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Kleppner’s Advertising Procedure, 18e Instructor Manual

Chapter 2Roles of Advertising

Chapter Objectives

After studying this chapter, you will be able to:

1. Identify advertising and marketing goals and objectives.2. Explain the importance of advertising and return-on-investment (ROI).3. Describe the four primary types of marketing communication.4. Explain the institutional roles of advertising for consumers, business and society.5. Identify the primary components and considerations of advertising strategy.6. List four types of advertising directed toward consumers.7. List the types of advertising directed toward businesses and professionals.

Chapter Overview

This chapter discusses the basic goals of advertising and its role in contributing to the bottom line through integrated marketing and other considerations. Because advertising does not operate in a vacuum, its economic and social roles are reviewed, as well as the different types of advertising, including national and local advertising, trade advertising, and nonproduct advertising.

Lecture Outline

1. Advertising and the Changing Communication Environment

A. Finding a cost-efficient plan for reaching increasingly in-control and demanding consumers is the major challenge of contemporary advertising. 1) Problems of convergence and consolidation determine virtually every advertising,

promotion, and marketing decision. B. The term convergence means coming together or intersecting different components of

some related system. In mass communication, the term has come to refer to three distinct though related areas.1) Technological convergence is the merging of previously separate technologies. 2) Business convergence is the merging of previously separate companies or

industries.

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3) Content convergence is the use of content in previously separate media platforms. C. Because of the resulting multitude of ways today’s consumers receive advertising

messages, advertisers have a dual problem.1) On the one hand, they must choose a media plan from an ever-expanding number

of options.2) At the same time, they must develop advertising messages that consumers will

invite to share their time. D. The use of the term citizen media to describe this situation implies greater control by

users of communication rather than by providers. 1) The more specific terms participatory media and user-generated content name

instances in which the audience takes an active role in creating media content.2) Weblogs (or blogs) began as informal communication links among individuals with

similar interests. 3) Commercially sponsored blogs not only provide a means of reaching fragmented

audience segments but also provide companies with information and research about their brands at virtually no cost.

E. In 2000, the communication revolution marked by the change in the role of users became commercially viable due to large-scale adoption. 1) Mobile technology fueled by the spread of cell phones are used for music

downloads, text messaging, and even program viewing—with much of the content sponsored by one or more brands.

2) Advertisers continue to shift media spending away from traditional media to new and, especially, interactive technology.

*****NOTES: Use Exhibit 2.1 about here.*****

F. Advertising as a Communications Tool. 1) Advertising rarely can accomplish tasks that are not related to communication.


2) While derived from the overall marketing plan, advertising executes the communication elements of the plan.

G. A typical marketing plan lays out the overall thinking for product promotion. 1) Overall goal(s) of the plan.

a. These are often expressed in financial terms such as expected sales revenues at the end of the first year or percentage increases over previous years.

2) Marketing objectives. a. These should be clearly stated and measurable, such as a significant increase

in market share relative to specific competitors over a set time period.

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3) Marketing strategy. a. This outlines the general course of action to achieve goals and objectives.

4) Situational analysis. a. This states the product benefits as well as data concerning sales trends,

competitive environment, and industry forecasts.5) Problems and opportunities.

a. These should include current and anticipated problems and opportunities facing the brand.

6) Financial plan. a. This outlines the expected profit or loss over various time frames, thus

helping project how much money is available for marketing. 7) Research.

a. The section on research outlines the data needed, where they can be obtained, their cost, and time frame for availability.

H. After the marketing plan, an advertising plan is developed to determine the corresponding communication tasks.1) Prospect identification.

a. This provides a detailed description of a company’s prime prospects, including basic demographic data and the social, cultural, and psychological characteristics useful for predicting purchase behavior.

2) Consumer motivations. a. Insights into motivations enhances understanding of the role advertising can

play in channeling consumer needs, wants, and aspirations into purchases of specific brands of goods and services.

3) Advertising execution.a. Overall creative themes and media plans are developed to effectively deliver

messages to set one’s brand apart from its competitors.4) The advertising budget and allocation.

a. This helps determine how much is spent on each area of advertising, including specific media, creative executions.

2. Advertising and Profitability

A. The value of a particular marketing function is often expressed as return-on-investment (ROI), that is, how many dollars are produced for every dollar spent.


