased the effectiveness of the entire campaign.

In an examination of four product categories, it was found that TV was the most used medium for all four product categories and that is was most useful for providing information on low involvement products, while the Internet was more useful for high involvement products. TV was also shown to be more useful for providing information on affective versus rational decisions. The study concluded that the Internet should be considered in conjunction with other traditional media alternatives.

IMC Exercise Have students find an example of a current or recent advertising campaign being used by a company. Have them explain the various measures of effectiveness that might be used by the company from both a attempting to move a consumer through the consumer funnel. They should explain why this particular testing method would be appropriate and how the information it provides can be used by the marketer at various stages of the funnel.

Chapter 19 - International Advertising and Promotion

CHAPTER 19 INTERNATIONAL ADVERTISING AND PROMOTION Chapter Overview The purpose of this chapter is to introduce the student to the role of advertising and promotion in a company’s international marketing program. We discuss the growing importance of companies being able to compete in the global marketplace and the importance of international advertising and promotion. The international environment and the major factors influencing marketing and promotional decisions in foreign markets are discussed and attention is given to the issue of global or standardized versus local or customized marketing and advertising. This chapter also examines how companies organize for international advertising, select agencies and make decisions in various areas such as research, creative strategy, and media selection. While the primary focus of this chapter is on international advertising, attention is also given to how other IMC tools are used in international marketing including sales promotion, public relations, and digital/social media.

Learning Objectives 1. To examine the importance of international marketing and the role of international advertising and promotion. 2. To review the various factors in the international environment and how they influence advertising and promotion decisions. 3. To consider the pros and cons of global versus localized marketing and advertising. 4. To examine the various decision areas of international advertising. 5. To examine the role of other promotional mix elements in the international integrated marketing communications program.

Chapter and Lecture Outline I.

THE IMPORTANCE OF INTERNATIONAL MARKETING

Throughout this book attention has been focused primarily on the development of promotional programs for products and services sold to the U.S. market. However, many companies are recognizing the opportunities that foreign markets offer for new sources of sales and profits as well as the necessity of marketing their products internationally. Today, world trade is driven by global competition among global companies for global consumers. It has become increasingly important for U.S. companies to adopt an international marketing orientation since imports are taking significant amount of the domestic market for many products and are likely to continue doing so. The balance-of-trade deficit and movement toward a global economy is requiring companies to become more adept at marketing their products and services to other countries. Professor Notes

Chapter 19 - International Advertising and Promotion

II.

THE ROLE OF INTERNATIONAL ADVERTISING AND PROMOTION

Advertising and promotion are important parts of the international marketing program of firms competing in the global marketplace. While the United States still leads the world in terms of advertising spending, expenditures outside of the U.S. have increased dramatically over the past decade and are now nearly $400 billion annually. It is worth noting and discussing the importance advertising and promotion for large foreign-based multinationals such as Unilever, Nestle, Volkswagen, Toyota Motor Corp. and Reckitt Benckiser. Figure 19-1 shows the top 10 companies by worldwide advertising spending. Advertising and promotion are the most visible as well as the most culture-bound of a firm’s marketing functions. Companies planning on marketing and advertising their products or services abroad are faced with an unfamiliar marketing environment and consumers with different customs, values, consumption patterns and habits, as well as different purchase motives and abilities. Media options are often more limited in foreign countries than in the US and different creative and media strategies, as well as changes in other promotional mix elements, are often required for foreign markets. Professor Notes

III.

THE INTERNATIONAL ENVIRONMENT

Just as with domestic marketing, companies engaging in international marketing must carefully analyze and consider the major environmental factors of each market in which they compete. Consideration of environmental factors is important, not only in evaluating the viability and/or potential of each country as a market, but also in designing and implementing a marketing and promotional program. Figure 19-2 shows some of the factors marketers must consider in each category when analyzing the environment of a country or market. The major environmental factors that must be considered include: A.

Economic Environment—a country’s economic conditions indicate its present and future potential for consuming. Marketers must consider the economic infrastructure or the communications, transportation, financial, and distribution networks needed to conduct business in a particular country. The global recession that has impacted many countries around the world is a very good example of how the economic environment impacts demand for products and services in various countries. The European Union has been behind many other countries and regions in recovering from the recession and unemployment remains high in many countries.

Demographic environment—international marketers must also examine the demographic characteristics of a country including factors such as income levels and distribution, age and occupation distributions, household size, literacy, education and employment rates. Many marketers are turning their attention to third world countries at the bottom of the economic pyramid where consumer markets are slowly emerging, as discussed in Global Perspective 19-1.

Cultural environment—an aspect of the international marketing environment that is very important to advertising and promotion is the culture of each country. Among the most important aspects of culture are the language, customs, tastes, attitudes, life style, values, religion, and ethical/moral standards of each society.

Chapter 19 - International Advertising and Promotion

Political/legal environment—the political and legal environment is one of the most important factors influencing advertising and promotional programs of international marketers. Government regulations and restrictions can affect a variety of aspects of a company’s advertising program, including: • the types of products and services that can be advertised in a country • the content or creative approach that may be used in advertisements • the media that all advertisers are permitted to employ • the amount of advertising a single advertiser may use in total or in a specific medium • the use of foreign languages in ads • the use of advertising material prepared outside the country • the use of local versus international advertising agencies • specific taxes that may be levied against advertising

IV.

GLOBAL VERSUS LOCALIZED ADVERTISING

In recent years a great deal of attention has been focused on the concept of global marketing whereby a firm utilizes a standard marketing plan for all countries in which it markets its product or service. Global advertising falls under the umbrella of global marketing as a means of implementing this strategy by using the same advertising approach in all markets. The theorizing of Harvard professor Theodore Levitt helped popularize the concept of global marketing. However, not everyone agrees with Levitt’s global marketing theory, particularly with respect to advertising, as they argue that products and advertising messages must be designed and/or adapted to meet the differing needs of consumers in various countries. The advantages and limitations of global marketing and advertising in particular should be discussed. A.

Advantages of Global Marketing and Advertising—the use of a global marketing and advertising program offers numerous advantages to a company including: • Economies of scale in production and distribution • Lower marketing and advertising costs as a result of reductions in planning and control • Lower advertising production costs • Abilities to exploit good ideas on a worldwide basis and introduce • products quickly into various world markets • A consistent international brand and/or company image • Simplification of coordination and control of marketing and promotional programs

Problems With Global Advertising—while the concepts of global marketing and advertising have received a great deal of attention recently, not everyone agrees with this strategy. Some of the problems with global marketing and advertising include: •

• •

Differences in culture, market and economic development, consumer needs, media availabilities and legal restrictions make it extremely difficult to develop an effective universal approach to marketing and advertising Advertising in particular is difficult to standardize because of cultural differences in circumstances, language, values, beliefs, lifestyle and so on Usage patterns and perceptions of a product may vary from one country to another and require adjustments in the marketing and advertising program rather than just using a global campaign

Chapter 19 - International Advertising and Promotion

When Is Globalization Appropriate? - While many advertisers view globalization of advertising as a difficult task, some progress has been made in learning what products and services are best suited to worldwide appeals. Products and services that can take advantage of global marketing and advertising opportunities include: 1. Brands that can be adapted for a visual appeal that avoid the problems of trying to translate words into dozens of languages. 2. Brands that are promoted with image campaigns that lend themselves to image campaigns play to universal needs, values and emotions. 3. High-tech products coming to the world for the first time; new technology products coming on the world at once and not steeped in the culture heritage of the country.

Products with nationalistic flavor if the country has a reputation in the field such as Swiss chocolate, Italian shoes, French wine, or German beer and automobiles. These products capitalize on the country-of-origin effect which refers to consumers’ general perceptions of quality for products made in a given country. An interesting study conducted among college students which found that the vast majority of them are unaware of the country from which brands originate is discussed in the chapter.

Products that appeal to a market segment with universally similar tastes, interests, needs and values. Examples of global market segments include the wealthy who can afford expensive clothing, jewelry, automobiles, hotels and other products and services. Teens are another example of a global market segment that is targeted by many companies.

Global Products, Localized Messages—While the pros and cons of globalized marketing and advertising continue to be debated, many companies are taking what might be called an inbetween approach by standardizing their products and basic marketing strategy but localizing their advertising messages to appeal to the local realities and conditions of each market. This approach has been given different labels such as “Think global, act local,” or “Global vision with a local touch.” Although some marketers use global ads with little or no modification, most companies adapt their messages to respond to differences in language, market conditions and other factors. Many global marketers use a strategy called pattern advertising whereby their ads follow the same basic approach, but themes, copy and sometimes even visual elements are adapted to differences in local markets. The TAG Heur ads shown in Exhibit 19-16 are an example of pattern advertising as different celebrities are used for various countries but the various creative elements of the ad such as design and layout remains the same. Another way marketers adapt their campaigns to local markets is by producing a variety of ads with a similar theme and format and allowing managers in various countries or regions to select those messages they feel will work best in their markets. A study which examined the international advertising strategy of successful US multinational corporations found that only 9 percent used totally standardized or global advertising for foreign markets, 37 percent used all localized advertising, and the remaining 54 percent used a combination strategy of standardizing some portions of their advertising for local markets. A more recent study shows a slight revision in this strategy. Many companies are moving toward a Think globally, act regionally” strategy which involves giving regional offices the autonomy to adapt the global theme for their local markets. 19-4

Chapter 19 - International Advertising and Promotion

Professor Notes

DECISION AREAS IN INTERNATIONAL ADVERTISING

As with domestic marketing, certain organizational and functional decisions must be made by companies developing advertising and promotional programs for international markets. This section examines these decision areas. A.

Organizing for International Advertising—the initial decision a company must make when it decides to market its products to other countries is how to organize the international advertising and promotion function. There are three basic options for organizing this function. 1. Centralization—all decisions and planning is done at the firm’s home office. Complete centralization is likely when market and media conditions are similar from one country to another, when the company has only one or a few international agencies, when it uses global marketing and advertising, or when it desires a consistent image worldwide. 2. Decentralization—marketing and advertising managers in each market have the authority to make their own decisions such as selecting agencies, developing budgets, conducting research, approving creative themes and executions, and selecting media. 3. Combination—many companies actually use a combination of the first two approaches whereby the home office will have the most control over advertising policy, guidelines and operations in all markets, while managers in local offices will be responsible for submitting advertising plans and budgets for their markets which must be reviewed and approved by the international advertising manager. This approach allows for consistency and uniformity in a firm’s international advertising program yet still permits local input and adaptation of the promotional program.

Agency Selection—one of the most important decisions a firm engaged in international marketing must make is the selection of an advertising agency. The three basic alternatives in selecting an agency include: 1. Choosing a major agency with both domestic and overseas office. A number of multinational companies are consolidating their advertising with one large agency to develop a consistent global image. IBM was one of the first to do this in 1994 and over the past two decades a number of global marketers including Colgate, Samsung, and Dell have and consolidated their worldwide marketing communications with one agency. 2. Choosing a domestic agency that is affiliated with agencies in other countries or belongs to a network of foreign agencies. Many agencies are now affiliated with agencies in other countries or belong to a global network of agencies.

Chapter 19 - International Advertising and Promotion

3. Selecting a local agency for each national market in which the company sells its products or services. Some companies prefer to use local agencies because they often provide the best talent in each market. This also increases the morale and involvement of local managers by giving them input into the agency selection process. •

Criteria for agency selection—the selection of an agency or agencies to handle a firm’s international advertising depends on how the firm is organized for international marketing and the type of assistance it needs to meet its goals and objectives in foreign markets. Specific criteria a company might use in making the agency selection decision are shown in Figure 19-3.

Creative Decisions—creative strategy development for international advertising is basically similar in process and procedure to domestic advertising as communication objectives must be set based on the marketing strategy and market conditions for each market, major selling ideas must be developed, and specific appeals and execution styles must be chosen. An important factor influencing the development of creative strategy for international markets is the issue of global versus localized advertising. Global advertising uses the same basic appeal and execution style in all countries and requires the development of advertising that will transcend cultural differences and communicate effectively in every country. Companies following a localized advertising strategy must determine what type of selling idea, appeal and execution will work in each market. A product or service may have to be positioned differently in each market depending on consumers’ usage patterns and habits.

Media Selection—one of the most difficult decision areas for international advertisers is that of media strategy and selection. U.S. firms usually find that there are major differences in media outside this country and media conditions may vary considerably from one area to another, particularly in developing countries. Problems and differences include the types of media available, the characteristics of media, availability of media information, and restrictions from one country to another. Media planners have two basic media options available. 1. Local media—using the local media of a country to reach its consumers, such as local magazines, newspapers, radio, billboards, direct mail and, where available and/or permitted, television. 2. International Media—international advertisers can also reach audiences in various countries through the use of international media that have multimarket coverage. The primary types of international media are magazines and newspapers. Some multinational commercial television stations and networks such as STAR and BSkyB are operating in Europe and Asia and are likely to continue to expand with the growth of direct broadcast by satellite (DBS) in homes.

Professor Notes

Chapter 19 - International Advertising and Promotion

VI.

THE ROLE OF OTHER PROMOTIONAL MIX ELEMENTS

The focus of this chapter has been on advertising since it is usually the primary element in the promotional mix of the international marketers. However, as in domestic marketing, promotional programs for foreign markets will generally include other elements such as personal selling, sales promotion and public relations. The role of these other promotional mix elements will vary depending on the firm’s marketing and promotional strategy in foreign markets. A.

Sales Promotion—many companies rely on sales promotional tools and techniques to help sell their products in foreign markets. Promotional tools that are effective in the U.S. such as free samples, premiums, contests, and gifts may also work well in other markets. One form of promotion that has become very popular among many U.S. firms for use in foreign markets is sponsorship of sporting events, concerts and other music-oriented radio and television programs. Unlike advertising, which often can be done on a global basis, sales promotion must often be adapted to local markets. Kashani and Quelch note several important differences among countries that must be considered in developing a sales promotion program including: a. Economic development—the ability to use various sales promotion tools can be influenced by the stage of economic infrastructure and stage of development of a country b. Market maturity—the stage of development of the market for the product or service within a country. Different types of sales promotion tools are needed to introduce a product or service versus competing in a mature market c. Consumer perceptions—consumer perceptions of and willingness to use various sales promotion tools varies by country d. Trade structure – the willingness and ability of channel members to accommodate sales promotion programs e. Regulations – legal restrictions and regulations on sales promotion vary by country and can be very restrictive in some countries and impact the type of promotions that can be used.

Public Relations—public relations plays an important role in supporting and enhancing the marketing and advertising efforts of companies involved in international advertising. Public relations activities are needed to deal with local governments, media, trade associations and the general public. The job of PR agencies in foreign markets is not only to help the company sell its products or services but also to present the firm as a “good corporate citizen” who is involved with and concerned about the future of the country. Companies must have a favorable reputation and image if they are to be successful in foreign markets, as groups may feel threatened by the presence of a foreign multinational in their country. Public relations efforts may also be needed to deal with specific problems a company faces in international markets. Many multinational companies are choosing ad agencies that offer public relations capabilities so their entire communication program can be integrated and conducted on a global basis. The chapter discusses major public relations problems companies such as Haagen-Dazs, McDonald’s and KFC have encountered in foreign markets.

Chapter 19 - International Advertising and Promotion

Internet/Digital Media—the Internet is coming of age as a global marketing medium as well as an important IMC tool for companies around the world. Internet usage is highest in China which now has more than 500 million people online followed by the United States with 220 million and Japan with 96 million. Internet use in international markets is still limited in some countries is expected to develop quickly as telecommunications companies move into emerging markets such as Eastern Europe, India, and Latin America and improve the communications infrastructure. Digital media is now an integral part of the IMC program for most international marketers as they have websites for specific countries and/or regions which allow them to tailor the information they provide to the needs, interests, and lifestyles of consumers in these markets. The use of social media is also becoming prevalent in countries around the world. Facebook has become the first truly global social networking brand has now has more than 1 billion users around the world. Digital and IMC Perspective 19-1 discusses how Facebook has become the leading social networking site in most countries.

Professor Notes

Teaching Suggestions In this chapter we turn our attention to the area of international advertising and promotion. We feel that it is very important to cover this topic as many U.S. companies are finding that our domestic market offers them limited opportunity for expansion due to slow population growth, saturated markets, and intense competition. Moreover, imports are taking a larger and larger share of the domestic market for many products and are likely to continue to do so. Companies must learn how to defend against foreign inroads into their domestic markets and how to market their products and services to foreign countries. We are living in very fascinating and rapidly changing time with respect to developments in the international arena. The chapter opener focuses on the marketing effort used by the tiny country of Qatar to win the opportunity to host the 2022 FIFA World Cup. A new video case study is available on the instructor DVDs that focuses on how Qatar was able to compete against other countries such as South Korea and the United States to become the host country in 2022 and the role IMC played in the bid process. This video also provides students with insight into the emerging role of Middle Eastern countries such as Qatar in the global economy. It is important that students are encouraged to keep abreast of these social, political and economic changes, how they are affecting the global marketplace, and their implications for international marketing and advertising. As discussed in IMC Perspective 19-2, China has become the world’s second largest economy after the United States and presents marketers with tremendous opportunities but many challenges as well. While most of the chapter discusses issues of relevance to international advertising, it also covers the role of other integrated marketing tools in international marketing including sales promotion, public relations and the use of the internet and digital/social media. An excellent source of information on international advertising is Advertising Age and an online version which focuses on global marketing and advertising issues (AdAgeglobal.com). Another online source available from Advertising Age focuses exclusively on China (AdAgeChina.com). This is an excellent source of information on advertising and marketing developments in the world’s largest consumer market.

Chapter 19 - International Advertising and Promotion

Answers to Discussion Questions 1. Discuss how global marketers might use the 2022 FIFA World Cup soccer tournament that will be held in Qatar as an integrated marketing communications opportunity. What types of companies are best suited to use the World Cup as an IMC opportunity? (L01,02)

The FIFA World Cup is held once every four years and features 32 qualifying nations. It is the largest single event sporting competition in the world as nearly 3 billion people worldwide follow the month long tournament on television and over 3 million spectators attend the 64 matches played. The World Cup, like the summer and winter Olympic Games, is an excellent integrated marketing communications opportunity for companies as soccer (or football as it is referred to in most countries) is the most popular sport in the world and has a very large and passionate fan base. Marketers use the World Cup in various ways as an IMC opportunity ranging from simply advertising during the televised games to using it as a global partnership or sponsorship opportunity. For example, for the 2014 World Cup in Brazil FIFA had six global partners, eight global sponsors and eight local supporters. The six global partners paid an average of $31 million each per year over a four year period from 2010 through 2014 while the eight sponsors paid an average of $15 million and six national supporters are laid out $8 million each. Companies that pay to be official partners or sponsors can refer to themselves as such in their marketing and promotional materials over the four year period and also use the FIFA World Cup logo. Given the high cost of being a World Cup partner or sponsor, it is the major global companies who generally pay the monies for this opportunity such as Adidas, Sony, Coca-Cola, Hyundai/Kia, and Emirates Airlines. These companies will often develop special IMC campaigns around the World Cup and activate their sponsorships in a variety of ways including advertising during the games, contests and sweepstakes, digital marketing through their websites and social media, on-site promotions at the games, and major public relations campaigns. Many marketers also become involved with the World Cup by being sponsors of their countries national teams and advertising during the games on networks such as ESPN that has the contract to televise the tournament in the United States. 2. What are some of the challenges the Q2022 Supreme Committee will face in promoting the World Cup in Qatar? Discuss the various IMC tools that can be used to promote the World Cup in countries around the world. (L01,02) The Qatar Supreme Committee will face a number of challenges in promoting the World Cup in its country in 2022. The effort put forth by the committee to win the rights to host the World Cup were remarkable and, as discussed in the chapter opener, utilized a variety of IMC tools as part of the “Expect Amazing” campaign including media advertising, digital and social media, public relations and, of course, personal selling by the committee to the FIFA selection committee. However, the awarding of the World Cup has been criticized by many in the soccer (football) community for a number of reasons. One of the major concerns centers on the intense summer heat in Qatar and as critics argue that the high summer temperatures (which can reach 120 to 130 degree Fahrenheit ) will be unsafe for the players as well as the fans, particularly if the cooling technology in the stadiums does not work properly. While there have been suggestions that the 2022 World Cup be moved to the fall or winter, this would conflict with European football league schedule or the Winter Olympics. Moreover, Fox has paid nearly $1billion for the U.S. broadcast rights and wants the games held in the summer when there is less competition for televised sports. If the games are held in the fall they would be competing against collegiate and NFL football games and thus would not attract as large a

Chapter 19 - International Advertising and Promotion

viewing audience which in turn would impact the advertising rates Fox could charge. Other issues Qatar must address include argument that it does not have the ability to host a sporting event as big as the World Cup and also whether soccer fans will travel to Qatar in the summer given the intense heat and concerns over safety and stability of the Middle East. Qatar will have to mount an intensive public relations effort as the 2022 World Cup approaches to address the concerns noted above. They will have to inform soccer officials and fans about the cooling technology they plan to use and ensure them that the playing and viewing environment will be comfortable and safe. They also must encourage people to travel to the country and promote Qatar, as well as surrounding cities and countries such as Dubai or Abu Dhabi in the United Arab Emirates, as places that are easily accessible to people when they visit the region. Media advertising will be an important part of the marketing effort leading up to the games as well as the use of digital media such as the Internet and social media sites such as Facebook, YouTube, Instagram and others. Instructors should monitor the media to see if the movement to move the World Cup to another country or hold it during the fall or winter gains support. 3. Why are international markets becoming so important to companies in the United States as well as other nations? Discuss the various factors that companies must consider in developing IMC programs for various countries (L01) There are several reasons why international markets are becoming so to companies such as well as corporations based in other nations. Many markets such the U.S., Japan and most European countries offer limited growth potential to many firms because of slow population growth, saturated markets, and intense competition. Also, in some industries such as alcoholic beverages, soft drinks and tobacco; socio/cultural and regulatory trends are causing many markets to stagnate or even decline. U.S. companies are also losing market share to imports and are likely to continue to do so in the future. As the standard of living and economic situation improve in many foreign markets, U.S. companies will want to take advantage of the marketing opportunities in these areas. In some countries such as Japan, changing values and lifestyles are also resulting in more consumption and spending by consumers and represent an opportunity to many U.S. companies. A key demographic segment for many companies is the teen market as they are heavy users of soft drinks, fast-food, movies and music. Many foreign countries have a very young population with a large number of teens and young adults who are very receptive to Western ways and products. Thus companies targeting teens have an opportunity to grow by penetrating foreign markets. For European companies such as Nestle, Unilever, Nokia, and Samsung, foreign markets are vital to their success. These companies are based in Switzerland, the Netherlands, Finland and South Korea respectively which are relatively small in size and without foreign markets these companies would not have a large enough market nor economies of scale to survive against larger U.S. and Japanese companies. Advertising and promotion play a very important role in many firms’ international marketing programs as they must communicate information about their products and services to foreign markets and convince inform consumers of their particular attributes, features and benefits. Advertising and promotion are the most visible of a firm’s marketing activities as well as the most culture bound. There are a number of factors marketers must consider in developing IMC programs for various countries. They must carefully analyze the major environmental factors of each market in which they compete or plan to enter including economic, demographic, cultural, and political/legal factors. Companies must also consider whether they can use a global marketing and advertising strategy or adapt their IMC programs for various countries and/or regions. Decisions also must be made regarding how to organize for IMC, agency selection, creative strategy and execution, media planning and selection, and the role of various other IMC tools such as sales promotion, public relations, and digital/social media.

