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Chapter Nine. Overview of Advertising Management: Messages, Media, and Measurement.  2007 Thomson South-Western. Is Advertising Rocket Science?. “The truth is that advertising is harder than rocket science. It’s news when a rocket launch FAILS. It’s news when an ad campaign launch SUCCEEDS.”.

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Chapter Nine

Overview of Advertising Management: Messages, Media, and Measurement

 2007 Thomson South-Western


Is advertising rocket science
Is Advertising Rocket Science?

“The truth is that advertising is harder than rocket science. It’s news when a rocket launch FAILS.

It’s news when an ad campaign launch SUCCEEDS.”


Advertising
Advertising

Advertising is a paid, mediated form of communication from an identifiable source, designed to persuade the receiver to take some action, now or in the future.

Contrast this with a PSA, PR and Product Placement


Magnitude of advertising
Magnitude of Advertising

2005

$280 Billion

U.S.

Worldwide

$900 spent on advertising for every man, woman, and child in the United States.

$550 Billion


Some top spenders in u s advertising http adage com images random lna2007 pdf
Some Top Spenders in U.S. Advertisinghttp://adage.com/images/random/lna2007.pdf

Some Top Spenders in U.S. Advertisinghttp://adage.com/images/random/lna2007.pdf


Advertising to sales ratios
Advertising-to-Sales Ratios

Average 2 to 10%

Ranging from

1.4%

To 30.7%


Advertising

Effects

Are Uncertain


Advertising effects are uncertain
Advertising Effects Are Uncertain

“If you want your brand to be fit, it’s got to exercise regularly. When you get the opportunity to go to the movies or do something else instead of working out, you can do that once in a while—that’s [equivalent to] shifting funds into [sales] promotion. But it’s not a good thing to do. If you get off the regimen, you will pay for it later.”

Jennifer Lawrence, P&G


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

Chairman, Unilever Group


Advertising functions
Advertising Functions wasted; The trouble is, I don’t know which half”

  • Informing

  • Influencing

  • Reminding and Increasing Salience

  • Adding Value

  • Assisting Other Company Efforts


Informing
Informing wasted; The trouble is, I don’t know which half”

  • Make consumers aware of new brands.

  • Increase TOMA (Top of Mind Awareness)

  • Teach new uses for existing brands (called usage expansion advertising)

    • Campbell’s soup for formal family dinners and for breakfast

    • Special K for afternoon or late-night snacking


Influencing
Influencing wasted; The trouble is, I don’t know which half”


Reminding and increasing salience
Reminding and Increasing Salience wasted; The trouble is, I don’t know which half”

  • Making a brand more salient: enriching the memory trace for a brand so that the brand comes to mind in relevant choice situations.

  • Increasing the customer’s interest in mature brands and the likelihood of choosing brands that might have otherwise not been chosen.


Adding value
Adding Value wasted; The trouble is, I don’t know which half”

  • Three ways a company can add value to its offerings:

    • Innovating

    • Improving quality

    • Altering consumer perceptions


Assisting other company efforts
Assisting Other Company Efforts wasted; The trouble is, I don’t know which half”

  • Advertising may be used as a vehicle for delivering coupons and sweepstakes

  • Assisting sales representatives

  • Pre-selling a company’s products by introducing the product and legitimizing salespeople’s claims.

  • Augment the effectiveness of price deals.


The advertising management process
The Advertising Management Process wasted; The trouble is, I don’t know which half”


The role of advertising agencies
The Role of Advertising Agencies wasted; The trouble is, I don’t know which half”

  • Three alternative ways to perform the advertising function:

    • Use an in-house advertising operation

    • Purchase advertising services on an ad-as-needed basis

    • Select a full-service advertising agency


Ad agency lists
Ad Agency Lists wasted; The trouble is, I don’t know which half”

  • http://adage.com/datacenter/article?article_id=116344


Alternative ways to perform the advertising function
Alternative ways to perform wasted; The trouble is, I don’t know which half” the advertising function

In-house advertising operation

  • Necessitates employing an advertising staff and absorbing the operation costs

  • Unprofitable unless a company does a large amount of continual advertising


Alternative ways to perform the advertising function1
Alternative ways to perform wasted; The trouble is, I don’t know which half” the advertising function

Full-service advertising agency

  • Advantages

  • In-depth knowledge and skills

  • Obtaining negotiating muscle with the media

  • Coordinating advertising and marketing efforts

  • Disadvantages

  • Some control is lost

  • Larger clients are favored over small clients

  • Occasionally inefficient in media buying


Alternative ways to perform the advertising function2
Alternative ways to perform wasted; The trouble is, I don’t know which half” the advertising function

A la carte

  • Advantages

  • Use services only when they are needed

  • Availability of high-caliber creative talent

  • Potential cost efficiencies

  • Disadvantages

  • Specialists approach client problems in a stereotyped fashion

  • Lack of cost accountability

  • Financial instability of smaller boutiques


Advertising agency organization
Advertising Agency Organization wasted; The trouble is, I don’t know which half”

  • Develop advertising copy and campaigns

  • Copywriters, production people, and creative directors

Creative Services

Media Services

Research Services

Account Management


Advertising agency organization1
Advertising Agency Organization wasted; The trouble is, I don’t know which half”

  • Selecting the best advertising media

  • Media planners develop overall media strategy

  • Media buyers procure the selected media

Creative Services

Media Services

Research Services

Account Management


Advertising agency organization2
Advertising Agency Organization wasted; The trouble is, I don’t know which half”

  • Study clients’ customers’ buying habits, purchase preferences, and responsiveness

  • Focus groups, mall intercepts, acquisition of syndicated research data

Creative Services

Media Services

Research Services

Account Management


Advertising agency organization3
Advertising Agency Organization wasted; The trouble is, I don’t know which half”

  • Link the agency with the client

  • Act as liaisons so that the client does not need to interact directly with several different service departments and specialists

Creative Services

Media Services

Research Services

Account Management


Agency compensation
Agency Compensation wasted; The trouble is, I don’t know which half”

  • Commissions from media (15%)

  • Reduced commission system(<15%)

Three

Sources

  • Labor-based fee system

  • Outcome-based


Which position is more acceptable

The Case for Investing: the belief that advertising can increase profitability by increasing sales volume, enabling higher selling prices, and thus increasing revenue beyond the incremental advertising expense.

The Case for Disinvesting: Firms often choose to reduce advertising expenses either when a brand is performing well or during economic recession. The belief is that an expense reduction, with all else held constant, will result in increased profits.

Which Position is More Acceptable?


Elasticity
Elasticity increase profitability by increasing sales volume, enabling higher selling prices, and thus increasing revenue beyond the incremental advertising expense.

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


How to increase profit
How to Increase Profit increase profitability by increasing sales volume, enabling higher selling prices, and thus increasing revenue beyond the incremental advertising expense.

  • Maintain status quo

  • Build Image Via Advertising

  • Grow Volume via Price Discounting

  • Increase Advertising and/or discount prices


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