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B. The necessity of a good ROI means measuring advertising success on the basis of effective communication rather than on audience exposure. 1) While measuring audience engagement and involvement addresses this need, no

general agreement exists on how to define and/or measure it. 2) Advertising researchers realize that each communication outlet presents its own

unique challenges for measuring audience response.


3) Some advertisers fear that an emphasis on short-term audience involvement runs the risk of devaluing the long-term value of advertising.

3. Integrated Marketing

A. The marketing mix is comprised of four primary elements: product, price, distribution, and communication.

B. The communication component of marketing is further divided into four primary categories.1) Personal selling.

a. This is the most effective as well as the most expensive, and is typically used as a follow-up to advertising to close a sale or develop a long-term relationship that will eventually result in a sale.

b. Techniques of personal selling are being adapted to a number of media platforms, such as direct response and the Internet.

2) Sales promotion.a. These are extra incentives for a customer to make an immediate purchase.

They are by far the most extensive category of promotional spending.b. Trade promotions to persuade wholesalers and retailers to carry a brand

and/or give it favorable shelf space are the largest category of promotions. c. Some advertisers fear they not only cut into immediate profits but harm

long-term brand equity by overemphasizing price.3) Public relations.

a. This includes ways that an organization manages its relationships with its various publics.


b. Public relations uses what researchers call the two-step flow theory of communication, that word-of-mouth endorsements by influential peers can be an important way of changing others’ minds.

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c. More recent techniques such as buzz, guerrilla marketing, and word-of-mouth marketing are updated efforts to engage marketplace influencers.

d. While audiences see public relations as having more credibility than advertising, its prevalence and effectiveness is ultimately controlled by other media.

e. Public relations tends to work best at the introductory stage of building brand awareness, with advertising taking over to build long-term brand loyalty.

4) Advertising.a. Advertising is a message paid for by an identified sponsor and delivered

through a medium of mass communication.b. Advertising is biased and not neutral by definition. c. It continues to undergo dramatic changes as its adapts to new

communications technologies. C. Integrated marketing communications (IMC) labels the effort among agencies today to

more comprehensively coordinate and manage a greater variety of marketing communications.1) During the early development of modern marketing and advertising, different

forms of marketing communications were regarded as separate. 2) Using many elements of marketing communication instead of one, can more

accurately measure the campaign’s ROI. D. In the past 20 years, companies have moved to organize the total communication

program under the general heading of integrated marketing communication (IMC)1) This emphasizes the effectiveness of the total marketing communication plan. 2) In coming years, IMC will become even more the norm in the marketing plans of

virtually every company.


4. Advertising: An Institutional Approach

A. Approaching advertising as an institution means understanding how it sets standards and guidelines for what are both appropriate and required to promote the goals of a society. 1) Seen as an institution, it becomes clearer how advertising is a logical—some

would say necessary—requirement for a capitalistic economic system.

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B. As an institution, advertising plays both an economic role as well as a social and cultural role. 1) The basic economic functions of advertising are to disseminate product

information that allows consumers to know that products exist, to give consumers information about competing brands, and to permit consumers to make intelligent choices among product options.

2) Its social and cultural role is to convey and promote certain social values. This is also often an inadvertent role that is not intended by its sponsors.

3) Advertisers must be aware of both economic and social aspects of their advertising.

4) The basic economic function of advertising is to disseminate product information that:a. allows consumers to know that products exist, b. gives consumers information about competing brands, c. and permits consumers to make intelligent choices among product options.

5) Most people believe that advertising also has an ethical and moral responsibility to provide product information that is both truthful and socially appropriate. a. Because people buy goods based on psychological and social factors as well

as strictly utilitarian considerations, a case can be made that advertising is manipulative because it creates these wants (as opposed to needs).

6) It’s more useful to regard advertising as mirroring the society in which it functions.a. At the same time, over time it also contributes to subtle changes in the

mores and behavior of the public that is exposed to it.C. What Advertising Does for Consumers.

1) Consumer problems can be utilitarian or hedonistic, with most being a combination.a. As a result, consumers search for products and services that satisfy their

need on both levels. 2) Advertising’s role is to provide information about goods and services as efficiently

and economically as possible to potential buyers.


3) It is particularly good at providing information and introducing consumers to new products and services.