Chapter 19 - International Advertising and Promotion

4. Global Perspective 19-1 discusses how many multinational companies have been focusing more attention on the 4 billion consumers who live in the remote, rural communities of developing countries. Discuss the challenges companies face in marketing their products to the world’s poorest consumers. How do they have to adapt their IMC programs for these countries? (L02) Marketers face a number of challenges in marketing their product to the world poorest consumers. Many of these 4 billion people live in remote, rural communities of developing countries in Africa as well as Viet Nam, India, and China. The tiny villages where many of them live are in remote areas that are beyond the reach of mass media and distribution systems. Many of these people live in severe poverty and are illiterate or nearly so. Thus it is difficult to communicate with them as well as to get products to them and they cannot afford to pay for even the most basic items. Marketers have to adapt their marketing programs as well as their integrated marketing communication programs in selling to these impoverished consumers. Products have to be made available in very small, singleuse sachets that can be sold for the equivalent of pennies and easily distributed through small kiosks. Marketers have to adapt their IMC programs in a number of ways in selling to these consumers. They cannot use conventional media to reach them since they are not available or cannot be read by most of them. Other contact tools such as event marketing, road shows, demonstrations and sampling programs are the primary ways to reach them. Word –of-mouth communication is a very important and marketers have to find ways to get information to opinion leaders and others and encourage them to tell others about their products. Some of these developing markets are now gaining access to digital media as wireless communication infrastructures are being built in rural China and India as well as in some African countries. Thus, it may be possible to use digital media to reach consumers although this may take some time since the diffusion of smartphones and computers into rural areas may take some time. 5. Why are so many multinational companies expanding into China? What challenges do marketers and advertising agencies face in developing IMC programs for the Chinese market? (L02) China has become such an important market for most multinational companies for a number of reasons. First, with 1.3 billion people, China has become one the world’s largest and fastest growing consumer markets. China has been experiencing tremendous economic growth, particularly in the urban areas that are home to more than a third of the country’s population. Political and economic reform has also brought a new spirit of consumption to China along with dramatic increases in purchasing power. The average annual disposable income of urban Chinese households has nearly doubled over the past five years and continues to rise. Since the government either subsidizes or provides many of the necessities including housing and health care, Chinese consumers have disposable income to spend on a variety of products. The newly emerging middle class in China is also very brand conscious and demand is strong for many of the popular import brands from Western companies as well as those in Japan and Korea. Marketers face a number of challenges in developing IMC programs for the Chinese market. While China has been experiencing strong economic growth, the per capita income of the country is still below that of most industrialized countries. Even in the major cities, where the standard of living is higher, disposable income is still not that high and the purchasing power of most consumers is still limited. Foreign companies also face cultural barriers and political/legal restrictions in developing marketing programs for China. The government does not want advertising to affect the political, moral, or social climate of the country and ads of outside companies are scrutinized very carefully. Marketers also must deal with a lack of information regarding media preferences and patterns as well as availability. Television in China is controlled by state-owned China Central Television which controls programming and scheduling. Foreign companies are also facing increasing competition from local brands that are improving their quality and brand images and have a cost advantage over imported products. Advertising agencies are also finding that doing business in China can be very

Chapter 19 - International Advertising and Promotion

challenging as local clients are very demanding and agency relationships often do not last long. Many multinational marketers are terminating their global agency alignments in China and working with local advertising and promotion agencies, particularly as they expand deeper into the rural areas of the country. 6. What are some of the cultural variables that marketers must considering in developing advertising and promotional programs in a foreign market? Choose one of these cultural variables and discuss how it has created a problem or challenge for a company in developing an advertising and promotional program in a specific country. (L02) Cultural factors influence the development of advertising and promotional programs for foreign markets in a number of ways. Advertisers must consider the language, customs, tastes, attitudes, lifestyle, values, religion, and ethical/moral standards of each society when developing an advertising campaign. Cultural factors determine what products and services marketers can sell to foreign markets as well as how they can communicate with consumers. They must understand not only the language of the country but also its nuances, idioms and subtleties. They must also be aware of the connotations of words and symbols they use in their ads and how ad copy and slogans will be translated. Students should be asked to choose a particular cultural variable such as customs, values, or ethical/moral standards and find an example of how it has created a specific challenge or problem for a company in a specific country. 7. What is meant by a country-of-origin effect? Discuss the implications of the results found in the survey conducted among college students in the United States which found that they have limited knowledge of the country-of-origin of most brands. Does this mean country-of-origin is not important to students? (L03) A country-of-origin effect refers to consumers’ general perceptions of quality for products made in a given country. For example, Germany is known for its excellent automotive engineering and brands such as Mercedes or BMW are generally perceived as being of higher quality because they are from this country. The results of the Andersen Analytics study found that the vast majority of college students are not away of the country of origin of most brands. The results of the study suggest that marketers targeting young people of college age have little to gain by promoting their country of origin in their advertising and other forms of marketing communication. Younger people are not as cognizant of country of origin and really may not care that much about where a product is made. It also may be that young people recognize that most products are not necessarily made in the country where the company is headquartered since companies use contract manufacturing or make products in countries where labor costs are low. It might be interesting to discuss whether the importance of country of origin becomes more important as consumers age and become more concerned with product quality, particularly for more expensive items such as cars, consumer electronics and clothing. 8. What is meant by a global market segment? Provide an example of a company that has identified a global market segment and advertises its product or service the same way around the world to this market. (L03) A global market segment is a group of consumers who are alike in certain ways and will respond similarly to some aspect of marketing strategy such as advertising. Global market segments have been identified on the basis of demographics, socioeconomic characteristics or lifestyle. Global segmentation is also possible on the basis of technology as businesses and consumers around the world purchase high tech products such as computers, HDTVs, and smartphones for the same basic reasons. As discussed in the chapter, young people (and teenagers in particular) are viewed by many marketers as a global market segment. Teens around the world show amazing similarities in taste, interests, language and attitudes. A number of companies whose products have universal appeal to

Chapter 19 - International Advertising and Promotion

teens such as Nike, Coca-Cola, PepsiCo, and MTV can use global advertising strategies. High tech companies such as IBM, Samsung, HTC, and Apple also use global advertising. Students should have no trouble identifying other companies whose products have universal appeal to global market segments and discussing how they can reach them with a global marketing and advertising campaign. 9. Discuss the evolving role of the Internet and other digital media in the IMC program of international marketers. How can marketers make effective use of digital and social media in marketing their products and service in various countries? (L05) The Internet has become an important IMC tool for companies around the world as more businesses and homes become connected to it. There are nearly 2.5 billion Internet users around the world with the largest number in Asia followed by Europe and North America. Digital media are becoming an integral part of international marketers IMC programs at a global, regional and local level as they are using the Internet to promote their companies and brands and engage in e-commerce. Most multinational marketers now have websites for specific countries or regions that allow them to tailor the information they provide to the needs, interests, lifestyles and consumption patterns of consumers in these markets. The use of social media is also becoming prevalent in many countries as Facebook now has more than 1 billion users around the globe and Twitter is expected to reach 1 billion in a few years. Many countries have their own social networking sites which are upgrading their capabilities to remain competitive as other sites enter their markets. It is likely that the use of social networking sites will become more prevalent and marketers will increase their use of them. Marketers are also expected to increase their use of mobile marketing techniques as more consumers use smart phones and other mobile devices to access the Internet. 10. Why do you think social media sites such as Facebook and Twitter are becoming so popular in countries around the world? Discuss the importance of social media sites in the IMC programs of international marketers. (L05) The use of social media is becoming prevalent in countries throughout the world as Facebook now has more than 1 billion users and is the leading social media site in the most countries while Twitter now has 500 million users. As discussed throughout the text, social media sites are becoming very popular with the growth of the internet and broadband connections, particularly through wireless. The growth of smartphones and other mobile devices are also driving the growth of social media in countries through the world as the majority of people now go online through their phones and this is likely to increase in the future. Facebook has been working to improve its platform and interface on mobile devices while Twitter already lends itself to mobile given its characteristics. The use of social media sites is also on the rise because people enjoy using them to communicate, stay in touch with friends, share pictures and other media, and to entertain themselves. Social media will continue to be an important part of the IMC programs of international marketers as companies recognize the value of using Facebook, Twitter and other sites to communicate with consumers and are finding more ways to do so. Companies around the world recognize that having a Facebook or Twitter page is as important as having a website and now a necessity as consumers expect to be able to connect with companies through social media. Moreover, it is important for marketers to monitor social media to see what consumers are saying about their companies and brands and be able to respond in a timely manner. It should be noted that there are still countries where Facebook and Twitter do not have a presence, such as China, which present them with growth opportunities. However, China has its own social media sites such as Sina Weibo and Renren which are very popular and provide a possible IMC platform for global marketers. The importance of social media in the IMC program of marketers is likely to increase as additional sites are developed and adopted by consumers as part of their daily lives.

Chapter 19 - International Advertising and Promotion

Additional Discussion Questions (not in text)

11. Discuss the arguments for and against the use of global marketing and advertising. What types of products and services are best suited for global advertising? What developments have taken place in recent years that support the use of global advertising and what factors might make this approach more difficult to use effectively? (L03) There are several advantages to global advertising including lower advertising production costs, the ability to exploit good creative ideas on a worldwide basis, the opportunity to have a consistent brand and/or company image all over the world, and the simplification of coordination and control of advertising programs. Problems with global advertising are that differences in culture, market and economic development, consumer needs and usage patterns, media availability and regulations make it extremely difficult to develop an effective universal approach to advertising. Advertising is very difficult to standardize because of cultural differences such as language, traditions, value, lifestyles, customs, and the like. Another problem with the use of global advertising is that consumer usage patterns and perceptions of a product may vary from one country to another and may require adjustments in marketing and advertising approaches. Marketers must also recognize that the use of a global advertising campaign can alienate consumers as well as local employees if they feel their individual differences or cultural diversities are being ignored. Products and services that can take advantage of global advertising include the following: •

brands that can be advertising using primarily a visual appeal and thus avoiding the problems of translating words into various languages

•

brands that are promoted using image advertising that lend themselves to themes with universal appeal such as sex, status, wealth, etc.

•

high-tech products being introduced to the world market for the first time that are not steeped in the cultural heritage of the country

•

products with strong nationalistic flavor that take advantage of a country’s reputation in the field

Advances in technology such as the Intent, telecommunications, cable and satellite television, travel and other areas are making the use of global marketing more feasible. Consumers around the globe are exposed to the same music, movies, TV shows, sporting events and web sites. Advances in travel are making it possible for consumers to visit other countries and experience their culture. One thing that is making global marketing more difficult is the trend in many countries to return to more localized music, TV shows and other forms of entertainment. Some countries are trying to preserve their local culture and national identity and may be less receptive to brands from foreign countries that are advertised globally. Global advertising is likely to be inappropriate when there are strong cultural differences among consumers that may influence their interpretation of, and responses to, advertising or when consumer usage patterns and perceptions of a product or service may vary from one country to another. However, these cultural differences are disappearing rapidly, particularly among certain markets such as young people. 12. What is meant by the “think global, act local” approach to global marketing and advertising? Discuss some of the ways marketers can adapt their advertising to local markets. (L03) Proponents of global marketing such as Professor Theodore Levitt argue that the worldwide marketplace is becoming homogenized and the basic needs, wants and expectations of consumers transcend geographic, national and cultural boundaries. They argue that consumers around the world are very similar with regard to tastes, needs, wants, preferences and emotional desires and motives. 19-14 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 19 - International Advertising and Promotion

Obviously much has happened over the past two decades that lends greater support to the call for global marketing. There have been significant developments in communications and technology that are leading to the globalization of markets. Satellite-delivered programming has resulted in the television shows being seen by consumers around the world as governments can no longer control what shows are seen in their countries. The Internet is clearly a new global medium that provides companies with access to consumers around the globe. Entertainment such as sporting events, movies, TV shows and concerts are now seen by consumers around the world and having an impact on them. Thus products and services can be marketed in a similar fashion around the world using global marketing approaches. Not everyone agrees with the concept of pure global marketing as they argue that total standardization is unrealistic and changes need to be made for local markets. They advocate a “think global, act local” approach whereby the same basic advertising theme or approach is used in each country but modifications are made to adapt to differences in culture, language, market conditions and other factors. Marketers use this approach by adapting their campaigns to local markets by producing ads with a similar theme or positioning platform but with copy, visual, models and other executional elements that are adapted to the local market. 13. Many large multinational companies are consolidating all of their worldwide advertising with one large agency. Evaluate the pros and cons of this approach. (L04) A number of factors are driving this consolidation trend. Major corporations recognize they must develop a consistent global image for the company and/or its brands and speak with one coordinated voice. This can be very difficult to do if a company is working with numerous agencies around the world. For example, Dell entered into a partnership with the WPP Group to form a new global integrated marketing and communications agency that will serve the company’s global marketing needs. Dell had been working with more than 800 different marketing communication firms around the world and wanted to simplify its agency structure. The reason 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 recognizes that it is competing in a global market for computers and feels it is important to deliver clear, consistent messages that take advantage of the high amount of equity in the IBM name. The agency consolidation move will allow IBM to gain greater control over and facilitate coordination of its worldwide advertising. IBM may also feel that a high tech product such as computers can 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 fax machines, e-mail, video conferencing, and airline connections make it much easier to manage accounts around the globe. The risk of the consolidation decision is that one centralized agency may not be able to develop as effective advertising in many foreign markets as a local agency. Local agencies often have a better understanding of the marketing and advertising environment in their country or region and thus may be able to develop more effective advertising than a large multinational agency. Using a single agency also means that a marketer has no backup agency to turn to if there are problems such as ineffective ad campaign. Companies who consolidate also face the problem of selling the idea to regional offices and local country managers who may not like having control of advertising taken from them.

Chapter 19 - International Advertising and Promotion

14. What are the three basic options a company has for organizing its international advertising and promotion function? Discuss the pros and cons of each. (L04) There are three basic options for organizing the international advertising and promotion function including centralization, decentralization or a combination of the two. The centralized organizational structure involves having all advertising and promotional decisions such as agency selection, research, creative strategy and campaign development, media strategy and budgeting done at a company’s home office. Under a decentralized organizational structure, marketing and advertising managers in each market have the authority to make their own advertising and promotional decisions for their local markets. Under the combination approach, the home office or headquarters will have the most control over advertising policy, guidelines and operations in all markets. However, the local advertising managers will submit advertising plans and budgets and play a major role in working with the agency in adapting the advertising appeals to their particular markets and making media selection decisions. Centralization works well when market and media conditions are similar from one country to another, when, the company has only one or a few international agencies handling its advertising, when the company can use standardized advertising or when it desires a consistent image worldwide. Centralization also works best when a company’s international business is small and it operates through foreign distributors or licensees. The decentralized approach is used when companies want to give more control and authority to local managers and believe they know the situations in their markets the best. Decentralization also works best in small or unique markets where advertising must be adapted to fit the conditions of the local market. The combination approach allows for standardization and consistency in a company’s international advertising yet allows for local input or adaptation. 15. Discuss the role of sales promotion tools such as sampling and coupons in international marketing. What challenges might marketers face in using these tools in various countries around the world? (L05) Sales promotion tools such as sampling and coupons basically play the same role in international marketing as they do in a domestic marketing program. Samples can be a very effective way to get consumers in foreign markets to try a new product and realize the benefits of using it. As noted in the text, a number of companies such as WD-40, Haagen-Dazs, and Nestle have used extensive sampling programs to generate trial of their products. Coupons can be very important in encouraging consumers to try a new product or an established brand. However, while most consumers may be willing to accept a sample of a product, coupons might face more hurdles as consumers in some countries have negative attitudes toward them and retailers may not be willing to accept coupons as readily as in the United States and other countries where there are systems in place to handle and process them. Retailers in many countries do not want to be bothered by coupons and other type of promotions that may require additional effort on their part. Thus, marketers have to carefully evaluate the marketing situation in each country before developing and implementing a sales promotion program.

Chapter 19 - International Advertising and Promotion

16. Coca-Cola and PepsiCo have been facing public relations problems in India resulting from accusations regarding the level of pesticide residue in their products. What are some of the ways these companies might deal with the PR problem they are facing in India? (L05) Coca-Cola and PepsiCo have been facing major public relations problems in India resulting from accusations regarding the level of pesticide residue in the products. Both companies have repeatedly argued that the level of pesticides in the water used in their beverages meets not only local standards but those used in the United States and Western Europe. They have also had their soft drinks tested by the Indian government which has issued statements noting that the level of pesticide residue conforms to local quality standards. However, the companies still face a major PR challenge as they must convince a skeptical public that their products are safe while dealing with the ongoing efforts of consumer activist Amit Srivastava and other organizations to get them to close the controversial bottling plants. The companies should consider working with governmental agencies as well as local communities where the plants are located and have suffered pollution damage. Public relations activities in foreign markets are often needed to deal with local governments, media, trade associations, and the general public as these groups may feel threatened by the presence of a foreign multinational in their country. A major focus of the public relations effort in foreign countries is to present the firms as “a good corporate citizen” who is involved with, and concerned about, the host country. Coca-Cola and PepsiCo will need major PR efforts to deal with the negative publicity and problems they are facing in India. India is a very large and fast-growing market for both companies and they will need to continue to work with the appropriate parties to find ways to alleviate the charges being made concerning the pesticide problem.

IMC Exercise Find an example of a company or brand that is using a global advertising campaign for its product or service using sources such as Ad Age Global which can be found on the website of Advertising Age (www.adage.com) or the website brand channel (www.brandchannel.com ). Does this company or brand fit in one of the five categories discussed in the chapter regarding when globalization might be appropriate? Evaluate the global advertising campaign being used for this company y/brand. Do you think it is appropriate to use a global campaign or could the advertising message be improved by adapting it for specific regions or countries? If so, identify a specific country or region where this local adaptation might be needed.

