Chapter Nine
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2007 Thomson South-Western

• Understand the magnitude of advertising and the percentage of sales revenue companies invest in this marcom tool.
• Recognize that advertising can be extraordinarily effective but that there is risk and uncertainty when investing in this practice.
• Appreciate the various functions advertising is capable of performing.
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• Explore the advertising management process from the perspective of clients and their agencies.
• Understand the functions agencies perform and how they are compensated.
• Explore the issue of when investing in advertising is warranted and when disinvesting is justified.
• Examine advertising elasticity as a means for understanding the contention that “strong advertising is an investment in the brand-equity bank.”
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Advertising is a paid, mediated form of communication from an identifiable source, designed to persuade the receiver to take some action, now or in the future.
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Average 2 to 10%
Ranging from
1.4%
To 30.7%
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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
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1. Informing
2. Influencing
3. Reminding and Increasing Salience
4. Adding Value
5. Assisting Other Company Efforts
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• 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
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Reminding and Increasing Salience
• Making a brand more salient: enriching the memory trace for a brand so that the brand comes to mind in relevant choice situations.
• Increasing the customer’s interest in mature brands and the likelihood of choosing brands that might have otherwise not been chosen.
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• Three ways a company can add value to its offerings:
– Innovating
– Improving quality
– Altering consumer perceptions
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The
Advertising
Management
Process
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The Role of Advertising Agencies
• Three alternative ways to perform the advertising function:
– Use an in-house advertising operation
– Purchase advertising services on an ad-asneeded basis
– Select a full-service advertising agency
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Alternative ways to perform the advertising function
In-house advertising operation
• Necessitates employing an advertising staff and absorbing the operation costs
• Unprofitable unless a company does a large amount of continual advertising
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Alternative ways to perform the advertising function
Full-service advertising agency
Advantages Disadvantages
• In-depth knowledge and skills
• Some control is lost
• Larger clients are
• Obtaining negotiating muscle with the media favored over small clients
• Coordinating advertising • Occasionally inefficient and marketing efforts in media buying
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Alternative ways to perform the advertising function
A la carte
Advantages
• Use services only when they are needed
• Availability of highcaliber creative talent
• Potential cost efficiencies
Disadvantages
• Specialists approach client problems in a stereotyped fashion
• Lack of cost accountability
• Financial instability of smaller boutiques
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Creative Services
Media Services
Research Services
Account Management
• Develop advertising copy and campaigns
• Copywriters, production people, and creative directors
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Creative Services
Media Services
Research Services
Account Management
• Selecting the best advertising media
• Media planners develop overall media strategy
• Media buyers procure the selected media
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Creative Services
Media Services
Research Services
Account Management
• Study clients’ customers’ buying habits, purchase preferences, and responsiveness
• Focus groups, mall intercepts, acquisition of syndicated research data
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Creative Services
Media Services
Research Services
Account Management
• 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
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Three
Sources
• Commissions from media (15%)
• Reduced commission system(<15%)
• Labor-based fee system
• Outcome-based
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Profit=Revenue –Expenses
Revenue =Price X Volume
Volume = Trial + Repeat
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A measure of how responsive the demand for a brand is to changes in marketing variables such as price and advertising.
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1. Maintain status quo
2. Build Image Via Advertising
3. Grow Volume via Price Discounting
4. Increase Advertising and/or discount prices
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