4) Many believe that advertising also promotes greater choice for the consumer. a. By informing consumers of new products, it increases the number available.

D. What Advertising Does for Business.1) Primary roles include:

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a. contributing to new-product launchings, b. increasing consumer brand loyalty for existing brands, c. and maintaining the sales of mature brands. d. In sum, advertising creates awareness of useful products so that businesses

can build shareholder value by profitably moving inventory. 2) Contrary to critics who bemoan the adversarial relationship between businesses

selling goods and consumers buying them with each side trying to “beat” the other, exchange theory suggests that advertising helps businesses build mutually beneficial relationship with its consumers.

3) Advertising also helps businesses provide economies of scale for communicating efficiently to large audiences.

E. What Advertising Does for Society.1) Advertisers convey subtle messages about society by the manner in which their

advertising portrays products and services. a. In a landscape of fragmented media and diverse audiences, it is more and

more difficult to develop messages that appeal to specific target audiences without exposure to unintended consumers.

2) Advertising and contemporary marketing should:a. Monitor changes so that a company is aware of what is happening in society.b. Create products and services compatible with changing values.c. Design marketing messages that reflect and build on the values target

markets and individual customers hold. 3) Advertising also provides revenues to support a diverse and independent press

system protected from government and special interest control. 4) In carrying out these goals, advertising must be aware of its responsibility as a

mirror and monitor of society. 5) New technology and sophisticated research methods have only increased the

importance of issues such as consumer privacy and the potentially intrusive nature of advertising.

5. Advertising to Diverse Publics

A. Because advertising communicates a message to various groups and individuals who in turn interpret this message in often unintended ways, companies must consider the effect of their messages on many publics.1) While advertisers must be aware that they reach unintended audiences, they also

often use a single advertising campaign to reach several publics at once. B. A single advertisement might be directed to a number of publics:

1) The distribution channel.

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a. National advertisers often use consumer advertising to demonstrate to retailers that they are offering brands with high consumer demand and ones they are willing to support with significant advertising dollars at the consumer level.

2) Employees.a. To maintain worker morale, an advertising message may carry an overt

appeal to employees by mentioning the quality workmanship that goes into a product or featuring company employees in advertising.

3) Current and potential customers.a. Obviously, the key to success for most companies is building brand

awareness among new customers and enhancing brand loyalty among current buyers.

4) Stockholders.a. Because the majority of customers hold ownership in many of the companies

they patronize, high brand awareness and a company’s positive reputation help keep stock prices higher than might otherwise be the case.

5) The community at large.a. Advertising is often used to influence public opinion so that when the

inevitable disputes about local tax assessments, excessive noise, or zoning ordinances arise, the company is viewed as a good neighbor.

6) Advertisers should always consider the entire range of publics when developing the campaign.

6. The Components of Advertising Strategy

A. Advertising should be designed to reach those consumers who are interested in the particular product features and benefits that a brand offers. 1) The most successful brands are those with features and benefits unique within a

product category and, consequently, those that hold a differentiated position in the minds of consumers.

2) It is advertising’s job to turn product benefits into an attention-getting story that appeals to prospective buyers.

B. Brand Name.1) An established brand name that customers recognize and respect is one of the

most valued assets of a company. a. While products are concrete objects, brands represent attitudes and feelings

about products.b. Although high brand recognition is important for any product, it is especially

critical for product categories that have little inherent product differentiation.

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C. Brand Extension1) A brand extension is the use of an established brand to reach new markets.2) If the scope of established brand positions is significantly enlarged, consumers

may question the values and benefits of the original brand. 3) However, because most successful brands reach a point of saturation among their

core consumers, some form of brand extension is the often the only way to expand markets.

4) Potential advantages of brand extension strategy include: a. Saving money by not needing to build awareness for a new and unknown

brand name, b. Adding equity to an existing brand name if the extension is successful.

5) Possible disadvantages of a brand-extension strategy include:a. Damaging a core brand in the minds of loyal consumers with a failed

introduction, b. Losing marketing focus on your existing brand and/or diluting marketing

efforts and budget across several brands6) Whether introducing a new product or maintaining the vitality of a mature one,

brand identity is crucial to a product’s successD. Fulfilling Perceived Needs.