Chapter 20 - Regulation of Advertising and Promotion

CHAPTER 20 REGULATION OF ADVERTISING AND PROMOTION Chapter Overview The purpose of this chapter is to examine the regulatory environment in which advertising and promotion operate including industry self-regulation and regulation by federal and state agencies. The chapter begins by examining the various ways the advertising industry attempts to police itself through the use of selfregulation by various parties including advertisers and agencies, trade associations, the business community, and the media. Attention is also given to appraising the value and effectiveness of selfregulation. The remainder of this chapter focuses on governmental regulation of advertising, particularly at the federal level. We discuss the background of federal regulation of advertising and examine the role and functioning of the Federal Trade Commission including its handling of deceptive advertising cases. Additional federal regulatory agencies that have some influence or power over advertising are also discussed along with advertising regulation at the state level. The chapter concludes with an examination of regulations affecting other promotional areas such as sales promotion, direct marketing, and marketing on the Internet.

Learning Objectives 1. To examine how advertising is regulated including the role and function of various regulatory agencies. 2. To examine self-regulation of advertising and evaluate its effectiveness. 3. To examine how advertising is regulated by federal and state governmental agencies, including the Federal Trade Commission. 4. To examine rules and regulations that affect sales promotion, direct marketing, and marketing on the Internet.

Chapter and Lecture Outline I.

INTRODUCTION

Advertisers operate in a complex environment of local, state, and federal rules and regulations. Additionally, there are a number of advertising and business-sponsored associations, consumer groups and organizations and media that attempt to police advertising through various self-regulatory programs and guidelines. While in most situations the various rules and regulations primarily influence individual advertisers and their messages, there are situations where advertising for an entire industry can be affected. The tobacco industry has already been banned from advertising on the broadcast media, while there is currently strong sentiment to impose restrictions on the advertising and promotion of alcoholic beverages and direct to consumer drug advertising. Regulation and control over advertising come from internal or self-regulation by various groups within the advertising industry and business community as well as from external federal and state regulatory agencies such as the Federal Trade Commission. While only the governmental agencies have the force of law, most advertisers will abide by the guidelines and decisions of internal or self-regulatory bodies. It is important for all of those involved in the advertising decision making process, both on the client and agency side, to have an understanding of various rules and regulations that affect advertising and promotion and how the regulatory bodies operate.

Chapter 20 - Regulation of Advertising and Promotion

II.

SELF-REGULATION

For many years the advertising industry has practiced and promoted the use of voluntary self-regulation as a means of regulating and controlling advertising. Most advertisers and their agencies as well as the media recognize the importance of maintaining consumer trust and confidence in advertising. Selfregulation has also been viewed as way of limiting government interference and control over advertising. A.

Self-regulation by Advertisers and Agencies—The self-regulatory process actually begins with the interaction of the client and agency when creative ideas are considered and evaluated. Most advertisers recognize that their ads are a reflection of the company and want to be sure that their advertising claims are truthful, verifiable, and do not mislead or deceive consumers. Internal control and regulation also come from advertising agencies, which are responsible for verifying all product claims made by the advertiser. Agencies generally take formal steps to protect themselves from legal and ethical perils through agency-clients contracts. However, agencies have been held legally responsible for fraudulent or deceptive claims along with the client in some cases.

Self-Regulation by Trade Associations—Many industries have developed self-regulatory programs and guidelines or codes for advertising. This is particularly true in industries where advertising is prone to controversy such as liquor and alcoholic beverages, drugs, and various products marketed to children. Many professions also maintain advertising guidelines through local, state and national organizations. While industry associations’ guidelines and codes are meant to show that member firms are concerned with the impact and consequences of their advertising, they have no legal basis for enforcing them and must rely on peer pressure or other sanctions to gain compliance. IMC Perspective 20-1 discusses how the Distilled Spirits Council ended its long-standing, self-imposed ban on broadcast advertising in 1996. The national broadcast networks have continued to restrict advertising as most ads do not air until after 11 p.m. However, advertising for hard liquor is becoming more prevalent on local network affiliates and independent stations as well as on cable networks.

Self-Regulation by Business—A number of self-regulatory mechanisms have been established by the business community in an effort to control advertising practices. The largest and best known of these is through the Better Business Bureau (BBB) which promotes fair advertising and selling practices in all industries in local areas. The parent organization of the local BBB offices is the Council of Better Business Bureaus which plays a major role in the monitoring and control of advertising at a national level through the Advertising Self-Regulatory Council which includes three investigative units: the National Advertising Division (NAD), Children’s Advertising Unit (CARU) and Electronic Retailing Self-Regulation Program (ERSP). 1. NAD/NARB—The National Advertising Division (NAD) works closely with the National Advertising Review Board (NARB) to sustain truth, accuracy and decency in national advertising. These two organizations are the operating arms of the Advertising SelfRegulatory Council (ASRC) and constitute the advertising industry’s most effective selfregulatory mechanism. The NAD maintains an advertising monitoring system that is the source of many of the cases it reviews along with complaints received from consumers, local BBBs, and competitors’ challenges (which have become the primary source of NAD cases as shown in Figure 20-1).

Chapter 20 - Regulation of Advertising and Promotion

2. CARU and ERSP – the Children’s Advertising Review Unit’s activities include the review and evaluation of child-directed advertising in all media, as well as online privacy issues that affect children. The CARU also provides a general advisory service for advertisers and agencies and has developed self-regulatory guidelines for children’s advertising. The Electronic Retailing Self-Regulation Program is sponsored by the electronic retailing association and its mission is to enhance consumer confidence in electronic retailing (ecommerce) and discourage advertising and marketing practices in the industry that contain unsubstantiated claims and promote effective self-regulation. In 2012 the ASRC implemented a news self-regulatory program, the Internet-Based Advertising Accountability Program which regulates online behavioral advertising across the Internet. The Self-Regulatory Principles for Online Behavioral Advertising are shown in Figure 20-2. 3. Advertising associations - Various groups in the advertising industry have also been proponents of self-regulation. These include the two major national organizations, the American Association of Advertising Agencies (AAAA) and the American Advertising Federation (AAF). These associations have established guidelines for truthful and responsible advertising and have been active in the legislative area of advertising and in influencing agencies to abide by their codes and principles. D.

Self-regulation by Media - Another very important self-regulatory mechanism in the advertising industry is that of the media. Most media maintain some form of advertising review process and may reject any ads they regard as objectionable. Newspapers and magazines have their own set of advertising standards, requirements, and restrictions that will often vary depending on the size and nature of the publication. Advertising on television and radio has been regulated for years through codes developed by the industry trade association—the National Association of Broadcasters (NAB). Probably the most stringent review process and standards of any media are those of the four major television networks through their “Standards and Practices” divisions which carefully review all commercials submitted to the network or affiliate stations. Figure 20-4 shows a sampling of the TV network’s guidelines for children’s advertising.

Appraising Self-regulation—The three major participants in the advertising process—the advertisers, agencies and media- all work both individually and collectively to encourage truthful, ethical, and responsible advertising. The advertising industry views self-regulation as an effective mechanism for controlling advertising and prefers this form of regulation to government intervention. The president-CEO of the ASRC notes that the self-regulatory system protects consumers from misleading advertising claims; points the way on new media issues; levels the playing field for all advertisers by holding them to high standards of truthfulness and requiring claim substantiation; and provides support for the development of new self-regulatory programs. Self-regulation has been effective and has probably led to the development of standards and practices that are higher than those imposed by law and beyond the scope of proper legislation. There are, however, limitations to self-regulation and this process has been criticized in a number of areas. Concern has been expressed over the time it takes the NAD to resolve a complaint, and over staffing and budgeting constraints which limit the NAD/NARB system’s ability to investigate more cases and complete them more rapidly. Self-regulation has also been criticized for being self-serving to the advertisers and the advertising industry and for lacking the power to be a viable alternative to federal or state regulation.

Chapter 20 - Regulation of Advertising and Promotion

III.

FEDERAL REGULATION OF ADVERTISING

Governmental control and regulation of advertising comes from various federal, state and local laws and regulations with enforcement being the responsibility of various government agencies. The most important source of external regulation of advertising comes from the Federal Trade Commission (FTC). A.

Advertising and the First Amendment—Freedom of speech or expression, as defined by the First Amendment, is the most basic federal law governing advertising in the United States. The courts have extended First Amendment protection to commercial speech, which is speech that promotes a commercial transaction. The text discusses some of the landmark cases where the federal courts have issues rulings supporting the coverage of commercial speech by the First Amendment. We also discuss a recent case involving Nike and whether statements the company made to defend its labor practices are protected by the First Amendment.

Background on Federal Regulation of Advertising—federal regulation of advertising originated in 1914 with the passage of the Federal Trade Commission Act, which created the FTC. This act was originally passed to help enforce antitrust laws, and false advertising was not prohibited unless there was evidence of injury to a competitor. Another important piece of legislation was the Wheeler-Lea Amendment, which Congress passed in 1938. It amended Section 5 of the FTC act and empowered the FTC to act against unfair or deceptive acts or practices if there was evidence of injury to the public. Proof of injury to competition was not necessary.

The Federal Trade Commission—The FTC is charged with the responsibility of protecting both consumers and businesses from anticompetitive behavior and unfair and deceptive practices. The major divisions of the FTC include the Bureaus of Competition, Economics and Consumer Protection. The Bureau of Consumer Protection investigates and litigates cases involving acts or practices alleged to be deceptive or unfair to consumers. The FTC has had the power to regulate advertising since the passage of the Wheeler-Lea Amendment. The authority of the FTC was increased considerably throughout the 1970s. The passage of the Magnusson-Moss Act of 1975 broadened the powers of the FTC and increased its budget as the second section of this act, the FTC Improvements Act, gave the FTC the power to establish trade regulation rules (TRRs). These are industry-wide rules that defined unfair practices before they occurred. During the 1970s the FTC made enforcement of laws regarding false and misleading advertising a top priority as several new programs were instituted. However, many of these programs, as well as the expanded powers of the FTC to develop regulations on the basis of “unfairness,” became the source of controversy. At the source of this controversy is the fundamental issue of what constitutes unfair or deceptive advertising.

The Concept of Unfairness—Under Section 5 of the FTC Act, the Federal Trade Commission has the mandate to act against unfair and deceptive advertising practices. While the FTC has taken steps to define and clarify the meaning of deception, for many years the Commission was less clear with regard to the meaning of unfairness. In response to this problem, the FTC sent Congress a statement in 1980 that contained an interpretation of unfairness. According to the FTC policy the basis for unfairness is that a trade practice (a) causes substantial physical or economic injury to consumers (b) could not be reasonably avoided by consumers, and (c) must not be outweighed by countervailing benefits to consumers or competition.

Chapter 20 - Regulation of Advertising and Promotion

Deceptive Advertising—Deceptive advertising can take a number of forms ranging from intentional false or misleading claims by an advertiser to ads that may be true in a literal sense but leave consumers with a false or misleading impression. Regulatory agencies must make a distinction between false or misleading messages and those that rely on puffery, which refers to the use subjective claims or statements about a product or service. discusses the legal battle The chapter discusses the battle between Pizza Hut and Papa John’s over the latter’s use of puffery as a defense for its “Better Ingredients. Better Pizza” tagline and how Domino’s Pizza joined the war by running a commercial poking fun at Papa John’s puffery defense (Exhibit 20-9). While unfair or deceptive acts or practices in advertising are the primary focus of the FTC, these terms have never really been precisely defined. In 1983 the FTC put forth a new working definition of deception which argued that the commission will find deception “if there is a misrepresentation, omission or practice that is likely to mislead the consumer acting reasonably in the circumstances to the consumer’s detriment.” There are three essential elements to this definition or deception. The first element is that the misrepresentation, omission or practice must be likely to mislead the consumer. The second element is that the act or practice must be considered from the perspective of the reasonable consumer. The third key element is materiality which means that the act influenced the consumer’s decision-making process in a detrimental way. The FTC does have several programs for helping in the evaluation of an ad for deception. 1. Affirmative disclosure—the FTC may require advertisers to include types of information in their ads so consumers will be aware of all the consequences, conditions, and limitations associated with the use of the product or service. The goal of affirmative disclosure is for consumers to have sufficient information to make an informed decision. Another area where the FTC is seeking more specificity from advertisers is in regard to country of origin claims. In 1998 the FTC issued new guidelines for advertising or labeling a product as “Made in USA” which requires that all significant parts and processing that go into the product must be of U.S. origin and the product should have no or very little foreign content. 2. Advertising substantiation—this FTC advertising substantiation program requires advertisers to have documentation to support the claims in their ads and to prove they are truthful. The program requires substantiation of claims made with respect to safety, performance, efficacy, quality, or comparative price. The FTC’s challenge of the claims made by Reebok and Skechers for their toning shoes on grounds that that lacked proper substantiation can be discussed here.

The FTC’s Handling of Deceptive Advertising Cases—Allegations that a firm is engaging in unfair or deceptive advertising come to the attention of the FTC from a variety of sources including complaints from competitors, from consumers, from other governmental agencies, or from the commission’s own monitoring and investigations. Once the FTC decides that a complaint is justified and warrants further action, it notifies the offender, who then has 30 days to respond to the complaint. The FTC complaint procedure will then depend on the response and actions taken by the advertiser. 1. Consent and cease and desist orders—An advertiser charged with deceptive advertising can agree to a settlement with the FTC by signing a consent order which is an agreement to stop the practice or advertising in question. This agreement is for settlement purposes only and does not constitute an admission of guilt by the advertiser. Most FTC inquiries are settled by consent orders. If the advertiser chooses not to sign the consent decree, a hearing can be

Chapter 20 - Regulation of Advertising and Promotion

requested before an administrative law judge. The judge’s decision can be appealed to the full five-member commission by either side. If the commission upholds the complaint, the advertiser can appeal the case to the federal courts. Since the appeal process may take some time, the FTC has the power to issue a cease and desist order requiring the advertiser to stop the specified advertising claim until a hearing is held. Violation of a cease and desist order is punishable by a fine of up to $10,000 a day. Figure 20-5 summarizes the FTC complaint procedure. 2. Corrective advertising—A problem may exist even if an advertiser ceases using a false or deceptive advertisement since consumers may still retain some or all of the deceptive claim in memory. To address this problem of residual effects of prior deceptive advertising, the FTC developed a program in the 1970s known as corrective advertising. Under this program, an advertiser found guilty of deceptive advertising can be required to run additional advertising (corrective ads) designed to remedy the deception or misinformation contained in previous ads. Corrective advertising is probably the most controversial of all the FTC programs as advertisers have argued that it infringes on First Amendment rights of free speech. The effectiveness of corrective advertising campaigns has also been questioned, as has the FTC’s involvement in specifying the content of corrective message. The text discusses the landmark corrective advertising case involving Listerine mouthwash and more recent cases involving Novartis Consumer Health and its product Doan’s Pills as well as Bayer’s Yaz birth control product. G.

Current Status of Federal Regulation by the FTC— After nearly a decade of relative inactivity, the FTC began taking a more activist role during the 1990s and is once again aggressively enforcing advertising rules and regulations. It should be noted that the direction and priorities of the FTC are usually influenced by the political party that is in control. Under the Bush administration (200-2008) the FTC focused its attention on the enforcement of existing regulations, particularly in areas such as telemarketing and Internet fraud. The agency also became more involved in the area of environmental marketing and use of “green” claims in various areas. The FTC also focused on deceptive health claims and the mortgage industry for deceptive and unfair practices in servicing mortgage loans. Under the Obama administration the FTC has been working to stop fraud that targets financially distressed consumers such as deceptive practices by unscrupulous providers of financial services and products. It has also been focusing attention on protecting consumers’ online privacy and the collection of sensitive information, particularly for those using social media such as Facebook and Twitter.

Additional Federal Regulatory Agencies 1. The Federal Communications Commission—the FCC has jurisdiction over the radio, television, telephone and telegraph industries. Its authority over the airways gives it the power to control advertising content and to restrict what products and services can be advertised on radio and television. It can also eliminate obscene and profane programs and/or messages and those it finds in poor taste. The FCC generally works closely with the FTC in the regulation of advertising. For example, the FCC and FTC have been investigating the advertising of long-distance phone services, as they are concerned that many of these ads deceive consumers. In recent years the FCC has become very active in enforcing laws governing the airing of obscene, indecent and profane material. For example, in 2004 the FCC levied fines against shock-jock Howard Stern for indecent content and Clear Channel Communications which carried his syndicated radio show. The FCC has also become 20-6

Chapter 20 - Regulation of Advertising and Promotion

involved in issues affecting the area of publicity and public relations such as making sure that broadcasters screen news releases to ensure that they clearly disclose the nature, source and sponsorship of material. The crackdown is designed to address a marketing practice whereby promotional vides sent to TV stations are represented as news stories. IMC Perspective 20-2 discusses how the FCC is considering regulating the use of product placements in television shows. 2. The Food and Drug Administration—now under the jurisdiction of the Department of Health and Human Services, the FDA has authority over the labeling, packaging, branding, ingredient listing, and advertising of packaged foods and drug products. The FDA has limited authority over nutritional claims made in food advertising and can set rules for promoting food and drug advertising. In 1996 President Clinton signed an executive order declaring that nicotine is an addictive drug and giving the FDA broad jurisdiction to regulate cigarettes and smokeless tobacco. However, the U.S. Supreme Court ruled in March 2000 that the FDA has no power to regulate the manufacture and sale of cigarettes. This decision blocked the FDA rules that would have restricted tobacco advertising from taking effect. However, in 2009 Congress passed a tobacco-control bill giving the FDA sweeping new powers over the packaging, manufacturing and marketing of tobacco products. The Family Smoking Prevention and Tobacco Control Act was signed into by President Obama and imposes many restrictions on the advertising and promotion of tobacco products, as discussed in the chapter. The American Legacy Foundation was established as part of the Master Settlement Agreement with the charge to reducing tobacco use and has developed a number of successful programs such as the truth® campaign that was launched in 2000 to reduce smoking among youth. However, as discussed in IMC Perspective 20-3, funding for the ALF has been reduced significantly in recent years. This perspective also discusses how some countries are now requiring graphic images on cigarette packs as a way to deter smoking. 3. The U.S. Postal Service—the U.S. mail is a major advertising medium, as a large number of marketers use the mail to deliver advertising and promotional messages. The U.S. Postal Service has control over advertising involving the use of mail and ads involved with lotteries, fraud and obscenity regulations. 4. Bureau of Alcohol, Tobacco, and Firearms—the BATF is an agency within the Treasury Department that enforces laws, develops regulations, is responsible for tax collection in the liquor industry, and regulates and controls the advertising of alcoholic beverages. I.

The Lanham Act—While most advertisers have relied on self-regulatory mechanisms and the FTC to deal with the problem of deceptive or misleading advertising by their competitors, many companies are becoming more active in filing lawsuits against competitors who they feel are making false claims under the Lanham Act. This act, which was originally written in 1947 as the Lanham Trade-Mark Act, was amended to encompass false advertising and provides individual advertisers with the opportunity to file a civil suit against a competitor. Many companies are using the Lanham Act to sue competitors for their advertising claims, particularly since comparative advertising has become so common. The Trademark Law Revision Act of 1988 closed some loopholes in the Lanham Act and has made it even easier to sue competitors for making false advertising claims.

Professor Notes

Chapter 20 - Regulation of Advertising and Promotion

IV.

STATE REGULATION

In addition to the various federal rules and regulations, advertisers must also concern themselves with numerous state and local controls over advertising. State regulation of advertising was based for many years on the Printers’ Ink Model Statutes. Many states have since modified the original statutes and adopted laws similar to those of the Federal Trade Commission Act that serve as a basis for false and misleading advertising. As the federal government became less involved in the regulation of advertising during the 1980s, many state attorneys general began to enforce state laws regarding false or deceptive advertising. The National Association of Attorneys General (NAAG) made concerted moves against a number of national advertisers as a result of inactivity by the FTC during the Reagan administration. The foray of the NAAG into the regulation of national advertising raised the issue of whether states working together can create and implement uniform national advertising standards that would, in effect, supersede federal authority. However, the American Bar Association panel that examined the FTC concluded that the Federal Trade Commission is the proper regulator of national advertising and recommended that the state attorneys focus their attention on practices that harm consumers in a single state. It remains to be seen how the NAAG will proceed and fare in its efforts to regulate national advertising. However, it has become evident that states will become involved in the policing of national, as well as local, advertising. Advertisers are concerned over this trend toward increased regulation of advertising at the state and local levels, as they do not want to have to modify national advertising campaigns to comply with regulations of individual states. V.