1) Successful products are those that solve a consumer problem better and/or more economically than an available alternative.

2) A perceived need means that advertisers must not focus on their produce as a physical object but, rather, as the means of solving a problem.


3) The more closely a brand is associated with a specific job, the more likely it will be the first choice of consumers faced with a particular task.

4) Successful products are those that are perceived by consumers as being best for a task, not necessarily those that are considered the winner according to some objective standard.

E. Assessing Needs.1) Reliable research is a key ingredient in determining product success.

a. Companies constantly employ a host of research techniques to discover the most appealing products, advertising and promotional messages.

b. The reason why is that product purchase decisions are a result of numerous factors.

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2) Conjoint analysis considers the many individual elements that together determine consumer preference.a. It places a value on each element to see how consumers actually weigh

considerations in making purchases. F. Sales, Revenues, and Profit Potential.

1) Marketing’s contribution to profitability is achieved through a complex balance among sales, market share, promotional expenditures, and cost efficiency. a. Despite the contemporary demand for marketing accountability, there is no

easy answer to the equation.b. For example, significant cuts in marketing and promotional outlays may

contribute to immediate profits, but doing so may also harm long-term success.

2) The cleverest advertisement or the most humorous, memorable television commercial is totally worthless unless it contributes directly to company profitability.


G. One of four major approaches is typically used by established companies to achieve long-term revenues and profits.1) Developing and expanding new-product niches to reach current customers. 2) Emphasizing profits over sales volume. 3) Emphasizing short-term market share rather than profitability.4) Customer tracking.

a. Many companies are beginning to identify and reward their best customers (i.e., most profitable) while discouraging less-valuable buyers.

H. The emphasis on profit-based accountability in all areas of advertising and promotion has created major changes in many areas of advertising. 1) Advertising agencies are being compensated on how their work contributes to a

client’s bottom line, not whether they produce award-winning advertisements. I. This move to more precisely measure the contributions of advertising has led to a

broader view of what advertising can and should accomplish. 1) Some advertisers focus as much on simply maintaining sales and market share as

they do on increasing sales. 2) Given the cost involved in finding new customers versus keeping present ones,

the overall contributions to profitability may actually be greater in the former case.

J. Product Timing.1) Properly timing strategic decisions can be clarified by understanding it in terms of

a product life cycle.

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2) The typical life cycle of a brand progresses linearly through four distinct phases. a. Introduction and growth phases:

(1) Businesses advertise to establish a beachhead against competition and to gain a level of consumer awareness.

b. Mature and declining stages of development:(1) Advertising strategies take longer perspectives and their goals are likely

to center on brand equity and a longer horizon for sales development. 3) No matter how good a product is, it can rarely be forced on consumers before

they are ready to accept it. 4) Market timing may be a matter of doing something first rather than doing

something different. 5) Timing can be either strategic, involving long-term decisions by both customers

and marketers, or tactical, involving sales related to specific events or occasions.


6) Finally, timing also is a major factor in the everyday function of advertising, such as in the decisions made by agency media planners.

K. Product Differentiation. 1) Product differentiation is the degree to which a target audience regards a

product as different from others in the same category. a. The difference may be the result of some tangible attribute of the physical

product,.b. But it also is often based on some intangible elements about the product

including a brand image created in part by advertising. 2) Without a strong brand identity built on meaningful differentiation, buyers tend

to view all brands in a category as interchangeable, and purchase decisions tend to be based on price. a. To the extent that price is the primary differentiating factor, profitability

suffers as brands offer deeper and deeper price cuts to maintain market share.


3) One of the most important elements of differentiation is keeping an open mind about how to achieve it. a. Too often when companies search for product differentiation they

concentrate on product function to the exclusion of other possibilities.

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4) Product differentiation is also a means of target marketing, because positioning a brand to a specific market segment also means surrendering consumers who are looking for features the brand doesn’t emphasize.

5) Because much of the criticism of modern advertising is that it tries to make obscure and inconsequential product variations important, advertisers have an obligation to promote meaningful product differences.

L. Price.1) Pricing strategy is much more complicated than simply covering costs and

providing a reasonable profit. 2) Rather than viewing pricing strategy as solely a means of covering costs, it should

also be seen as an integral part of overall marketing strategy. a. Price is most often dictated by favorable consumer perceptions of the value

of a product—a perception that is created in part by advertising.b. A primary function of advertising is to create, or enhance, a positive gap

between the price of a product and the value the average consumer assigns to the product.

c. The greater this value gap, the more insulated the product is from price competition.

3) A major part of positioning a product in the market and in the minds of consumers is setting the price. a. At least some segment of consumers in each product category equates price

with value.b. Price can help consumers gain a psychological benefit by the mere fact of

paying more for a product. 4) Price also defines who your competitors are. 5) New technology helps marketers be more flexible and precise in relating price to

specific market segments, seasonal selling, and particular items within a product line a. The technique of yield management helps even out supply and demand.b. It has been made more precise through the use of software programs that

identify consumer segments in terms of their sensitivity to price.c. A variable pricing strategy offers each customer a different price at a

different point in time.(1) It helps enhance a marketer’s ability to neither lose sales by offering

price-sensitive customers merchandise at too high a cost nor lose profits by selling goods below what premium buyers would be willing to pay.


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6) It is very difficult for an advertising creative plan to ignore the basic price/value perception held by a target audience.a. The pricing strategy for a brand determines to a significant degree the type

of marketing strategy that can be used and the success that advertising will have in promoting and selling a specific brand.

7. Variations in the Importance Of Advertising

A. Because companies differ in terms of their marketing goals, competitive situation, product line, and customer base, their advertising plans differ as well.

*********NOTES: Use Exhibit 2.15 about here.*****

B. The role that advertising plays in a company’s promotional strategy depends on a number of factors including:1) Corporate preference for various segments of marketing communication channels.

a. Marketers have more choices than ever before to effectively reach their target audiences.

2) High sales volume tends to lower advertising-to-sales ratios.a. Companies with high sales volumes tend to spend less on advertising as a

percentage of sales, particularly given that the costs of attaining new customers through additional advertising may be nonproductive.

3) Industries with a number of competing firms and/or extensive competition.4) Product categories with widespread competition and little perceived product

differentiation.5) Reversing sales or market share declines.

a. Advertising can be used as a defensive weapon to halt declines. C. Many variables must be considered when a business is deciding what role advertising

will play.

8. Advertising and the Marketing Channel

A. One of the most important aspects of marketing is the development of the marketing channel.


1) A well-organized channel is one in which both products and communication flow from manufacturers to ultimate consumers.

2) It also creates efficiencies through specialization in the movement of goods from producers, wholesalers, and retailers to ultimate consumers.

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B. Crucial to market-channel efficiency is effective communication, including advertising.1) Most of the advertising that we see every day is called consumer advertising

because it is directed to end-of-channel customers.C. Traditional channels remained unchanged over most of the twentieth century.

1) Each product and service developed certain distribution methods for reaching consumers that were relatively consistent within an industry.

D. The past decade, however, has seen many changes resulting from technological innovations.1) With the advent of the World Wide Web, travelers can now bypass travel agents

and go directly to airlines and hotels to make reservations.2) Digital cameras are greatly impacting film processors.3) The downloading of music is now significantly impacting the distribution and sale

of recording companies’ products. 4) The “traditional” marketing channel has largely been replaced by distribution and

marketing communication systems that are unique to each seller.E. One of the most fundamental changes has been the control of both marketing and

communication channels by the consumer. 1) Research studies underscore the importance of the Internet as a marketing

communications tool across a number of product categories and market segments.

F. Marketing strategy not only determines the role of advertising and its budget but also plays a major part in decisions concerning media choices.1) The use of coupons will dictate the use of print media.2) Product demonstrations will call for the use of television or the Internet.3) Complex messages may require magazine media.4) Local messages will employ newspaper media.

G. Although consumer advertising is the most familiar to us, it is only one category of marketing communication necessary at any number of distribution levels. 1) Advertising must both communicate and carry out marketing goals.

H. Directness and Duration.1) Marketers must continually assess:

a. the success of the directness of the intended communication effect, and b. The anticipated time over which the effect is supposed to function.

2) Direct-action, short-term.a. Designed to produce an immediate response in the form of a product

purchase. 3) Direct-action, long-term.

a. Used with high-ticket items in which the purchase decision is the result of many factors and the purchase cycle is relatively long.

4) Indirect sales tools.