REGULATION OF OTHER PROMOTIONAL AREAS

Sales Promotion—Both consumer- and trade-oriented promotions are subject to various regulations. The FTC regulates many areas of sales promotion through the Marketing Practices Division of the Bureau of Consumer Protection. Many promotional practices are policed by the state attorney general offices and local regulatory agencies. Various aspects of trade promotion such as allowances are regulated by the Robinson-Patman Act. Specific sales promotion tools that are subject to regulations include: 1. Contests and sweepstakes—marketers must be careful to ensure that their contest or sweepstakes is not classified as a lottery, which is considered a form of gambling. A second important requirement in the marketer provide full disclosure of the promotion regarding issues such as the number of prizes to be awarded, odds of winning, duration and dates of termination, and availability of lists of prize winners. Many marketers are now using the Internet and social media sites to run their contests and sweepstakes. This is creating additional issues that marketers must consider such as whether automated or repetitive electronic submissions will be accepted, content of submissions, and online data privacy laws if the promotion is being marketing using e-mail. Marketers that post audio visual entries on YouTube or feature a contest on Facebook or Twitter must comply with each site’s guidelines for on-site promotions. 2. Premiums—marketers must make a fair representation of the value of a premium offer. Marketers must also be careful in the use of premium offers for special audiences such as children. The Children’s Advertising Review Unit has voluntary guidelines concerning the use of premium stating that advertising promoting a premium must emphasize the product rather than the premium offer.

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3. Trade Allowances—marketers using various types of trade allowances must be careful not to violate any stipulations of the Robinson-Patman Act, which prohibits any form of price discrimination. Certain sections of the Robinson-Patman Act prohibit a manufacturer from granting wholesalers and retailers various types of promotional allowances unless they are made available to all customers on proportionally equal terms. Vertical cooperative advertising is also regulated by the Robinson-Patman Act. B.

Direct Marketing—The Federal Trade Commission enforces laws in a number of areas that relate to direct marketing including mail-order offers, the use of 900 telephone numbers, and directresponse television advertising. In addition to the FTC, the United States Postal Service enforces laws dealing with the use of the mail to deliver advertising and promotional messages or receive payments and orders that have been delivered by other means such as print or broadcast advertising. Both the FTC and Postal Service police direct-response advertising very closely to ensure that the ads are not deceptive or misleading or misrepresent the product or service being marketed. Laws also forbid mailing unordered merchandise to consumers and rules govern the use of negative option plans whereby a company proposes to send merchandise to consumers and expects payment unless a notice of rejection or cancellation is sent by the consumer. The FTC also has rules requiring direct marketers to promptly ship merchandise. Another area of direct marketing facing increased regulation is telemarketing. With the passage of the Telephone Consumer Protection Act of 1991, marketers who use telephones to contact consumers must follow a complex set of rules developed by the Federal Communications Commission. Under these rules telemarketers are required to maintain an in-house list of residential telephone subscribers who do not want to be called and consumers who continue to receive unsolicited calls can sue for damages. This law also bans unsolicited “junk fax” ads. The FTC has also been actively involved in the regulation of advertising that encourages consumers to call telephone numbers with a 900 prefix, whereupon they are automatically billed for the call. In 1993 the FTC issued its 900-Number Rule for advertising directed at children. The rule restricts advertisers from targeting children under the age of 12 with ads containing 900 numbers unless they provide a bona fide educational service. The rule also requires that 900number ads directed to those under the age of 18 must contain a clear and conspicuous disclosure statement that requires the caller to have parental/guardian permission to complete the call. The name of this legislation was changed to the Pay-Per-Call Rule and in 1998 it was revised to give the FTC the authority to broaden its scope and add new provisions. In 2003 Congress approved the FTC’s proposal for a national “do-not-call” registry under which consumers can sign up to be put on a list that will bar them from receiving calls from telemarketers. The do-not-call registry has withstood several legal challenges by the direct marketing industry and in 2005 the FTC, FCC and individual states began enforcing it. Companies can be fined $11,000 for each call that violates the FTC provisions. The National Do Not Call Registry contained more than 217 million phone numbers as of 2013. The direct-marketing industry is also scrutinized by various self-regulatory groups such as the Direct Marketing Association and the Direct Selling Association that have specific guidelines and standards firms are expected to adhere to and abide by. However, many critics argue that these groups are not doing enough to keep consumers from receiving unwanted marketing messages, such as calls from telemarketer and direct-mail offer and solicitations.

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Marketing on the Internet—Two major areas of concern with regard to marketing on the Internet are privacy issues and online marketing to children. Several restrictions have been proposed including: • •

Disclosing fully and prominently both the marketer’s identity and the use for which information is being gathered in every communication. Giving consumers the right to bar marketers from selling or sharing any information collected from them as well as to review the personal information collected.

1. Recently the major privacy issue regarding the Internet that has emerged involves undisclosed profiling whereby Web marketers can profile a user on the basis of name, address, demographics, and online/offline purchasing data. Companies that collect Internet usage data and information have joined together under the banner of the Network Advertising Initiative and developed a self-regulatory code that requires websites to disclose their use of ad servers and permit consumers to opt out of data collection that could be used for profiling. 2. One of the biggest concerns regarding the Internet is how to restrict marketers whose activities or websites are targeted at children. Concerns over online marketing to children led to the passage of the Children’s Online Privacy Protection Act of 1998, which the FTC began enforcing in April 2000. This law requires posted privacy policies and verifiable parental consent before marketers can collect personally identifiable information from children, such as names and email addresses. Concerns over privacy have increased with the explosion in the popularity of social media sites such as Facebook, MySpace, Twitter and others. Many marketers adhere to the Digital Alliance Ad Choice program which is a self-regulatory initiative that was implemented by the Advertising Self-Regulatory Council as part of it Internet Advertising Accountability Program. FTC has brought complaints against both Facebook and Twitter and both have had to make changes to their privacy policies. In 2010 the FTC settled a complaint against Twitter charging it deceived consumers and put their privacy at risk by failing to safeguard their personal information. Twitter agreed to establish a security program subject to government monitoring for that runs until 2020. The FTC has also taken action to address the issue of endorsements made through social media sites and blogs. In 2009 the agency passed a new set of guidelines for online endorsements that require online endorsers and bloggers to disclose any material connection to an advertiser. Under the new guidelines, paid endorsers who post on social media sites such as Facebook or post product reviews on marketer sites such as Amazon can be held liable if they do not identify themselves as such. 3. Another Internet related area receiving regulatory attention is spamming which is the sending of unsolicited multiple commercial electronic messages. A number of states have enacted anti-spamming legislation and a federal antispam bill (CAN-SPAM) act went into effect on January 1, 2004.

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Teaching Suggestions Regulatory factors are a major concern in the integrated marketing communications decision-making process and consideration and attention must be given to the various laws, rules and regulations that can constrain and restrict advertising and other forms of promotion. While students may have some knowledge of the area of advertising regulation, it is unlikely that they will understand the extent to which advertisers must deal with regulatory concerns from various governmental agencies or self-regulation by various business, advertising and media organizations. For example, the chapter opener discusses how the Federal Trade Commission (FTC) took action against Reebok and Skechers for deceptive advertising of their toning shoes and the lack of data to substantiate their advertising claims for the product. Most students will be familiar with the ads used by the two companies as Skechers used well known celebrities such as Kim Kardashian and Brooke Burke in its ads as well as former NFL quarterback Joe Montana. There is a very interesting ABC News video available on the YouTube channel for the book (Chapter 20) that focuses on Skechers advertising for its toning shoes and settlement with the FTC. Students should be encouraged to appraise and evaluate self-regulation by the advertising industry and the media as a means of regulating and controlling advertising. It is also important to discuss the Federal Trade Commission and the changes that have occurred in its power and role over the past decade. You might refer student to the Advertising Self-Regulatory Council web site which can be found at http://www.asrcreviews.org/ and contains information on the ASRC’s various self-regulatory programs. Several of the landmark cases supporting protection of advertising as a form of commercial speech under the First Amendment are noted and should be discussed. A very important case is Kasky v. Nike which is discussed in the chapter. The U.S. Supreme Court refused to hear this landmark case involving Nike and whether its statements about the company’s labor policies and practices should be considered commercial in nature or protected political speech. This case could alter the definition of commercial speech and lead to new restrictions on the claims that companies make through press releases and other forms of communication regarding their behavior. You may also find it helpful to research some of the other important cases involving advertising in more detail and discuss them in class. These include some of the older and well-known deceptive advertising cases such as Profile Bread, Ocean Spray Cranberry Juice, STP and Listerine. There is an excellent article in October 17, 1994 issue of Advertising Age on the landmark legal battle between Campbell Soup Co. and the FTC that was the impetus for the FTC program of corrective advertising. An interesting area for discussion is just how involved the government and FTC should be in the regulation of advertising and whether programs such as advertising substantiation or corrective advertising are necessary. Attention should also be given to discussing the Lanham Act, which has become a very significant development in the area of advertising regulation. Competitors are now suing one another under this act rather than just complaining to the NAD/NARB or the FTC. An excellent article on the Lanham Act and its implications for advertising is “Us vs. Them: The Minefield of Comparative Ads,” by Bruce Buchanan and Doron Goldman, Harvard Business Review, May/June 1989, pp. 38-50. Attention should also be given to legal developments affecting other IMC tools such as direct marketing, sales promotion and the Internet. For example, in February 2003 Congress approved the FTC’s proposal for the formation of a nation “do-not-call” registry and this program is now in effect. Several lawsuits against the FTC registry have been filed by direct marketing groups such as the Direct Marketing Association. However, thus far the courts have upheld the registry’s validity and it has reduced the number of households to which telemarketers can make phone calls. We suggest that you stay abreast of developments concerning the status of the FTC’s “Do-Not-Call” Registry by referring to publications such as Advertising Age or going to the DMA web site at www.the-dma.org.

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Answers To Discussion Questions 1. The chapter opener discusses how Skechers and Reebok were fined for making advertising claims for their toning shoes that the Federal Trade Commission argues were false and misleading and unsubstantiated. Evaluate the claims made by these companies in their toning-shoe ads from a deceptive advertising perspective. Why do you think they agreed to pay money to settle their cases rather than appeal them? (L01,02) As discussed in the chapter opener, the Federal Trade Commission, along with attorneys general from nearly all 50 states, launched an investigation of the advertising claims being made by both Skechers and Reebok for their toning shoes and found them to be deceptive. Both companies were making claims in their advertising touting benefits from wearing the shoes such increased muscle activation, improved circulation, greater muscle tone, reduced cellulite, weight loss and firmer, toner butts. Following an investigation the FTC alleged that neither company could substantiate the claims being made in advertising for their shoes. Skechers was charged with selectively “cherry-picking” results from its studies and failed to substantiate its advertising claims. Moreover, the FTC noted that the Skecher ads included an endorsement from a chiropractor who was married to a marketing executive in the company and that the independent clinical study conducted by the chiropractor did not support the results claimed. The advertising used by both companies would meet the FTC’s definition of deception which focuses on whether there is a misrepresentation, omission or practice that is likely to mislead the consumer acting reasonably in the circumstances. A key element to deceptive advertising is materiality or whether the misrepresentation or practice is material and would influence the reasonable consumer’s decision making process. Obviously the various claims being made by both companies for their toning shoes were material in nature. There are several reasons why both Reebok and Skechers agreed to settle their cases rather than appeal them. First of all the companies wanted to avoid a prolonged legal battle that would likely have resulted in a significant amount of negative publicity for both companies. Also, as discussed in the chapter, many deceptive advertising cases brought by the FTC are settled by having companies sign a consent order which is an agreement to stop the practice or advertising in question. This type of agreement is for settlement purposes only and does not constitute an admission of guilt by the advertiser. However, it should be noted that the FTC required Rebook to pay $25 million to resolve the charges while Skechers had to pay $40 million. The companies were required to put most of the money into a fund so it could be returned to consumers who bought toning shoes based on the unsubstantiated claims. It is important to note that the FTC also focused on the lack of proper substantiation or support for the claims Skechers and Reebok were making for their toning shoes. Under the settlement the companies can still sell the shoes but cannot make specific claims and assertions without proper substantiation to support them. 2. Discuss the need for regulation of advertising and other IMC tools Do you advocate more or less regulation of advertising and other forms of promotion by governmental agencies such as the Federal Trade Commission and the Food and Drug Administration? (L01, 03) There is a need for regulation of advertising and other IMC tools as consumers rely on the information provided by marketers to make consumption decisions. If this information is false and/or misleads the consumer then, the advertising and other forms of promotion are not fulfilling this basic function. Consumers also have a right to know that the claims made in advertising and other forms of promotion such as the efficacy, performance, quality or safety of a product can be supported by the companies that make them and also should be aware of any consequences, conditions and/or limitations associated with the use of a product or service. While most marketers are honest and truthful with regard to the advertising and promotion messages they use, there are still many

Chapter 20 - Regulation of Advertising and Promotion

companies who might use deceptive message to persuade consumers to purchase their product and/or service. Thus, there is a need for governmental agencies such as the FTC and FDA to become involved in the regulation of advertising to ensure that consumers are receiving accurate and truthful information and can make informed choices. Opponents of government regulation argue that the advertising industry does a very good job of regulating itself through voluntary self-regulation. They also note that legislation such as the Lanham Act serves as a deterrent to companies who might engage in deceptive advertising as they can be sued by competitors for doing so. While selfregulation of advertising and promotion has been effective it is unrealistic to think that it is sufficient for regulating this complex industry. Thus, regulation by government agencies is necessary to protect consumers and to ensure that they are receiving truthful and accurate information upon which they can base their purchase decisions and choose among the myriad of brands available in most product/service categories. 3. Discuss the role the Advertising Self-Regulatory Council plays in the self-regulation of advertising. Discuss the arguments for and against self-regulation as an effective way of protecting consumers from misleading or deceptive advertising as well as companies competing against one another. Do you view self-regulation as an effective way o protecting consumers from misleading or deceptive advertising? (L02) The Advertising Self-Regulatory Council (formerly known as the National Advertising Review Council) was formed by the three leading advertising industry associations – the American Association of Advertising Agencies, American Advertising Federation and the Association of National Advertisers - along with the Council of Better Business Bureaus to sustain high standards of truth, accuracy, and social responsibility in national advertising. In 2009 the CEOs of three other major marketing associations - the Direct Marketing Association, Electronic Retailing Association and the Interactive Advertising Bureau- joined the NARC Board of Directors. For many years the advertising industry, business community, and the media have promoted the use of voluntary selfregulation as a means of regulating and controlling advertising. These organizations recognize the importance of maintaining consumer trust and confidence and for advertising to be perceived as truthful and non-offensive. It can be argued that self-regulation has resulted in advertising standards and practices that are higher than those imposed by law. On the other hand, critics of self-regulation argue that it is self-serving to the advertisers and advertising industry as groups such as the NAD/NARB lack the power and authority to properly regulate and control advertising. These agencies do not have the staff or budget to investigate cases and it takes them too long to resolve them. The incentive for advertisers to cooperate with self-regulatory bodies is based on several factors. First, it is in the best interest of all advertisers to maintain consumer trust and interest in advertising. Peer group pressure and sanctions may also provide an incentive to cooperate with self-regulation. Finally, most advertisers view self-regulation as preferable to government interference and control over advertising as the latter may result in more stringent and troublesome regulations. 4. IMC Perspective 20-1 discusses the battle that marketers of hard liquor have waged to advertise on television and the broadcast networks in particular. Do you agree with the DISCUS argument that for hard liquor should be treated the same as advertising for beer and wine? Should advertising for spirits be confined to late-night programs on the networks or should the ads be permitted to run earlier in the evening as well? (L02) The decision by the Distilled Spirits Council of the United States (DISCUS) to overturn the selfimposed ban on broadcast advertising has been very controversial. DISCUS has argued that marketers of distilled spirits want to break down the public perception that spirits are stronger or more dangerous than beer and wine and thus deserving of harsher social and political treatment. The vice-

Chapter 20 - Regulation of Advertising and Promotion

president for marketing and strategy at Seagram, the company that actually ended industry’s ban by airing an ad for Crown Royal Canadian whiskey, has argued that distilled spirits should have the same access to broadcast media as beer and wine. He noted that “the average consumer talks about liquor as being hard…so therefore liquor has to have sort of specialness or evilness about it.” The distilled spirits companies argue that the alcohol content of standard drinks of beer, wine, or distilled spirits (either straight or in a mixed drink) are equivalent. It should be noted that the Federal Trade Commission argues that there is no basis for treating liquor ads differently than advertising for other types of alcohol. It is likely that distilled spirits are at a competitive disadvantage to beer and wine if marketers of the products cannot advertise on television. This is particularly true in today’s media environment as narrowcasting is now possible through television, which means distilled spirits marketers can target their advertising to specific segments of the adult population. Moreover, image advertising is very common in the marketing of alcoholic beverages and television is an excellent medium for creating brand images. However, critics argue that that television advertising provides marketers with a very effective way to advertise hard liquor and will encourage young people to drink. They also argue that allowing ads for hard liquor on network television shows, particularly during prime time, will result in many young people under the legal drinking age of 21 seeing them which may encourage them to drink. However, limiting ads for hard liquor to late-night programs will reduce the likelihood that they will be viewed by young people. It is likely that the level of advertising for hard liquor will continue to increase on cable networks and local affiliates of the four major networks. However, it is probably in the best interest of the four major networks to refrain from accepting commercials for hard liquor during prime time shows as this will lead to more controversy and increase the likelihood that public advocacy groups such as MADD and the Center for Science in the Public Interest will step up their efforts to ban all alcohol advertising from television and radio. 5. What are the three essential elements required to prove deception under the definition used by the Federal Trade Commission? (L03) In 1983 the FTC put forth a new definition of deception which states that “the commission will find deception if there is a misrepresentation, omission, or practice that is likely to mislead the consumer acting reasonably in the circumstances to the consumer’s detriment. The first element in this definition is that the representation, omission or practice must be likely to mislead the consumer. The second element is that the act or practice must be considered from the perspective of the reasonable consumer. In determining reasonableness the FTC considers the group to which the advertising is targeted and factors such as their age, education level, intellectual capacity and frame of mind. The third element to the FTC’s definition is materiality, which means that the misrepresentation or practice is one that is likely to affect a consumer’s choice or conduct with regard to a product or service. This means that the information, claim, or practice in question is important to consumers, and if acted upon, would be likely to influence their purchase decision. 6. Find several examples of advertising claims or slogans that are based on puffery rather than substantiated claims. Discuss whether you feel these advertising claims can be defended on the basis of puffery. (L03) Puffery has been defined as “advertising or other sales presentations which praise the item to be sold with subjective opinions, superlatives, or exaggerations, vaguely and generally, stating no specific facts.” For example, Nestle claims that it “makes the very best chocolate” while BMW uses “The Ultimate Driving Machine” tagline and Bayer aspirin calls itself the “wonder drug that works wonders.” The use of puffery is very common and students should be asked to find additional examples of ads that use puffery and evaluate them. They should have no problem finding ads in magazines or on television that use puffery.

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Defenders of puffery argue that it represents a form of “poetic license” or allowable exaggeration and does no harm as consumers can recognize it and do not really believe the claims. However, critics of puffery argue that consumers cannot distinguish between puffery and verifiable, fact-based claims. Preston argues that puffery burdens consumers with untrue beliefs and has a negative effect on their purchase decisions. The argument over puffery concerns how much latitude advertisers should be given in their use of superlatives and subjective claims. One could take the position that puffery may make advertising more interesting; however, it may also have the capacity to mislead consumers. 7. IMC Perspective 20-2 discusses how the Federal Communications Commission is considering more stringent regulation of product placements in television shows Evaluate the arguments for and against more stringent regulation of product placements by the FCC. (L03) Unlike some countries, the use of product placements in television shows and movies is not prohibited in the United States. While the use of undisclosed commercial messages in broadcasting has been regulated by the FCC since 1934, broadcasters do not have to disclose product placements when they are offered without charge or for a nominal fee. However, they are required to disclose any money, service or valuable consideration that is paid to, promised to, or charged by the broadcaster in exchange for product placements. The broadcasters have been considered in compliance with the regulation by placing an announcement in the credits at the beginning or end of the program stating that “promotion consideration paid for by (name of sponsor)” which remains on the screen long enough to be seen and/or heard by the average viewer. However, as the use of product placements has increased, a number of consumer advocacy groups have argued that more regulation of the practice is needed. They argue that product placements are inherently deceptive because many TV viewers do not realize they are in fact a form of advertising. Moreover, critics argue that consumers do not have their usual veil of skepticism or perceptual defenses engage, like they do when watching a standard television commercial, when exposed to a product placement in a show. They are also concerned over the way many of the product placements are now being integrated into television shows which makes it difficult for viewers to distinguish a commercial message from the actual program. They also note that seeing a brand used in the context of a TV show and used by a popular character may have an impact on consumers, particularly children, and thus increase the likelihood of purchase. Marketers are obviously opposed to any additional regulation of product placements such as the use of a notification system that would alert consumers when a product placement appears in a show. They argue that disclosure at the end of a program is sufficient as notification during a program would disrupt the flow of a show (and of course alert viewers to the fact that a fee was paid for the product placement). Producers of television shows and the major broadcast and cable networks are also opposed to any regulations as product placements are becoming an important source of revenue that help underwrite the costs of TV shows. Marketers view product placements as a way to deliver branding messages to consumers who are becoming increasingly difficult to reach with regular TV advertising as many of them now record shows on their DVRs and fast-forward through the commercials during playback. Proponents of product placement also note that the Federal Trade Commission has declined to regulate their use arguing that they have no basis for doing so since they rarely make objective material claims about a product or service when used within a program. The FTC also argues that it would be difficult to develop a “one-size –fits-all” rule or guidelines that could effectively regulate product placements. It is likely that the use of product placements in their current form will continue unless there is more consumer backlash against them or the practice becomes too intrusive.

Chapter 20 - Regulation of Advertising and Promotion

Discuss the Lanham Act and how it affects advertising. What elements are necessary to win a false advertising claim under the Lanham Act? (L03) The Lanham Act is a very important piece of legislation as it provides companies with a basis for suing competitors for making false or misleading advertising claims. The Lanham Act makes it possible for a company to take civil action against a competitor who might be engaging in deceptive advertising rather than relying on self-regulatory or governmental remedies to deal with the problem. Comparative advertising is most likely to be affected by the Lanham Act as this law deals with advertising claims that misrepresent the nature, characteristics or qualities of either the advertiser’s or the competitor’s products or service. Comparative ads are most prone to litigation under this act since they involve direct claims or comparisons of one company’s product or service against another. To win a false advertising lawsuit under the Lanham Act the plaintiff must prove that false statements have been made about the advertiser’s product or your product; the ads actually deceived or had the tendency to deceive a substantial segment of the audience; the deception was material or meaningful and is likely to influence purchasing decisions, the falsely advertised product or service is sold in interstate commerce; and you have been or likely will be injured as a result of the false statements, either by loss of sales or loss of goodwill.

9. Do you think the U.S. Food and Drug Administration should consider adopting the type of cigarette packaging being used in Australia that requires graphic images and removes all branding elements? How effective do you think this type of packaging would be in reducing cigarette smoking? (L03) In late 2012 Australia became the first country to require cigarettes to be sold in uniform plain packages. The Australian law requires cigarettes to be sold with no company logos and with the same font for all brands on a dark brown background. Graphic health warnings cover 90% of the back of the packaging and 70% of the front. The Australian government enacted the law as part of its effort to deter smoking as it estimates that diseases related to tobacco have killed nearly a million people in the country over the past 50 years and annual health costs from the habit are nearly $33 billion each year. A number of other countries are considering implementing similar legislations such as New Zealand and the United Kingdom. Mandatory picture warnings were first introduced in Canada in 2010 and are now used in 47 countries and legislation requiring the use of graphic images was supposed to go into effect in the U.S. in late 2012 bus has been delayed by challenges from the tobacco companies on First Amendment ground. However, this legislation would not go as far as Australia’s law which takes away cigarette companies’ ability to use its trademarks and other branding elements. Supporters of the use of the approach being used in Australia argue that the use of the graphic images will deter smoking by making the health risk associated with the habit and also taking away the brand identity and image of cigarette brands which have been built through years of advertising and other forms of IMC. However, the tobacco industry is vehemently opposed to the legislation on the grounds that it violates their First Amendment rights. Many other companies are opposed to the idea as there is concern that it could set a precedent that might eventually spread to other industries where there are public health concerns such as alcohol or food and beverage products that are high in sugar. Opponents also question whether the graphic images will really deter smokers since most are addicted to tobacco and thus will purchase cigarettes in the plain packages and just put them in some type of case or sleeve to hide the images. 10. Discuss how the Do-Not-Call” Registry developed by the Federal Trade Commission is impacting the direct marketing industry. What arguments might direct marketers use in trying to have this program rescinded? (L04) Congress approved the FTC’s proposal for the formation of a national Do-Not-Call registry in February 2003 and this program contained nearly 217 million phone numbers by 2013. Marketers face penalties of $11,000 per incident for calling someone on the list. The new federal rules do not cover telemarketing activities that occur within a state and, thus, do not involve interstate commerce.

Chapter 20 - Regulation of Advertising and Promotion

However, many states now have their own Do-Not-Call registries and these will continue to be important to protect consumers from unwanted calls originating from companies doing business within the state where they reside. The creation of the do-not-call registry has greatly reduced the number of households that telemarketers can call. However, it has not had the negative impact that was anticipated by the telemarketing industry. Telemarketers can still call consumers with whom they have an established relationship and many companies have shifted their focus from cold-calling for prospects to managing existing customer relationships. These customers are generally receptive to calls from telemarketers which has increased the efficiency of the business. The primary arguments direct marketers can use in trying to implement this program is that it violates their First Amendment rights and that such a program is not needed. The Direct Marketing Association, which is the primary trade group for the direct marketing industry, has argued that consumers already have a number of do-not-call options. They can already ask to be excluded from an individual company's telemarketing list at the same time they can sign up with state lists or pay $5 to sign up on the voluntary national list maintained by the Direct Marketing Association. The DMA argues that the national registry will impose more bureaucracy on the direct marketing industry and that the industry that the same goal can be achieved by the industry itself with better education and enforcement. The Direct Marketers Association and the American Teleservices Association, which represents callers, each has separately sued the Federal Trade Commission over its Do Not Call telemarketing rules. The DMA's lawsuit contends the FTC has overstepped its legal authority to prevent fraud by attempting to ban legitimate telemarketing, and that its action also violates marketers' First Amendment rights at free speech. The American Teleservices Association, which represents callers, made similar claims in its suit. However, in February 2004, the U.S. Court of Appeals upheld the validity of the Do-Not-Call Registry, ruling that it is a valid commercial speech regulation. The two major trade associations may yet appeal the case to the U.S. Supreme Court. 11. Do you agree with the new guidelines from the Federal Trade Commission requiring bloggers and endorsers to disclose any material connection to an advertiser?” How might this impact companies that use social media in their IMC programs? (L04) Marketing on the Internet is not yet subject to any formal government regulations as Internet industry leaders have encouraged the FTC to allow the industry to regulate itself. However, the Federal Trade Commission has been active in the regulation of fraud and misleading advertising though this new medium. With the growth of social media and the explosion in the number of blogs, the FTC has become concerned over endorsers using these platforms to promote a product or service without making consumers aware that they are being paid to do so. The FTC notes that its new guidelines are designed to clarify what an endorser can say about a company or brand on a social media site or blog. Proponents of the guidelines note that bloggers and social media marketers should not be exempt from the same rules of openness and fairness that other they have to follow when using other media. They note that endorsements on social media sites or blogs should not be hidden and represented as editorial as that the consumer has a right to know if someone is being paid to endorse a brand on these sites. The use of fraudulent testimonials and endorsements are not permitted in traditional media advertising and should not be allowed on blogs or through social media. Opponent to the new guidelines argue that they are too broad and vague and not enough specificity is provided regarding how disclosures must be communicated. They note that the FTC will review violations of the new guidelines on a case-by-case basis which means the commission can apply the rules selectively. Critics also argue that there are First Amendment issues with the new guidelines as well as it they may be overly restrictive as to what a consumer can say on a social media site or a blog. The new guidelines are going to require that marketers take more responsibility for the actions of people they pay to endorse their products The guidelines require that marketers develop policies regarding disclosure and truthfulness in their social media programs and that they monitor online conversations of those paid to endorse their products and services and correct any misstatements. 20-17 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 20 - Regulation of Advertising and Promotion

Additional Discussion Question (not in text) 12. Discuss the role the media play in the self-regulation of advertising. Do you view self-regulation as an effective way of protecting consumers from offensive or misleading advertising? (L02) The media are an important self-regulatory mechanism in the advertising industry. Most major media have some type of review process for advertising and can reject ads they find objectionable. Some media exclude ads for an entire product class such as Reader’s Digest’s ban on tobacco and liquor ads. Many magazines and newspapers have standards regarding the type of advertising they will accept. However, these standards vary depending on the nature and size of the publication. Large established publications may have more stringent standards than those that are less financially secure and in need of advertising revenue. The major television networks have incorporated many of the provisions of the codes used by the National Association of Broadcasters into their own standards. The networks have the most stringent advertising review process of any media as their standards and practices division reviews all commercials before they can be aired on the network or an affiliate. Commercials that are considered to be too offensive or potentially misleading are sent back to the advertiser for revision and resubmission. However, most of the cable channels do not have the same standards as the networks and advertisers often will run ads on cable to circumvent the review more stringent requirements of the networks. Media self-regulation plays an important role in protecting consumers from offensive or misleading advertising. However, given the myriad of magazines and newspapers, as well as the increasing number of cable channels, it is possible for advertisers to find a way to reach consumers with their messages. 13. The texts discusses the decision by the California Supreme Court in the Nike v Kasky case to view statements about a company’s labor policies or operations in ads or press releases as commercial, rather than political in nature and thus not subject to First Amendment protection. Do you agree or disagree with this ruling? Discuss how this ruling might affect various forms of integrated marketing communications used by Nike and other companies in California? (L01)) Freedom of speech or expression is the most basic federal law governing advertising in the United States. For many years, freedom of speech protection did not include advertising and other forms of speech that support a commercial transaction. However, the courts have extended First Amendment protection to advertising as a form of commercial speech. There have been a number of landmark cases where the federal courts have issued ruling supporting the coverage of commercial speech such as advertising under the First Amendment. However, the courts have ruled that only truthful commercial speech is protected, not advertising or other forms of promotion that are false, misleading or deceptive. In the case involving Nike, the California Supreme Court reversed the decisions of two lower courts and ruled that Nike’s public relations campaign defending its labor policies and working conditions inside its factories in Asia should be considered commercial speech, even though it was not talking specifically about its shoes. The court ruled that corporations know that issues such as labor conditions and policies contribute to the public’s perception of a company and consumers’ willingness to buy its products. At issue here is how to distinguish between political and commercial speech. The U.S. Supreme Court has held that political speech, even when inaccurate, is protected by the First Amendment. However, this is not true for advertising and other forms of commercial speech that are used to sell a product or service. Nike has argued that its public relations activities defending its labor practices and working conditions, which have included the issuing of press releases and writing letters to colleges faced with student activists calling for the boycott of Nike products, are not the same as advertising and cannot be considered commercial in nature. However, the California Supreme Court ruled that if Nike could misrepresent the conditions under which its shoes are made without any punishment through its public relations efforts, then any company could use the First Amendment to make false statements about its products or practices with the intent of increasing sales. It is

Chapter 20 - Regulation of Advertising and Promotion

important to note that the California Supreme Court did not decide whether Nike really was guilty of abusing workers or misleading consumers, leaving these issues for an eventual trial court. The U.S. Supreme Court heard oral arguments and reviewed 34 briefs regarding the case but dismissed it for lack of jurisdiction and sent it back to California for trial. Rather than risk a costly and protracted trial, Nike decided to settle the case and the California Supreme Court decision now stands. Thus, companies doing business in the state run the risk of attracting a lawsuit if their public relation campaigns touch upon their products or operations. The outcome alters the definition of commercial speech and leads to new restrictions on claims that companies can make about their policies, practices and behavior. Treating press releases, letters, and other public statements defending a company’s actions as equivalent to advertising could also result in companies being less willing to speak out on important public issues and have a profound impact on their public relations activities. It will be interesting to see additional cases regarding the PR activities of a company result in law suits in California as well as other states. 14. What is meant by advertising substantiation? Should advertisers be required to substantiate their claims before running an ad or only be required to provide documentation only if their advertising claims are challenged? (L03) Advertising substantiation is a FTC program which requires advertisers to have supporting documentation for their claims and to be able to prove that they are truthful before running their ads. It can be argued that advertisers should be required to substantiate their claims before running an ad so that they have a reasonable basis for making the claim. Prior substantiation provides consumers with a basis for believing advertising claims such that they can make rational and informed decisions and also deters companies from making claims that they cannot adequately substantiate. Opponents of prior substantiation argue that it is too expensive to have a company document all of their claims and that most consumers would not be interested in the technical data and evidence used to substantiate them. Requiring formal, prior substantiation might also result in advertisers resorting in puffery rather than making specific performance or efficacy claims. 15. What is corrective advertising? Why do you think corrective advertising is so controversial? Evaluate the arguments for and against corrective advertising? (L03) Corrective advertising is a Federal Trade Commission program whereby and advertiser found guilty of deceptive advertising can be required to run additional ads designed to remedy the deception resulting from consumer exposure to the previous ads. The purpose of corrective advertising is to remedy the misinformation, incorrect beliefs or perceptions that consumers may have developed as a result of deceptive or misleading advertising. Corrective advertising is also designed to help restore competition to the stage which prevailed before the deceptive advertising occurred. The FTC can determine the extent of corrective advertising effort required of an advertiser by considering the length of time for which the deceptive ads were run and the extent to which the market holds misperceptions or incorrect beliefs as a result of the deceptive ads. Consumer research may be needed to determine the prevalence of the misperceptions in the market, their impact on purchase behavior and how strongly these false beliefs are held. With respect to media in which corrective ads should appear, the FTC should consider the media which the advertiser used in running the deceptive ads and require that corrective ads be run in these vehicles. Corrective advertising is very controversial because advertisers feel that they feel it is a drastic remedy that infringes on First Amendment right of freedom of speech by requiring them to run the corrective messages. They argue that corrective advertising puts the FTC in the business of creating ads when they require particular content in corrective messages. Moreover, the monies that must be spent to run corrective messages comes out of the advertisers media budgets and means they have less funds available for messages promoting their brands. They also question whether corrective messages are effective. 20-19 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 20 - Regulation of Advertising and Promotion

16. The text discusses the issue of direct-to-consumer advertising of prescription drugs. Evaluate the new authority the Food and Drug Administration has been given to regulate DTC drug advertising. Do you think the FDA needs more authority to regulate advertising in this area? (L03) In 1997, the Food and Drug Administration (FDA) issued new guidelines making it easier for pharmaceutical companies to advertise their prescription drugs directly to consumers. Reasons given for easing the restrictions are that increased advertising will help educate consumers by providing them with more information about their options and encourage people to see doctors about medications who might not have done so otherwise. However, physician, consumer, and health groups have questioned whether some of the ads are accurate and inform consumers of the risks associated with taking these drugs and have raised concern over the increase in drug advertising. Consumer groups have asked the FDA to enforce the “fair balance” provision that requires drug ads to give both the benefits and risks of taking a medication. Critics argue that much of the advertising done by pharmaceutical companies only shows the benefits of taking a drug and that the disclaimers and cautionary voiceovers are not sufficient in getting consumers to research the potential side effects associated with many drugs. Insurance companies and employers who pay for medical coverage of their employees have also raised concern over the increase in prescription drug advertising. They argue that the ads will drive up the costs of health care since advertising is expensive and is added to the costs of drugs and encourages consumers to request higher-cost brand names rather than less expensive generic alternatives. Concerns over DTC drug advertising escalated in late 2004 when Merck had to pull its popular Vioxx medication from the market after it was determined that the drug increased the risk of heart attack in some people. This led critics to call for a moratorium on the DTC advertising of new drugs following their approval until the product is in the marketplace long enough for the FDA to have confidence that it is as safe as thought to be when it was approved. The argument for an even longer moratorium gained momentum recently after it was announced that Merck and Schering-Plough, which co-market Vytorin, delayed for 21 months the results of a study that showed the cholesterol medication did not reduce plaque buildup in arteries as claimed. The pharmaceutical industry is recognizing that it needs to address the problems with DTC advertising. In 2005 the industry’s trade association released voluntary guidelines calling for better presentation of risk information. However, critics have argued that the industry developed these standards to preempt stricter guidelines that might be imposed by the FDA. In 2007 Congress passed legislation giving the FDA more power to regulate DTC drug advertising. The new bill gives the FDA power to require drug companies to submit TV ads for review before they run, but it can only recommend changes, not require them. It also gives the FDA the power to impose fines if a drug company’s ads are found to be false and misleading. Many argue that the FDA needs even more authority to regulate DTC advertising of prescription drugs. They point to examples such as Pfizer agreeing to pay $2.3 billion in 2009to settle the largest fraudulent health care marketing case in history for false and misleading claims regarding the safety and efficacy of Bextra. The U.S. is one of only two countries that permit the DTC advertising of prospection drugs and many feel the practice should be banned entirely. 17. A number of states are considering legislation that would create Do Not Mail list registries, which would allow consumers to keep unsolicited direct mail out of their mailboxes. Discuss the arguments for and against legislation that would prohibit marketers from sending direct mail to consumers. (L04) There are several arguments in favor of legislation that would create Do Not Mail list registries. The typical American household receives nearly 40 pounds of direct mail each year, most of which is unsolicited, never opened and rarely responded to. The response rate for direct mail solicitations is only about 2 percent which makes this a very inefficient process that as well as one that most consumers find very annoying as most of the direct mail offers that consumers receive come from companies they have never bought anything from and/or have no interest in buying from.

Chapter 20 - Regulation of Advertising and Promotion

Environmental groups argue that the vast amount of direct mail solicitations and catalogs that consumers receive have a major environmental impact as it take 53 million trees to product the 3.6 million tons of paper in all of the catalogs and direct mail pieces. Advocates of the creation of Do Not Mail registries argue that consumers should have the right to decide if they want to receive catalogs and other types of direct mail rather than have to sift through all of the unwanted solicitations they receive. The creation of Do Not Mail registries is opposed by marketers as well as the Direct Marketing Association which is the primary trade organization for the direct marketing industry. The DMA argues that there are already provisions available for those consumers who do not want to receive unsolicited direct mail as they can pay $1 and have their name put on Do Not Mail list for three years. They note that the service is supported by the United States Postal Service and has more than 4.5 million subscribers. However, it should be noted that the online service prevents companies from adding a person’s name to their list but does not stop catalogs and other mail solicitations they are already receiving. The DMA also refutes the environmental impact of direct mail by noting that the trees are planted to replace those cut down for wood and paper products and that Americans can save over 3 billion miles of driving by eliminating trips to retailers and shopping by catalog instead. The Finally, the DMA argues that direct mail is important to businesses that rely on it to communicate with consumers and creates nearly $700 billion in economic activity annually. Thus, there would be a major economic impact if Do Not Mail legislation was enacted. IMC Exercise Choose an industry whose advertising or marketing practices are prone to controversy such as distilled spirits, beer, wine, soft drinks, or toys. Visit the website for the industry trade association such as the Pharmaceutical Research and Manufacturers of America (www.phrma.org), the Direct Marketing Association (www.thedma.org), the Wine Institute (www.wineinstitute.org), the Distilled Spirits Council (www.discus.org), the Beer Institute (www.beerinstitute.org), the Toy Industry Association (www.toyassociaton.org) or the American Beverage Association (www.ameribev.org). Search the website to find a copy of the advertising and/or marketing guidelines or codes that the member companies are expected to abide by from the association evaluate them. Do you think their voluntary regulations and guidelines are adequate? What could be done to improve the industry’s advertising code or marketing guidelines?

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

CHAPTER 21 EVALUATING THE SOCIAL, ETHICAL, AND ECONOMIC ASPECTS OF ADVERTISING AND PROMOTION Chapter Overview The purpose of this final chapter is to evaluate the social, ethical and economic aspects of advertising. Advertising is a very powerful and influential force in our society, and this text would not be complete without considering the various perspectives and criticisms regarding its social and economic effects. The first half of the chapter focuses on the various criticisms of advertising from an ethical and societal perspective. Attention is then given to appraising the effects of advertising on the economy including its effect on consumer choice, competition, and product costs and prices. Perspectives regarding the economic effects of advertising are summarized by considering two principal models or schools of thought: the Advertising = Market Power and Advertising = Information perspectives. It should be noted that the primary focus in this chapter is on social and economic aspects of advertising, as this is the promotional mix variable that is the subject of the most concern, controversy, and regulation.

Learning Objectives 1. To consider various perspectives concerning the ethical aspects of advertising and promotion. 2. To consider various perspectives concerning the social aspects of advertising and promotion. 3. To examine and evaluate the social criticisms of advertising. 4. To examine the economic role of advertising and its effects on consumer choice, competition, and product costs and prices.