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a. Intended to affect sales only over the long term.b. Promote general attributes of the manufacturer rather than specific product

characteristics. c. Most institutional or public relations advertising falls in this category.

(1) The exception would be remedial public relations advertising designed to overcome some immediate negative publicity.

9. Advertising to the Consumer

A. National advertising. 1) National advertising refers to advertising by the owner of a trademarked product

(brand) or service through different distributors or stores.2) Despite differences, all national advertising has common characteristics:

a. It tends to be general in terms of product information. (1) Because retailers often have varying policies and business practices,

information concerning price, retail availability, and even service and installation is often omitted from national advertising or mentioned only in general terms.

(2) Conversely, retail advertising often includes price information, service and return policies, store locations, and hours of operation—information that national advertisers usually cannot provide.

b. However, the need to communicate more closely with targeted consumers has caused national advertising to take on a more personalized tone during the past decade.

3) Geographic targeting began in the 1980s.a. At first regional, it started reaching more narrowly defined segments on a

market-by-market basis.4) Advances in computer technology are now allowing individual tailoring based

upon lifestyles and product usage.


B. Retail (Local) Advertising. 1) Retailing has undergone dramatic changes in the past 20 years, and these changes

are reflected in its advertising and promotion.a. The most important change is the move from local/regional stores to

national chains. 2) Consolidation of the retail industry has had pronounced effects on the way retail

marketing is conducted.a. Customers more and more are doing “one-stop shopping.”

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b. The diverse products in retail stores often makes it difficult to categorize them and their competitors.

3) The move to national retailing has significant ramifications for newspapers and local radio stations. a. Newspapers, in particular, are seeing dramatic advertising spending shifts as

retailers move to national promotional plans.b. A continuing trend over the past decade has seen declines in advertising

pages in most major newspapers.4) Retail consolidation has also changed the relationship between retailers and

manufacturers. a. Manufacturers provide a number of product, merchandising, and

promotional services specific to each retailer to gain entry.b. At the same time, manufacturers find themselves increasingly competing

with in-store brands.C. End-Product Advertising.

1) Some products are not purchased directly by consumers, but are acquired by them by virtue of being an ingredient or component part of other products.

2) The promotion of such products is called end-product advertising (or branded ingredient advertising). a. End-product advertising is most commonly employed by manufacturers of

ingredients used in consumer products. b. Successful end-product advertising builds consumer demand for an

ingredient that will help in the sale of a product.c. The knowledge that manufacturers are creating consumer demand will

encourage companies to use these ingredients in their consumer products.3) End-product advertising began in the 1940s when DuPont began promoting its

Teflon non-stick coating on cookware.D. Direct-Response Advertising.

1) Direct marketing and direct-response advertising have long been a part of this country’s history.a. Ben Franklin is credited with creating America’s first direct sales catalog in

1744.b. The modern era of direct selling was ushered in with the publication of the

Montgomery Ward catalog in 1872.2) Techniques and media of direct-response advertising have changed dramatically.

a. As advertisers have shifted dollars from traditional mass media to more targeted vehicles, direct-response advertising has grown to more than $170 billion or almost half of all advertising expenditures.

b. The largest sector is direct mail, which accounts for almost 1/3 of total spending.

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c. Internet advertising is the fastest growing sector.3) Advertisers in traditional media will increasingly adopt direct-response

techniques.

10. Advertising to Business and Professions

A. The average consumer does not see the large share of advertising directed to business, industry, professions, and all stages of the marketing distribution channel.

B. Business-to-business advertising (B2B) is one of the fastest growing categories of advertising, and it requires a different strategy from consumer advertising.1) Personal selling, telemarketing and other forms of direct response, and the

Internet occupy a much higher share of expenditures directed to businesses. 2) B2B advertisements tend to be factual, efficiency- and profit-oriented, rather than

the emotional appeals seen in consumer ads.3) Business-to-business messages are addressed not only to specific industries but

also often to particular job classifications within these industries. 4) Profit-oriented appeals are very common.

C. The buying process is different for B2B. 1) Purchase decisions made by companies frequently involve many people, including

those who do the actual buying, those who directly or indirectly influence this decision, and the employees who will actually use the product or service.

2) Organizational and industrial products are often bought according to precise, technical specifications that require significant knowledge about the product category on the part of both buyers and sellers.