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

Chapter and Lecture Outline I.

INTRODUCTION

Because of its high visibility and pervasiveness, along with its persuasive character, advertising has been the subject of a great deal of controversy and criticism. Various parties and scholars have attacked advertising for a variety of reasons including its excessiveness, the way it influences society, the methods used by advertisers, its supposed exploitation of consumers, and its effect on our economic system. The role of advertising and other forms of marketing communication in society is a controversial one and a discussion of the area would not be complete without considering the various criticisms regarding its social and economic effects as well as some of the responses to these charges. II.

ADVERTISING AND PROMOTION ETHICS

While many laws and regulations determine what advertisers can and cannot do, not every issue is covered by a rule or guideline. In many situations, advertisers must make decisions regarding appropriate and responsible actions based on ethical considerations rather than what is legal or within industry guidelines. Ethics are moral principles or values that govern the actions and decisions or an individual or group. While a particular action or practice may be within the law, this does not necessarily mean it is ethical. Ethical issues must be considered in making integrated marketing communication decisions as a lapse in ethical standards or judgment can result in actions that are highly visible and can be damaging to a company’s reputation and image. Advertising is subject to considerable criticism because it is judged by a variety of groups with different norms, values, and ethical standards. Arguments on both sides of controversial ethical and social issues will be presented in this chapter. However, students may have to draw their own conclusions as to which position is right or wrong. Professor Notes

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

III.

SOCIAL AND ETHICAL CRITICISMS OF ADVERTISING

Much of the controversy over advertising stems from the ways it is used by many companies as a selling tool and because of the impact advertising has on society’s tastes, values, and lifestyles. There are a number of criticisms of specific techniques used by advertisers as well as charges against its impact on society in general. A.

Advertising as Untruthful or Deceptive—One of the major attacks against advertising is that many ads are misleading or untruthful and end up deceiving consumers. The issue of what constitutes deception is, as we discussed in Chapter 20, a very difficult one. However, a concern of many critics is the extent to which advertisers are deliberately untruthful or misleading in their advertising. Most large companies are unlikely to risk their reputation and image or subject themselves to prosecution by various regulatory groups by making overtly false or misleading advertising claims. Many of the companies involved in outright fraud or deception are often smaller, local companies or those using direct mail to advertise their products and services. However, national advertisers will often test the limits of various industry and governmental rules and regulations and make claims that may give their brands an advantage in highly competitive markets. Critics of advertising often question whether consumers are receiving proper information to make an informed choice since advertisers usually only present information that is favorable to their brands. Many critics feel that advertising should be primarily informative in nature and not be permitted to use puffery or embellished messages. Others argue that advertisers should have the right to present the most favorable case for their products and services. They note that most consumers can protect themselves from being persuaded against their will and that various regulatory bodies and mechanisms are sufficient to keep advertisers from deceiving or misleading consumers.

Advertising as Offensive or in Bad Taste—Another common criticism of advertising, particularly by consumers, is that ads are offensive, tasteless, irritating, boring obnoxious, and so on. 1. Sources of distaste—consumers can be offended or irritated by advertising in a number of ways. Some are offended that a product or service is even advertised at all (such as contraceptives or personal hygiene products). A research study of prime time commercials found a strong product class effect with respect to the type of ads consumers perceived as distasteful or irritating. Another way advertising can offend consumers is by the type of appeal or the manner of presentation. Ads that use fear appeals or exploit consumer anxieties, such as fear of social rejection, are often the target of criticism. 2. Sexual appeals—the type of advertising appeals that have received the most criticism for being offensive or in poor taste are those using sexual appeals and/or nudity. These techniques are often used as ways of gaining consumers’ attention and in some cases may not even be appropriate to the product being advertised. Even if the sexual appeal is appropriate for the product, many people may still be offended. Advertisers who use nudity and sexual suggestiveness argue that their ads are not offensive and are consistent with contemporary values and lifestyles that are more accepting of this type of advertising. Another common criticism of sexual appeals is that they can be demeaning to women (and men as well) by depicting them as sex objects. Figure 21-2 shows the results of a very interesting study that examined differences between men and women in their attitudes toward sex in advertising. This study found interesting differences in how the two sexes view the use of sexual appeals.

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

3. Shock advertising- Many advertisers are relying on shock advertising by using nudity, suggestiveness, and/or other startling images to gain consumers attention and shock them. Companies that have been known for using shock advertising over the years include Benetton, Calvin Klein and Bijan. Clothing retailer Abercrombie & Fitch has also been criticized in recent years for the sexual-laden content in its quarterly catalogs. The company recently toned down its catalogs and eliminated the racy ads and sexual images that offended many parents. Advertisers often complain about the double standard that exists for TV programs and commercials, noting that even the most suggestive commercials are bland compared with what is shown in many television programs. The networks argue, however, that they have to scrutinize commercials more carefully because they encourage people to imitate behaviors, whereas programs are merely meant to entertain. It is likely that advertisers will continue to use sexual appeals and shock ads to gain the attention of consumers. C. Advertising and Children—One of the most controversial topics advertisers must deal with is the issue of advertising to children. A study by the Kaiser Family Foundation found that children ages 2 to 7 are exposed to an average of 13,904 TV commercials per year, those between the ages of 8 to 12 are exposed to just over 30,000 while teens are exposed to 28,655. Concern has also been expressed over marketers’ use of other promotional vehicles and techniques such as radio ads, point-of-purchase displays, premium offers, and the use of commercial characters as the basis for television shows. Arguments can be presented on both sides of this controversial issue. Arguments against advertising to children include: • Children, especially young ones, are vulnerable to advertising because they lack the necessary experience and knowledge to understand and evaluate the purpose of persuasive advertising appeals. • Children cannot differentiate between commercials and television programs, do not perceive the selling intent of commercials, and cannot distinguish between fantasy and reality. • •

Children must be able to understand how advertising works and develop a skeptical or critical attitude to defend themselves against it. Advertising to children is inherently unfair or deceptive.

Arguments in favor of advertising to children include: •

Advertising is a part of life and children must learn to deal with it as part of the consumer socialization process of acquiring the skills needed to function in the marketplace.

•

Studies have shown that children are capable of perceiving persuasive intent and the inability to perceive such intent does not necessarily lead to incorrect beliefs about a product. There is no evidence of a relationship between television advertising of sugared foods and tooth decay. Parents should be involved in helping children interpret advertising and can refuse to purchase products they feel are undesirable for their children.

• • •

Advertisers have a right under the First Amendment to communicate with consumers who make up their primary target audience

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

Concern over advertising to children remains an important issue for consumer groups such as the Center for Science in the Public Interest and Commercial Alert. Advertising to children is likely to remain a controversial issue to which advertisers must remain sensitive. Another area of concern that has emerged is the role of advertising and other marketing practices in contributing to the obesity problem among children (as well as adults). The opening vignette to the chapter discusses this controversy and the attacks being made against the food industry. D.

Social and Cultural Consequences—Concern is often expressed over the impact of advertising on society, particularly with respect to its influence on values and lifestyles. Opinions regarding the value of advertising as an important social influence agent are often very negative and it is criticized for a number of reasons. 1. Advertising Encourages Materialism—many critics claim that advertising has an adverse effect on consumer values by encouraging materialism, which refers to a preoccupation with material things rather than intellectual or spiritual concerns. Advertising can create materialism in many ways such as: • 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 nonmaterialistic goals. Even if one assumes that materialism is undesirable, there is still the issue of whether advertising is responsible for creating and encouraging these values. This brings up the classic argument as to whether advertising is a major force contributing to society’s values, such as materialism, or whether advertising merely reflects or mirrors the values of society and does not mold or shape them.

2. Advertising makes people buy things they do not need—another common criticism of advertising is that it has the power to manipulate consumers and make them buy things they do not need. Persuasive advertising which plays on consumers’ emotions, anxieties, and social and psychological needs and desires is viewed as undesirable. This type of advertising is seen as going beyond basic needs or necessities in appeals to sell products and services. Only informational advertising, which reports factual, functional information such as price performance, and other objective criteria, is viewed as acceptable and desirable. Defenders of advertising offer a number of rebuttals to these criticisms. They argue that a substantial amount of advertising is essentially informational in nature and that it is difficult to separate desirable, informational advertising from undesirable, persuasive advertising. They also note that most lower-level needs in our society are satisfied and it is natural for consumers to be concerned with higher order needs, and for advertising to appeal to these wants and desires. They also note that advertising cannot make consumers do things against their will and they can defend themselves against advertising. Consumers do have a choice and can ignore ads for products and services that they do not really need.

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

3. Advertising and stereotyping—advertising is often accused of creating and perpetuating stereotypes thorough its portrayal of certain groups including women and ethnic minorities. a. Women—Advertising has received a great deal of criticism for its stereotyping of women. Critics charge that advertising generally depicts women as being preoccupied with beauty, household duties, and/or motherhood or shows them as decorative objects or sexually provocative figures. Critics also argue that advertisers have failed to acknowledge the changing role of women in society. While sexism and stereotyping of women still exist, advertising’s portrayal of women is improving in many areas as more advertisers recognize the changing role of women in our society and the importance of portraying them realistically. b. African Americans/Hispanics—African Americans and Hispanics are two ethnic groups that have also been the target of stereotyping in advertising. For many years advertisers ignored blacks and Hispanics as identifiable subcultures and viable markets and ads were either not targeted to them and the use of black or Hispanic models and spokespersons was very limited. In recent years, however, not only has the use of blacks and Hispanics in advertising increased, but so too has the depiction of their social and role status. Another trend is that the more ads are likely to be racially integrated such as the Banana Republic ad shown in Exhibit 21-15. c. Other groups—Some advertisers have been criticized for portraying senior citizens as feeble, foolish, inept, or in desperate need of help. It has become increasingly difficult for advertisers not to offend some segment of the public. However, advertisers must be sensitive to the portrayal of specific types of people in their ads. One area where changes are occurring is in advertising targeted to gay consumers. Many major advertisers have begun running ads with gay themes although they are often confined to magazines and newspapers targeting the gay market. 4. Advertising and the media—the fact that advertising plays such an important role in financing the media has led to concern on the part of many that advertisers can influence or even control the media. The text discusses how the media sometimes face challenges from advertisers who stop advertising in a publication when they find their editorial coverage objectionable or unfavorable to the company. a. Arguments supporting advertiser control of the media: •

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 most of their total revenue from advertising, whereas commercial television and radio derive nearly all of their income from advertising. Thus, the media may be reluctant to carry stories detrimental to companies who purchase large amounts of advertising time or space.

•

There have been several situations where advertisers have brought pressure to the media and influenced content or programming decisions. Some of these situations

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

have been in response to pressure or the threat of boycotts from consumer groups opposed to program content. b. Arguments against advertiser control: • It is in the best self-interest of the media that advertisers not influence them too much. To retain public confidence, they must report the news fairly and accurately and not be perceived as biased or attempting to avoid controversial issues. Media executives point to the vast amount of topics they cover and the investigative reporting they do as evidence of their objectivity.

•

It can be argued that advertisers need the media more than the media need any individual advertiser, particularly when the medium reaches a large audience or does a good job of reaching a specific market segment.

The media in the U.S. are basically supported by advertising 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.

Summarizing the Social Effects of Advertising—Negative opinions regarding advertising have been around just as long as the field itself and it is very unlikely that they will ever disappear. It is important that the advertising industry remains cognizant of, and continually addresses the various issues and concerns over, the effects of advertising on society. Advertising is a very powerful institution, but it will only remain so as long as consumers have faith and trust in the ads they see and hear every day. It is important to note that advertising and other integrated marketing communication tools, such as direct marketing and public relations, are also used to promote worthy causes and to deal with problems facing society such as drunk driving, drug abuse, and the AIDS crisis. Many advertising agencies do pro bono work for nonprofit organizations and various causes and the media often donate free advertising time and space for these ads.

Professor’s Notes

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

IV.

ECONOMIC EFFECTS OF ADVERTISING

Considerable attention has been given to examining the economic impact of advertising. Advertising plays an important role in a free-market system such as that found in the US and other countries by making consumers aware of products and services and providing them with information that can be used to make purchase decisions. However, advertising’s economic role goes beyond this basic function of information provision, as it is a very powerful force that can affect the functioning of an entire economic system. It is viewed by many as a positive force that encourages consumption and fosters economic growth. On the other hand, many critics of advertising view it as having detrimental economic effects, by not only failing to perform its basic function of information provision adequately, but also adding to the costs of products and services and discouraging competition. A number of major issues regarding the economic effects of advertising are considered. A.

Effects on Consumer Choice—Some critics argue that advertising has a negative effect on consumer choice, as large advertisers use their power to limit our options to a few well-advertised brands. Economists argue that advertising is used by large national advertisers to achieve differentiation and brand loyalty, usually at the expense of smaller brands. These large companies often end up charging a higher price and are able to achieve a more dominant position in the market than smaller companies that cannot compete against their large advertising budgets. When this occurs, advertising restricts choices and becomes a substitute for competition based on price or product quality. Defenders of advertising argue that it does not create brand monopolies and reduce the opportunities for new brand or product introduction. The opportunity to advertise gives companies the incentive to develop new brands and improve existing ones. Advertising is instrumental in helping companies inform consumers about their new products.

Effects on Competition—One of the most common criticisms economists have with advertising concerns its effect on competition. They argue that large firms with huge advertising budgets create a barrier to entry, which makes it difficult for other firms to enter the market. This in turn leads to less competition and higher prices. Large advertisers enjoy certain competitive advantages such as economies of scale in advertising, particularly with respect to factors such as media costs. While advertising may have an anticompetitive effect on a market, there is no clear evidence that advertising alone reduces competition, creates barriers to entry and thus increases market concentration. Defenders of advertising note that it is unrealistic to attribute a firm’s market dominance solely to advertising as there are a number of other factors to consider such as price, product quality, distribution effectiveness, production efficiencies, and competitive strategies. While market entry against large established competitors is difficult, companies with a quality product offered at a reasonable price find that advertising actually facilitates their market entry by make it possible to communicate with consumers.

Effects on Product Costs and Prices—A major area of debate among economists, advertisers, consumer advocates and policymakers concerns the effects of advertising on product costs and prices. Critics offer several reasons why advertising results in higher prices: • •

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 21-8

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

•

There are often large differences in prices between national brands and private label brands that are physically and functionally similar, which is evidence of the added value created by advertising. Consumers pay higher prices for this added value.

Proponents of advertising offer several counter-arguments to the claim that advertising increases prices: • Price insensitivity and brand loyalty can be created by a number of nonadvertising factors such as product quality, packaging, favorable usage experience and market position • Advertising can actually result in lower costs by helping firms achieve economies of scale in product and distribution and helping stimulate demand among mass markets •

Advertising can make a market more competitive, which often leads to greater price competition. Several studies have found lower consumer prices in markets permitting advertising for a product versus those that did not.

Summarizing Economic Effects—Economists’ perspectives regarding the effects of advertising can be divided into two principal models or schools of thought, each of which makes different assumptions regarding the influence of advertising on the economy: 1. Advertising = 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 = Information—This model takes a more positive viewpoint of advertising’s economic effects, as it views advertising as providing consumers with useful information, increasing their price sensitivity, which moves them toward lower-priced products, and increasing competition in the market. Advertising is viewed as a means of communicating with consumers and telling them about a product and its major features and attributes. More informed consumers put pressures on firms to lower prices and improve quality. Proponents of this model assume that the economic effects of advertising are favorable and view it as contributing to efficient and competitive markets. These two perspectives take very divergent views regarding the economic impact of advertising as shown in Figure 21-6. 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.

Professor Notes

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

Teaching Suggestions In this final chapter we evaluate advertising from a societal, ethical and economic perspective. Advertising is a very powerful institution in this country and has been the target of considerable criticism regarding its social and economic impact. Much of the criticism of advertising concerns the specific techniques and methods used by advertisers, as well as advertising’s effect on societal values, tastes, lifestyles and behavior. We examine these various criticisms of advertising along with the responses of advertisers to these attacks. It is important to recognize that there are usually two sides to each of these issues and we try to recognize the arguments of the critics as well as of the advertising industry. For example, one of the classic debates over the social impact of advertising concerns the issue of whether advertising is responsible for creating undesirable consumer values, such as materialism, or whether advertising merely reflects or mirrors the values of society rather than molding or shaping them. Arguments can be made on both sides of this issue and it makes an interesting topic for student discussion. A very good exchange of arguments regarding this issue can be found in articles by Richard W. Pollay, “The Distorted Mirror: Reflections on the Unintended Consequences of Advertising,” Journal of Marketing, April 1986 and Morris B. Holbrook, “Mirror, Mirror on the Wall, What’s Unfair in the Reflections on Advertising,” Journal of Marketing, July 1987 and a rejoinder by Pollay, “On the Value of Reflections in ‘The Distorted Mirror,” which also appeared in the July 1987 issue of JM. Stephen Fox’s book, The Mirror Makers: A History of American Advertising and Its Creators (New York: Morrow 1984) also provides an excellent discussion of arguments concerning the impact of advertising on society. Numerous controversial issues regarding advertising are raised in this chapter and can be used as a basis for discussion or debate. These include the issues of targeting promotional programs to schools; advertising to children; advertising’s portrayal of women as well as various ethnic groups; the ability of large advertisers to exert influence on, or even control over, the media; and the economic impact of advertising. You may want to have your students visit web sites or advertising watchdog organizations such as Commercial Alert (www.commercialalert.org) to learn more about how this group works to keep advertising and other commercial activities within their proper sphere.

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

Answers to Discussion Questions 1.

The chapter presents both sides of the argument as to whether the government should get involved in the battle of obesity by passing regulations, restrictions, and/or taxes. Present both sides of the argument and take a position, providing support for your opinion. (LO3) The so-called “soda ban” proposed by the mayor of New York City is just one example of the battle between regulatory agencies, civil groups and advertisers as to who is responsible for consumers’ weight. Food marketers spend approximately $40 billion per year to market their products to children. These marketing efforts include media advertising, promotions, the use of licensed characters to promote food products, web sites and online promotions, and many other techniques. Critics argue that the marketing efforts of the food industry are spent to promote foods that are high in calories, sugar and/or fat content such as candy, soda and snack foods. They note that the ads and other forms of promotion encourage people to eat more than they should and to consume unhealthy food and beverage products. The opening of school doors to various advertising and promotional programs by companies such the granting of pouring rights to soft drink companies has also created a major controversy. The soft drink companies do offer alternative beverages such as fruit juices, juice drinks and bottled water to alleviate this concern. However, critics still argue that our schools are not a proper venue for any types of commercial messages and that school administrators should not have to strike marketing deals with companies to fund education programs. The food industry recognize that they are under attack and are taking steps to address the problem such as developing more healthy products and changing their advertising and promotion practices. Companies such as Kraft Foods have stopped advertising popular snack-food items to children under the age of 12 while Coca-Cola updated its guidelines to eliminate advertising and sampling to kids under 12 and not show young children consuming soft drinks unless they are accompanied by an adult. The industry recognizes that they need to be proactive in addressing the problem or face the possibility of more stringent government regulation of the marketing of their products. A significant development occurred in 2007 when a group of 11 major companies that account for two-thirds of all food advertising targeted at children pledged to stop advertising products that do not meet certain nutritional standards to children under the age of 12. However, it is likely that the food industry will continue to come under attack by various consumer groups such as the Center for Science in the Public Interest and others. These groups argue that food and beverage marketers have not gone far enough and there should be even more restrictions on the advertising and promotional efforts to children. It is likely that the food and beverage companies will continue to develop new product and modify existing brands to keep them compliant with their own new guidelines and provide children with more healthy options. Companies such as PepsiCo and Coca-Cola have diversified their product portfolios and added items such as vitamin water, juices and even reduced calorie sport drinks to lower their dependency on soft drinks and provide more options to consumers.

There seems to be a relaxed atmosphere regarding the use of ethnic groups, interracial couples, and gay and lesbian themes in advertising. Explain the benefits and pitfalls inherent in this strategy. (LO2)

A 2013 study reported on by Susan Heavey of Reuters News indicated that there are very mixed emotions regarding the acceptability of homosexuality around the world. While there seems to be a growing acceptance in the United States, Canada, Europe and South America, but still staunch 21-11 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

resistance in the Mideast. The Olympic Games of 2014 demonstrated the strong sentiment against gays and lesbians in Russia. Other studies have indicated that for those with more acceptance of homosexuality, ads depicting this more liberal view were perceived favorably, while more conservative positions led to more negative evaluations. It seems tautological that those holding different perspectives would evaluate these ads differently. Thus marketers who run these forms of advertising run the risk of alienating those who oppose gay and lesbian depictions, but at the same time may stand to gain favor among those with a more liberal bent. Marriage equality laws are being passed by more and more states in the U.S. and polls have shown that the majority of U.S. citizens no longer take a negative stance on homosexuality. This certainly reduces the risk of running these ads. At the same time, a Coca-Cola ad shown on the 2014 Super Bowl showing people in different languages singing “America the Beautiful” led to thousands and thousands of negative comments on Social Media protesting the commercial. All of this was over language. It should be clear to advertisers that some are not quite as liberal as they might expect, and that running any type of potentially negative ads may have consequences.

Camel cigarettes continues to go in the face of government regulations in its efforts to market cigarettes to children. Give some of the reasons why you think Camel continues to do so. What could be done to put an end to these practices? (LO4) The cigarette industry and advertising regulators have been at odds for decades. Just as it appears that the regulators are winning this battle, a new battle emerges. Right now this battle involves the advertising of smokeless cigarettes—particularly when children and teens are the target market. One of the most common opponents of regulation is Camel cigarettes (regular, not smokeless), who despite lawsuits, warnings and boycotts continues to target those under the age of 18. The reasons are obvious, the younger demographic constitutes a large and growing marketplace, that could be purchasers of cigarettes. Not only that, but by catching the market at an early age, many years of cigarette sales are gained. Simply put, the younger you start to smoke, the more cigarettes you will buy. As smoking trends continue to decline, Camel is seeking new markets. Government regulations have worked. Increased taxes and laws against selling to minors have helped. So too have the anti-smoking ads which have been shown to be effective in research studies. Stiffer penalties and more ads may help even more. Perhaps the most effective deterrent, however, may be peer pressure. Some of the most effective anti-smoking ads are those employing social fear appeals (rather than physical) which make smokers look less attractive. Increased use of these forms of advertising, and more social network messages of how bad cigarette smoking is may help even more.

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

Do you consider the TV ad of Lake Silver (see Ethical Perspective 21–1) to be deceptive? (LO1) Advertising is deceptive if it fulfils three conditions/elements: a) There is misrepresentation, omission, or practice that is likely to mislead the customer acting reasonably or responsibly in the circumstances to the consumer’s detriment. b) The practice is material and consumer injury is possible because consumers are likely to have chosen differently if there was no deception.

c) Reasonable customer: The customer is acting responsibly or reasonably in the circumstances. Omitting information is an important factor in misleading consumers ( condition a) . It is hardly believed that the advertiser does not know the constructions nearby the site of Lake Silver and thus the TV ad is likely deliberately omitting important information in order to mislead the consumers in their purchase intention. Surely it violates the ethical requirement of providing true information to the consumers.

Economists argue that advertising can be a barrier to entry for many companies that simply cannot come up with the money required to initiate an effective advertising campaign. At the same time, SPANX has succeeded without spending any money at all to promote the product. Explain how a company like SPANX can be successful with little or no advertising. (LO4) The Advertising = Market Power perspective reflects traditional economic thinking and views advertising as a way of changing consumers’ tastes, lowering their sensitivity to price, and building brand loyalty among buyers of advertised brands. This results in higher profits and market power for large advertisers, reduces competition in the market, and leads to higher prices and fewer choice alternatives for consumers. High prices and excessive profits give advertisers even more incentive to advertise their products and output is restricted compared with conditions of perfect competition. Proponents of this model are generally negative in their perspective regarding the economic impact of advertising. The Advertising = Information perspective views advertising as providing consumers with useful information, increasing their price sensitivity which moves them toward lower-priced products, and increasing competition in the market. Advertising is viewed as a means of communicating with consumers and telling them about a product and its major features and benefits. More informed and knowledgeable consumers will put pressure on companies to provide high quality products at lower prices, and efficient firms remain in the market, whereas inefficient firms leave as new entrants appear. Proponents of this model assume that the economic effects of advertising are favorable and view it as contributing to more efficient and competitive markets. In general, many marketers believe that companies with large advertising budgets have an advantage of those who do not. But along comes a SPANX who succeeds with no ad budget, seemingly defying this perspective. While SPANX represents the exception rather than the rule, it does appear that companies are more able to become successful in this day and age with less ad spending. Some of this can be attributed to the power of social media, some to the effective use of public relations, and some to effectively using product placements—all of which SPANX did well. At the same time, the SPANX speaks to another component of the Marketing 4p’s—product. The fact is that the product met the needs of the consumer, and when women found out about it, the looked for it and bought it—any form of communications worked. 21-13

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

What are shock ads? Do you think they are designed to create sales, or to bring attention to specific issues? Do they work? (LO2)

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, bestiality, 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.. Benetton has always been known for its controversial advertising, which the company has defended by arguing that it is trying to raise people’s awareness and consciousness regarding various social issues. However, the “Death Row” campaign is probably the most controversial of all the shock advertising used by company. Benetton argues that it was running the global campaign solely to spark debate on capital punishment. However, the ads outraged many people including victims’ advocates who accused Benetton of glamorizing murders while ignoring their crimes. Benetton appears to have pushed the envelope too far with its “Death Row” campaign as the company received a tremendous amount of negative publicity for running the ads. A lawsuit was also filed against the company by the state of Missouri claiming that Toscani and his collaborators lied to officials of the state’s Department of Corrections to gain access to the inmates. Various victims’ right groups have organized boycotts of the company’s store. Sears canceled an exclusive contract to sell a line of Benetton clothes, calling the death row images “terribly insensitive.” In May 2000 Olivero Toscani, who had overseen Benetton’s advertising since 1982, left the company as a result of the controversy created by the “Death Row” campaign. With Toscanni’s departure Benetton returned to more traditional advertising that focuses on its colorful clothes rather than continuing to use the controversial shock ads. The new “Africa Works” global campaign that the company launched in 2008 which focused on entrepreneurial Africa and microcredit programs shows how the company was still focusing on social issues in its advertising but in a much less controversial manner. However, recently Benneton returned to it’s use of shock advertising, as shown in Exhibit 21-5, perhaps believing it had to? A&E also uses shock advertising extensively. The results of their use are provide in the answer to discussion question 5.

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

Over the years, and again very recently, there have been calls to eliminate or severely restrict advertising to children. Discuss the social and ethical issues as to whether advertising to children should be permitted. Support your position. (LO1) 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. As discussed in Chapter 20, the self-regulatory groups as well as government agencies 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. It is also argued that restrictions on advertising to children would violate advertisers’ freedom of speech, which is guaranteed under the First Amendment. It can also be argued that children are protected from negative influences of television commercials by network censors and industry self-regulatory groups.

Groups such as Commercial Alert are concerned about the intrusion of advertising and other types of marketing messages into all aspects of consumers’ lives. Discuss some of the reasons consumer watchdog groups are critical of advertising and other types of marketing practices. (LO2) Many marketers are obliterating the line between marketing communications and entertainment by creating and delivering ads and other messages that appear to be part of popular culture. Branded content refers to the practice of creating various forms of entertainment into which brands can be integrated such as music, movies, short films, video games, and music videos. The practice goes beyond traditional product placement as it seeks to make brand a more integral part of the entertainment. Many companies are making their brands part of reality TV shows such as The Apprentice or Extreme Makeover Home Edition. These practices are becoming popular among marketers for several reasons. Many companies feel that traditional TV commercials are losing their effectiveness and are looking for new ways to reach consumers. They are also realizing that with advances in technology such as digital video recorders, audiences will be able to skip over ads and they must make find more entertaining genres of advertising in order to capture and hold the attention of consumers. Critics are concerned over the use these techniques as they view them as stealth messages and argue that consumers are often unaware of their persuasive intent. Groups such as Commercial Alert are concerned over the use of branded content as they feel that movies and television shows are being corrupted by commercialization that goes beyond mere product placement and now includes the altering of scripts to integrated advertising and branding messages into films and television shows. Consumer groups are also concerned over the impact that advertainment and 21-15

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

branded content will have on children who cannot identify or properly process advertising messages that are embedded into movies and TV shows. Critics also argue that consumers should have places in their lives that are free from advertising and marketing messages rather than being constantly persuaded by marketers. 9.

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 21-8 is suggestive and symbolizes sexual submission? (LO3) 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 shown in Exhibit 21-8 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 literary theory interpretation of the ad can be found in an article by Aaron C. Ahuvia in the Journal of Advertising, (Vol. 27, No. 1, Spring 1998 on p. 150). You might want to ask students their opinions of the ad and then read his interpretation to them.

10.

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. (LO1) The results of an online survey of 200 men and 200 women conducted by MediaAnalyzer Software & Research in September 2005 are shown in Figure 21-2. 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 21-16

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

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). 11.

The chapter discusses how many marketers are struggling with their multicultural marketing efforts and suggest that one reason may be the lack of diversity in advertising agencies. What are some of the reasons for the low number of minorities, such as African-Americans, working in advertising? How can the industry address this problem? (LO2) As discussed in the chapter, there are a number of reasons why the number of minorities working in advertising might be low. First, advertising agencies have to compete against other employers for talented employees and the low pay scale in advertising versus other industries is often cited as a barrier to hiring and retaining minorities. Also, the advertising industry is still concentrated in major cities such as New York, Chicago, and Los Angeles which have very high costs of living and the parents of many minorities cannot afford to help support them if they take lower paying jobs in advertising. The advertising industry also faces strong competition from other industries for top minorities which makes it difficult to attract them as well. The advertising industry is taking steps to attract and retain minorities. Many of the larger agencies and holding companies have pledged to increase minority hiring and put programs in place to retain them. For example, the Interpublic Group now offers its top minority candidates a two year talent and diversity program where they do rotations in various areas of the marketing communications business. Industry Groups such as the 4A’s and American Advertising Federation (AAF) offer multicultural advertising internship programs that help connect minority candidates with ad agencies, media companies, and marketers.

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

Additional Discussion Questions (not in text) 12.

The Campaign for Real Beauty is an integrated marketing communication program that Unilever has been using for its Dove brand since 2004. Do you view this campaign as movement in a positive direction with regard to the portrayal of women in advertising or as a creative way for Dove to sell more beauty products? Defend your position. (LO3) Unilever has developed an extensive integrated marketing communications programs to support the Campaign for Real Beauty for its Dove beauty products. The campaign uses a variety of IMC tools including media advertising that targets women with the natural beauty appeal message; the Campaign for Real Beauty web site; sales promotion tools such as contests and sweepstakes, events and sponsorship programs with various groups such as the Girl Scouts of the USA; causerelated marketing through the Dove Self-Esteem Fund; direct marketing to women who register on the web site or attend events; and an extensive publicity/public relations campaign. The Campaign for Real Beauty is much more than just an advertising campaign has Dove uses a variety of IMC tools. The campaign has generated a great deal of publicity and media coverage with brings even greater attention to Dove and its products and contributes to the marketing program. The Campaign for Real Beauty was launched after Unilever’s Dove brand team reviewed the results of a study indicating that most women feel that the media and advertisers set an unrealistic standard of beauty that they cannot achieve. The survey also found that only a small percentage of women are satisfied with their body weight and shape and only two percent considered themselves beautiful. The goal of the campaign is to change the stereotypical portrayal of beauty based on physical attractiveness and to encourage women to feel good about themselves. Most ads for beauty and cosmetic products show glamorous super models and are based on the idea that women will aspire to be like these women and purchase the advertised product in hopes of improving their appearance. However, Dove has taken more of an inspirational approach by encouraging women to focus on their natural beauty and appealing to their self-esteem. The goal is to send a positive message to women, particularly teens and younger women, regarding acceptable standards of beauty. Critics of the campaign argue that it is really just a clever way for Dove to market its beauty and cosmetic brands and is more about selling these products than making a social statement. They argue that there is a contradiction in the message of the campaign as it suggests that women still need to use Dove products to be beautiful. They also argue that Dove markets items such as cellulite cream and anti-aging products and the efficacy of these products has not been proven. The campaign has also been criticized on the grounds while the models shown in the ads are not the typical slender super model, they are still more attractive than the average woman. Overall, the Dove campaign has been viewed very favorably and most observers feel that it a very positive step in terms of the way women are portrayed in advertising. The campaign has encouraged other marketers such as Nike to change the way they portray women and celebrate the diversity of their physical appearance. Even the critics of the campaign would probably agree that portraying women in a more natural and realistic way is better than encouraging them to try and look like the super models that appear in most ads.

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

13.

Discuss the arguments for and against advertiser influence and/or control over the media. How might a newspaper or magazine avoid being influenced by advertisers? (LO4) There are a number of reasons why critics argue that advertisers have influence over the media and that the advertising and financial side of the publishing business controls or influences the editorial content of magazines and newspapers. The main factor in support of this position is that the media are either totally or highly dependent upon advertising revenue. Television and radio networks and stations receive nearly all their revenue from advertising, while newspapers and magazines receive nearly 70 percent of their total revenue from the ads they sell. Smaller, less financially secure media are the most prone to influence and pressure from advertisers, particularly companies who account for a large amount of the medium’s advertising revenue. Thus, they may be reluctant to print an unfavorable story about a company or industry that accounts for a large percentage of their advertising revenue. There is concern that some magazines and newspapers may be lowering “The Wall” which separates their news and business departments in their search for new ways to increase readership and revenue as competition from the Internet and other media increases and their audience or circulation numbers decline. The lowering of the Wall has serious implications for the media as journalists argue there must be not be any pressure from the advertising and financial side of the business so they are free to cover any story and be objective in their reporting. They argue that decisions on the writing, editing, and publishing of stories should be made on their journalistic merit rather than whether they will attract or repel advertisers. There are several arguments against advertisers’ ability to control the editorial content of media such as television stations, magazines and newspapers. First, it is in the best self-interest of the media that they not be influenced too much by advertisers. To retain public confidence, they must report the news fairly and accurately and not be perceived as biased or attempting to avoid controversial issues. Many TV stations, magazines and newspapers also note the vast amount of topics they cover and the investigative reporting they often do on companies as evidence of their objectivity. They also note that the advertiser needs the media more than they need an individual advertiser, particularly when the medium has a large audience or reaches a specific market segment. Many television stations, newspapers and magazines have a very broad base of advertising support and can afford to lose an advertiser who might attempt to exert too much influence or control over them.

14.

Discuss the role of ethics in advertising and promotion. How do ethical considerations differ from legal considerations in developing an integrated marketing communications program? (LO1) 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. 21-19

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

15.

With which position do you agree? “Advertising determines American consumers’ tastes and values and is responsible for creating a materialistic society.” “Advertising is a reflection of society and mirrors it tastes and values”(LO2) 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.

16.

Discuss how advertising can affect product costs and the prices consumers pay for products and services. (LO4) Arguments that advertising increases the costs of products and services include the fact that the large sums of money spent on advertising constitute a business expense that must be covered and thus is passed on to consumers in the form of higher prices. Advertising can also result in higher prices by increasing product differentiation and adding to the perceived value of the product in the mind of the consumer. Brands that have achieved high levels of differentiation or perceived value can command a premium price. Proponents of advertising argue that it can actually result in lower costs of products and services by helping firms achieve economies of scale in production, distribution and marketing by stimulating demand among mass markets. Advertising can also lead to lower prices by making a market more competitive, which usually leads to greater price competition. Studies of several industries have shown that advertising results in lower consumer prices. Some critics argue that advertising has a negative impact on consumer choice, as large advertisers use their power to limit consumers’ options to a few heavily advertised brands. They argue that advertising is used to achieve differentiation and brand loyalty, which occurs at the expense of smaller brands. Defenders of advertising argue that it does not create brand monopolies and reduce opportunities for new companies and/or brands to enter the market. The opportunity to advertise gives companies the incentive to introduce new brands and improve existing ones. Advertising is viewed as playing a critical role in informing consumers about new products and making it possible for new companies to enter the market. Thus, it helps expand consumer choice rather than limiting it.

Chapter 21 - Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion

IMC Exercise Have students find several ads that they feel are examples of negative social consequences of advertising discussed in the text such as the following: •

Ads that are offensive or in poor taste because of the product or service they advertise, the type of appeal they or the manner of presentation used.

•

Ads that use one of the shock-vertising techniques discussed in the chapter.

•

Ads that may have an adverse effect on consumer values by encouraging materialism.

•

Ads that encourage consumers to purchase a product that they really do not need.

•

Ads that stereotype women, men, or ethnic groups such as African Americans, Hispanics, AsianAmericans or some other group such as the elderly.

Explain why you feel these ads are examples of negative advertising. How do you think the advertisers might justify the use of the ads you have chosen?

Chapter 22 - Personal Selling (online)

CHAPTER 22 PERSONAL SELLING (ONLINE) Chapter Overview While certainly an integral part of the promotional mix, personal selling is generally the responsibility of the sales department rather than the advertising or promotional departments. Given this fact, personal selling receives less attention in this text than in some others. This does not mean, however, that we consider this function to be of less importance. Rather, we feel that selling roles and responsibilities may be better covered in other courses. Personal selling involves selling through a person-to-person communications process. The importance placed on this element of the promotional mix will vary from firm to firm and/or industry to industry. In this chapter we examine the role of personal selling in the promotional mix, the costs involved, and the responsibilities associated with this promotional mix element. We also examine the advantages and disadvantages associated with personal selling, how the personal selling effort can be combined with other promotional tools and criteria for evaluating personal selling contributions to the promotional program.

Learning Objectives 1. To understand the role of personal selling in the integrated marketing communications program. 2. To know the advantages and disadvantages of personal selling as a promotional program element. 3. To understand how personal selling is combined with other elements in an IMC program. 4. To know ways to determine the effectiveness of the personal selling effort.

Chapter and Lecture Outline I.

THE SCOPE OF PERSONAL SELLING

Personal selling will take on a more or less important role depending upon the characteristics of the firm and the marketplace in which it is competing. A few years ago a survey was sent to managers regarding their perceived importance of this element of the promotional mix relative to other components. As the survey demonstrated, many managers feel that this element will continue to gain importance in the coming years. While personal selling is the responsibility of the sales department, the efforts of the sales force should be coordinated with those of the advertising and promotions department. To achieve maximum success of the marketing program, the two departments need to work together to achieve marketing goals.

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II.

THE ROLE OF PERSONAL SELLING IN THE PROMOTIONAL MIX

Personal selling offers the marketer a number of advantages not offered by other advertising and promotional media. The dyadic exchange process allows for direct feedback, tailoring of the message and increased attention getting capabilities. At the same time, as noted, the efforts of the personal sales force must be supported and integrated into the overall promotional program. This section of the chapter discusses the integration of these elements.

Determining the Role of Personal Selling—The marketing manager needs to consider the role that personal selling will assume relative to other promotional mix elements, and the specific responsibilities that personal selling will assume. To determine what this role should be, four specific questions must be asked: 1. What specific information must be exchanged between the firm and potential customers? 2. What are the alternative ways of carrying out these communications objectives? 3. How effective is each alternative in carrying out the needed exchange? 4. What is the cost-effectiveness of each alternative?

The Nature of Personal Selling—the evolution of personal selling. According to Tom Wotruba, the personal selling area is constantly evolving. Wotruba notes five distinct stages of personal selling: • provider stage—activities are limited to accepting orders • persuader stage—an attempt is made to persuade the market to buy the supplier’s offerings • prospector stage—seeking out buyers with a need and the resources to purchase the product • problem-solver stage—the seller helps to identify problems, translate them into needs, and help solve them • procreator stage—selling defines the buyers’ problems, and the solutions through active buyer-seller collaboration Understanding personal selling requires examination in respect to three areas: 1. Relationship marketing—The idea behind relationship marketing is the salesperson serves as a partner to the client, engaging in problem solving, need satisfaction, etc. The concept is to develop a long-term mutually profitable relationship.

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2. The costs of personal selling—Personal selling is a very expensive means of communicating with the consumer. As noted on page 22-9, estimated costs per sales call was expected to reach $379 in 2006 while continuing to rise. These costs are even higher when you realize that one sales call is not likely to be enough to close a sale. As a result, personal selling is generally considered one of the most expensive of the promotional mix elements. 3. Personal selling responsibilities—Sales & Marketing Management magazine lists three categories of salespersons’ responsibilities. These include order taking, creative selling, and missionary sales. Figure 22- 9 in the text describes these responsibilities in some detail. C.

Advantages and Disadvantages of Personal Selling Advantages include: • the ability to achieve two way interaction • tailoring of the message • lack of distractions • involvement in the decision process Disadvantages include: • inconsistent messages • sales force/ management conflicts • high cost • poor reach

Professor’s Notes

III.

COMBINING PERSONAL SELLING WITH OTHER PROMOTIONAL TOOLS

As stated earlier, personal selling must be integrated into the promotional mix to achieve success. Personal selling efforts should support, and be supported by, other promotional mix elements. A.

Combining Personal Selling and Advertising—A complementary relationship should exist in which advertising is used to support personal selling efforts and vice versa. The text demonstrates how both parties could benefit from such a relationship.

Combining Personal Selling and Public Relations—Personal sales persons must often perform public relations activities. For example, public appearances, speaking engagements, etc. are all beneficial to the organization, and can be carried on by the sales staff. In return, public relations sponsored by the firm support the image of the salesperson.

Chapter 22 - Personal Selling (online)

Combining Personal Selling and Direct Marketing—One way marketers have found to reduce the costs of personal selling is by supporting this function with direct marketing. Letters and/or phone calls may be designed to solicit leads, screen potential customers, close sales, or as a follow-up to the salespersons efforts. The net result is a more effective, and cost conscious program. As shown in the chapter, there has been a rapid growth in the use of the telemarketing/sales combination. Combining Personal Selling and Sales Promotions—Sales promotions targeted at resellers (discussed earlier) benefit the sales force as well. Likewise, many sales promotions (such as contests, motivational programs, etc.) are targeted directly at the sales staff.

Combining Personal Selling and the Internet—Many of the roles of personal selling are now done on the Internet. For some companies, the Internet has all but replaced order takers. For others, many of the activities performed by the sales force are now done online.

IV.

EVALUATING THE PERSONAL SELLING EFFORT The chapter shows a variety of criteria that that can be used to evaluate personal selling contributions. While these criteria are generally offered as an evaluation of the sales force itself, an evaluation should be made regarding contributions to the promotional program objectives also. Criteria that may be used in this regard are: • • • •

providing marketing intelligence follow-up activities program implementation attainment of communications objectives

Professor’s Notes

Teaching Suggestions A key determinant of how this chapter will be taught is the orientation that the instructor wishes to assume. Some instructors like to emphasize personal selling more than we have done here. Others care only to address it as a promotional mix element, and demonstrate how this element should be integrated into the overall promotional plan. For those wishing to assume the former orientation, we suggest supplementing this chapter with materials from other texts. A variety of materials can be obtained to use as illustrations of those discussed in the text. Personal sales people always seem to be willing to share their promotional aids, and others can be picked up in local stores. In addition, many students who graduate with marketing degrees get sales jobs. Having them back as guest lectures to discuss their activities and supporting programs is always received quite favorably by students.

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Answers to Discussion Questions

Social media has been shown to play an important role in business to consumer markets, and now is being used for assisting personal selling effort in business to business markets. Explain how marketers are using social media in this regard. (LO3) At first, it was thought that social media would be a powerful marketing tool for business to consumer (b to c) markets, but perhaps not as powerful for use in business to business markets (b to b). Marketers have now discovered that social media are important to b to b companies as well. Perhaps more now than in the past, relationships are critical in b to b dealings. Trust, communications, and reliability are critical in business dealings. In addition, market information regarding competitors’ pricing, product offerings and promotions need to be exchanged in a short period of time, and social media allow for this. Likewise, business news can be communicated much more rapidly than in the past. B to b marketers will watch the happenings in the b to c social media community, and adapt many of the strategies to their own markets.

The cost of a personal sales call is very high relative to one exposure in other media, and continues to rise. Explain how effective utilization of the Internet can help bring these costs down. (LO4) The salesperson of old is very different than today’s. In the past, many salespersons made personal sales calls to attempt to find new customers, make the sales pitch, take orders and close sales. In addition, servicing accounts often required a personal sales call. When telemarketing began to show its usefulness for marketing, some companies stayed away from this tool, while others embraced it as a way to cut costs, improve sales performance, etc. The value of the Internet seems to have been discovered much more rapidly, particularly by the b to b marketer. Sales teams quickly realized how this medium could save them time and money, resulting in more effective and efficient sales persons. Rather than make expensive personal calls to find potential customers, the Internet allows for customers to find the company. Search allows the buyer to find companies with products and services they need, and initiate the contact requesting a sales call. This makes the sales person much more effective as the customer has already expressed an interest. Product updates, recalls, etc. can also be updated on the Internet, as can instructions as to what needs to be done to amend the situation. Sales promotions, new product introductions and ads can now be provided on the Internet at a fraction of the cost of being communicated in person. Many companies now ask their customers to order and/or reorder online, saving the salesperson time that can be used to find new customers, and conduct more valuable activities that require personal visits.

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Webinars are now being successfully employed to keep customers up to date, informed and knowledgeable about what is going on in their industries. All of these tactics free up the sales person to do what s/he does best—sell. 3.

There has always been a divide between marketing and sales departments in companies. Explain how the changing role of the personal sales person may help to narrow this divide. (LO1) While both employed by the same company, and usually in the same department, there has always been a conflict between sales and marketing. A number of reasons exist for this divide, most of which can be explained by a lack of understanding of what each other does. Sales people are “on the street”. Marketers sit in offices. Marketing positions often require advanced degrees. Sales positions are less likely to do so. Sales persons think markets work in “the Ivory Tower” and know nothing about what they do. Marketers think sales people only care about selling and know nothing about what marketing is. As the knowledgeable sales person is no longer just selling, but learning how to use various tools like the Internet, social media, etc. to increase his/her effectiveness, they are beginning to get a better understanding of what marketers really do. They now get a better understanding as to why prices may be set the way they are, how promotions work and why the company spends money on various tools like advertising and direct marketing. When they see these tools used effectively, they gain an understanding and appreciation for what marketing is doing. Likewise, as marketers have more communications with the sales force, they learn more about the everyday doings of this team. Establishing effective marketing programs that benefit the sales team is now easier. Creating webinars and conducting sales meeting leads to more frequent interactions, and allows for more feedback and an enhanced understanding. Someday, they may just get along!

Describe how personal selling has become more involved with the use of other media in the IMC program. Explain how successful sales persons will use these media to their advantage. (LO3) Lets start with advertising Personal selling and advertising both offer their own advantages and disadvantages to the IMC program. While advertising may be more effective for reach and at lower stages of the response hierarchies, for closing the sale and/or providing in-depth information, personal selling may be more effective. Advertising is also more affordable on a cost per contact basis. Personal selling, on the other hand, while less cost efficient, is more effective for closing the sale, helping the customer understand the product and/or service offering and relationship building. Personal selling can also be more effective for cross selling.

Chapter 22 - Personal Selling (online)

By combining personal selling with advertising, the marketer may more effectively and efficiently reach customers and or potential customers. As noted, advertising can be used at the early stages of the response process to achieve the objectives of reach, creating interest, etc. Personal selling can then be used once prospects have expressed an interest, been qualified and sent information. The one to one personal selling effort can then be used to close the sale. Studies have shown that advertising can be effective in creating brand image and awareness of products. Additional studies have shown that once the prospective buyer knows about the brand through advertising, it makes it easier for the salesperson to get an appointment and presentation. While advertising may not mean that the salesperson gets the sale, it at least gets them in the door to have the opportunity to do so. Another example is public relations. Companies have involved the sales force in a variety of public relations activities including: A number of examples are cited, and a few more can be added: 1. A number of insurance sales agents assisted flood victims in the Midwest, helping them get reorganized, file claims, etc. 2. Computer sales teams helped earthquake victims get re-established by assisting them in setting up new computer systems, installing networks, etc. 3. Media sales people often engage in public relations activities ranging from fence painting to cleaning up neighborhoods to aiding local charities to better the media image. 4. Companies encourage their employees to become involved in community efforts through the Little League, joining organizations and supporting charities. 5. Sales persons are encouraged to speak at schools, colleges and/or other functions to provide knowledge about sales careers and the specific company. The chapter provides numerous additional examples of how selling can integrate public relations into their programs. The answers to other discussion questions shows how other tools can be used. 5.

CRM is not new to marketers. However, the text shows that the definition as well as the requirements of CRM have changed over the years. Explain the differences in the way companies employ CRM now versus previous years. (LO1) Just a few decades ago relationship marketing was defined as “an organization’s effort to develop a long-term, cost-effective link with individual customers for mutual benefit.” Rather than focusing on a short-term sale, the sales rep tries to establish a long-term bond. And rather than just selling, the sales department works with marketing to use techniques like database marketing, message differentiation to different target markets, and tracking of promotional effects to improve the relationship. Forrester now offers an updated definition of customer relationship management (CRM) as “the business processes and supporting technologies that support the key activities of targeting, acquiring, retaining, understanding and collaborating with customers.” Note how this definition has changed over the years. The newer version reflects how CRM has changed to focus on the balance of benefits to both buyer and seller. CRM tools have been used by a number of companies. These companies make extensive uses of their databases on purchase behavior and frequency and duration of customer interactions to estimate profitability at the individual account level. 22-7

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Explain what is meant by customer relationship management. Discuss why CRM has become such an important practice to marketers (LO1) Customer relationship management (CRM) requires that the marketer develop and maintain a significant amount of information about its clients. The aim of CRM is to establish a relationship with one’s customers through affinities, personalized communications and product/service offerings. In a CRM relationship the seller and customer act as partners, working together to the betterment of both parties. To be successful, direct marketers must have a full understanding of the customers’ needs and wants, as well as a history of their relationship. This is where database marketing comes in. In CRM, a database is a must. Only through the utilization of this database can the marketer truly understand the customer, helping them solve their problems and take advantages of opportunities through product offerings and services.

Figure 22-8 describes the traits of successful sales people. Discuss these traits and why they are important in developing and sustaining an effective sales relationship with clients. (LO1) Page 13 lists the ten traits buyers consider most helpful in salespeople. Without repeating the list here, one can refer to it in the chapter. Selling is a dyadic process. Just like any other relationship, you are most responsive to people with whom you trust, that have empathy toward you, and know what they are talking about (among the other traits listed therein.) It should come as no surprise then, that the same traits are important in the dyadic relationship between buyer and seller. Likewise, we are less likely to form close relationships with those we do not trust, have no respect for us, etc. The same holds for salespeople. Besides the personal traits listed, the others that distinguish between good and bad reps are those that are likely to distinguish between good and bad professionals in any area. Being prepared, dependable, punctual and following through (among others) are characteristics that distinguish between good and bad employees in any area. There is no reason to expect that sales would be any different.

Explain what is meant by “the new role of personal selling.” How does this new role differ from what personal selling has involved in the past? (LO1) The days of just being a salesperson are slowly disappearing. Now salespeople are being asked to perform a multitude of roles. In addition to being information providers, influencers, and demonstrators, salespeople will also engage in: a. Surveying--educating themselves more about their customers’ businesses and regularly assessing these businesses to achieve a position of knowledgeable and authority. b. Mapmaking--outlining both an account strategy and a solutions strategy for the customer. This means laying out a plan, discussing it with the customer, and revising it as required. c. Guiding--bringing incremental value to the customer by identifying problems and opportunities, offering alternative options and solutions and providing solutions with tangible value. 22-8

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d. e.

Fire starting--engaging customers and driving them to commit to a solution. Locating prospective customers-- often referred to as prospecting, this activity involves the search for and qualification of prospective customers. In this stage salespeople must follow up on leads and prospects. They also determine whether these prospects are qualified prospects and are able to make the decision to buy the product. Determining customers’ needs and wants-- the sales person gathers more information on the prospect and decides the best way to approach him or her. In some instances the salesperson might have to assist the customer in determining what he or she needs. Recommending a way to satisfy the customers’ needs and wants-- the salesperson recommends a possible solution to the problem and or needs of the potential customer. The sales person acts as a systems provider. Demonstrating the capabilities of the firm and its products-- the sales person demonstrates the capabilities of the firm and shows the prospect why that firm is the obvious choice. Closing the sale--this is the key ingredient in any sales presentation. This is a difficult task because many salespeople are reluctant to ask for the sale. Managers work with their sales force to close the sale and help reluctant or uncertain buyers make a decision. Following up and servicing the account--responsibilities don’t end at the close of the sale. It is easier to keep old customers than attract new ones. The role of the salesperson is to maintain customer loyalty, generate repeat sales, and obtaining cross selling opportunities.

As noted in the chapter, these roles will create added value and develop a relationship between buyer and seller

9. Figure 22-4 describes three types of sales positions. Discuss each of these. Describe some of the industries in which each might play a more important role. (LO1) Figure 22-4 lists the various sales jobs, including: Creative selling—to fulfill the requirements of creative selling, it is necessary to conduct a situation analysis, determine needs to be met, prospect and get the order. Many jobs like insurance sales, real estate and mortgage banking employ these positions. Order taking—Order takers often replace the creative seller. For many large companies, having a manufacturers rep is to fulfill the job of a creative seller, and order takers become inside sales jobs, or are turned over to distributors. This action hardly requires a sales visit and many of the responsibilities are taken over by the net. Missionary sales reps—the missionary sales rep is an information provider. S/he introduces new products, programs, promotions, etc. Much of this may require personal calls, but once a strong relationship has been established with the client, much can be done over the Internet and the phone (particularly when used together). Secondly, the missionary sales rep can prospect, and can provide potential clients with information without being intrusive. Qualified prospects can then receive a follow-up visit to close the sale. Keep in mind that for purposes of our discussion we are not referring to retail sales such as a salesperson at Nordstroms or Sears. Rather, we are discussing the role of manufacturers’ reps or others at that level.

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10. Explain why the high cost of personal selling might be warranted. Give a specific example situation where this is the case.(LO4) In many business to business situations, the high cost of personal selling is often warranted. For major purchase decisions like heavy equipment, contract services, etc., no other form of communications will suffice. Terms must be explained, specifications must be identified, and other formalities that require face to face interaction are necessary Given that these relationships are usually long term, and not just a single purchase, the cost is well warranted. The sales person must be able to answer questions, make specific changes to meet requirements and address any concerns on behalf of the buyer. Studies have also shown that as much as 60% of the purchase decision even in b to b situations include non-rational buying criteria. The personality of the sales person, the trust they provide and even just likeability are important. No other medium can provide this as well as personal selling.

Additional discussion questions (not in text) 11. Describe some of the criteria used to evaluate qualitative aspects of the effectiveness of the salesperson. How might these be used to support the IMC program? (LO4) Figure 22-12 provides a comprehensive list of criteria used to evaluate the sales force. Note that some of the qualitative criteria listed therein specifically relate to the use of promotional tools. In addition, the text lists some other criteria that may be useful including:

12.

•

gathering and providing marketing intelligence—salespeople should be the “eyes and ears” of the company. As such they should be evaluated and rewarded for information provided in regard to the marketplace, competitive activities, etc.

•

follow-up activities—the use and dissemination of promotional materials, introduction of new promotional programs, etc., should also be part of the evaluation program.

•

program implementations—too often promotional tools such as selling aids, counter displays, etc., never get out of the trunk of a salesperson’s cars. Objectives for implementing such programs should be set, with the achievement of these objectives being part of the evaluation program.

•

Customer relations—relationship building, developing accounts, and maintaining customer satisfaction are often used as criteria for evaluation.

•

Attainment of communication objectives—the establishment of communications objectives such as the number of accounts made aware, the number of trials attained, etc., could be used to evaluate performances.

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is low with this medium. Personal selling may be used more in the later stages to demonstrate products, stimulate trial and close the deal. When these elements are combined they compensate for each other’s weaknesses and compliment each other. For example for a new product introduction, advertising will be used to reach consumers to make them aware of the product. Specific benefits of new products may not be obvious and the advertising could be useful in creating this awareness. This can be useful to the sales force when the advertising message is received before the sales call. A number of studies have shown the complementary relationship between personal selling and advertising. For example, a study by Theodore Levitt showed that sales reps from well-known companies are better received than those from companies that do not spend advertising dollars to create awareness. In another study, John Morill found that selling costs were 2 to 28 percent lower if the buyer had received an advertising message before the salesperson’s arrival. In another example, Gateway recently launched a $50 million dollars IMC campaign using advertising, direct marketing, sales promotions, and the Internet to create awareness that Gateway is interested in companies’ business, that is, that they are also in the business to business market. This effort may lead to sales leads through the newly created awareness. McGraw -Hill in a review of 54 studies concluded the combination of advertising and personal selling is important since “less that 10 percent of industrial decision makers had been called upon by a salesperson from a specific company about a specific product in the previous two months.” Combining advertising and personal selling is likely to improve reach, reduce costs, and increase the probability of sales. Thus, as one moves consumers down through the hierarchy, the IMC mix will change. At lower levels such as awareness and interest, advertising may play the dominant role. As one moves to evaluation, the Internet may play an increased role, and to stimulate trial or complete the sale (particularly in high involvement or business to business sales) personal selling may take on the dominant role.

13. The text describes a number of ways that sales personal selling can use advertising to help them sell more. Discuss these, providing examples of each. (LO2) Figure 22-10 in the text discusses 12 ways that advertising can support the personal selling effort. Without explaining each here, we will list them and provide an example: a. Save sales force time—ads can provide information or awareness prior to the sales call b. Save lengthy explanations—ads can explain what the product can and cannot do, answering questions that need not be asked later. c. Visual aids—many reps use advertisements as visual aids d. Ego boosters—buyers and reps like to see their ads in the media. For some customers, seeing their name or the name of the company in an ad is good for the ego e. Personal refreshers—sometimes the ad serves as a “cheat-sheet” helping the sales rep in the presentation f.

Clues to prospect’s interests—inquiries may tip off the benefits the potential customer is seeking. “Do you have that new_____available?”

g. Prove a point—advertising reinforces the sale pitch, adding credibility 22-11 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education.

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h. Nudge indecisive prospects—the ad may be the closer that leads clinches the deal i.

Create preference—keeping the company name and brand in front of the customer may help lead to developing brand preference

Provide follow-ups—ads can be used as a post-sale follow-up to reduce dissonance, and show interest on the part of the rep

k. Fight lower priced competitors—many companies sell on quality, not price. Price competitors may not offer supplemental materials, create a strong brand image, etc. A good ad campaign may help the rep selling on quality. l.

14.

Getting the customer into the act—anything from co-op ads to asking the customer for input will involve the customer and assist the sale.

What is “cloud computing”? What are some of the advantages that cloud computing offers marketers? Provide some examples. (LO1) Cloud computing allows marketers to access software packages over the Internet that will allow them to improve CRM practices, but at a lower cost. Because such software is often expensive, some companies cannot afford to use it, but in cloud computing, the software is rented, making it affordable to almost everyone. To effectively use CRM, companies often need a wealth of data, such as sales histories, past purchase behaviors, etc. Cloud computing makes this all possible.

Chapter 22 - Personal Selling (online)

15.

It has been said that the importance of the sales force varies at various stages in the communication hierarchies. Discuss this idea, providing examples to support your position. (LO1) Various elements of the IMC program assume more or less importance at various stages of the communications hierarchies. For example, advertising may take on the most important role in the first stage of the hierarchies, as awareness is the primary objective, and cost per exposure is low with this medium. Personal selling may be used more in the later stages to demonstrate products, stimulate trial and close the deal. When these elements are combined they compensate for each other’s weaknesses and compliment each other. For example for a new product introduction, advertising will be used to reach consumers to make them aware of the product. Specific benefits of new products may not be obvious and the advertising could be useful in creating this awareness. This can be useful to the sales force when the advertising message is received before the sales call. A number of studies have shown the complementary relationship between personal selling and advertising. For example, a study by Theodore Levitt showed that sales reps from well-known companies are better received than those from companies that do not spend advertising dollars to create awareness. In another study, John Morill found that selling costs were 2 to 28 percent lower if the buyer had received an advertising message before the salesperson’s arrival. In another example, Gateway recently launched a $50 million dollars IMC campaign using advertising, direct marketing, sales promotions, and the Internet to create awareness that Gateway is interested in companies’ business, that is, that they are also in the business to business market. This effort may lead to sales leads through the newly created awareness. McGraw -Hill in a review of 54 studies concluded the combination of advertising and personal selling is important since “less that 10 percent of industrial decision makers had been called upon by a salesperson from a specific company about a specific product in the previous two months.” Combining advertising and personal selling is likely to improve reach, reduce costs, and increase the probability of sales. Thus, as one moves consumers down through the hierarchy, the IMC mix will change. At lower levels such as awareness and interest, advertising may play the dominant role. As one moves to evaluation, the Internet may play an increased role, and to stimulate trial or complete the sale (particularly in high involvement or business to business sales) personal selling may take on the dominant role.

IMC Exercise Have students make a sales presentation to the class for a product/service of their choice. In the presentation, promotional materials (ads, sales promotions, and advertising specialties) should be included to aid the presentation. Have the student discuss how other tools support the sales effort. Have other class members critique the presentation.