3) Impulse buying is rare (industrial buyers do not suddenly get an “urge to splurge” on heavy machinery or silicon chips).

4) The dollar volume of purchases is often substantial, dwarfing most individual consumer grocery bills or mortgage payments.

11. Categories of Business Advertising

A. Trade Advertising. 1) Trade advertising is created by manufacturers and directed to middle

components of the marketing channel—usually wholesalers and retailers.2) Promotional messages emphasize profitability and advertising support retailers

will receive from manufacturers.3) In addition, trade advertising promotes products and services that retailers need

to operate their businesses.4) Trade advertising objectives.

a. Gain additional distribution.b. Increase trade support. This includes eliciting favorable shelf space and using

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c. Announce consumer promotions. B. Industrial Advertising.

1) Manufacturers are also consumers, purchasing machinery, equipment, raw materials, and component parts. a. Companies selling to manufacturers must target their sales messages, called

industrial advertising, to this market.2) Advertising is placed in publications directly related to particular industries.3) It is directed to a very small, specialized audience.4) Purchases are usually made through a number of decision makers.5) Industrial advertising informs companies of new products and builds brand

awareness.C. Professional Advertising.

1) The primary difference between professional advertising and other trade advertising is the degree of control exercised by professionals over the purchase decisions of their clients.

2) Advertising is directed to individuals or groups of individuals in various professions such as medical, legal, and engineering.


3) The clientele of these professions purchase whatever products are recommended.

D. Corporate or Institutional Advertising. 1) Corporate or institutional advertising done by an organization speaking of its

world views, and problems as a whole, to gain public goodwill and support rather than to sell a specific product.

2) While institutional advertising remains a long-term image-building technique, in recent years it has taken on a decided sales orientation in terms of the audiences reached and intent of communication.

3) Several objectives of corporate advertising are suggested:a. Establishing a public identity.b. Explaining company’s diverse missions.c. Boosting corporate identity and image.d. Gaining awareness with target audiences for sales across a number of

brands.e. Associating a company’s brands with some distinctive corporate character.

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12. Non-Product Advertising

A. Idea advertising. 1) Idea advertising is used to promote an idea or cause rather than to sell a product

or service.2) Although it is not a new phenomenon, the number of public interest groups using

advertising and the sophistication of the communication techniques being employed is new.

3) Idea advertising is often controversial.a. Critics think advertising messages are too short and superficial to fully

debate many of the issues.b. Proponents argue that it is the most practical means to reach mass

audiences.4) The increasing sophistication of media’s ability to narrowly target audiences by

ideology will make this type of advertising more prevalent in the future.B. Service advertising.

1) Service advertising is that which promotes a service rather than a product. 2) America is increasingly becoming a service economy, with consumers seeking a

wide range of help from financial planning and advice to child care. 3) Similar to corporate advertising, providers of services need to build consumer

awareness over a prolonged period of time and develop distinct differentiation among competitors.

4) Some basic principles of service advertising include:a. Feature tangibles. Adding a personal dimension through testimonials and

stressing service benefits.b. Feature employees. Building trust with customers by demonstrating the

quality of the firm’s employees; an added benefit is improvement of employee morale.

c. Stress quality. Advertising messages should emphasize consistency and high levels of competency.

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13. Government Advertising

A. Advertising has been used by governmental agencies for generations and labeled as “propaganda.”

B. The more recent growth in numbers of government services and programs has, however, resulted in greater use of traditional advertising by government agencies.

C. Traditional advertising techniques are being applied by an array of national agencies such as the volunteer armed forces, consumer protection agencies, and environmental and health initiatives.


D. State governmental agencies, too, are finding the use of advertising to advise the citizenry on beneficial services related to savings plans for higher education.

Review Questions

1. Compare and contrast the three types of convergence discussed in this chapter and their effect on advertising.

In mass communication, convergence refers to three distinctive though related areas: 1) technological convergence, 2) business convergence or consolidation, and 3) content convergence.

Technological convergence means that there are more options than ever for reaching consumers and increasingly the consumer is in control of the communication. This presents a dual problem to advertisers. On the one hand, they must choose a media plan from an ever-expanding number of options. At the same time, they must develop advertising messages that consumers will invite to share their time.

One of the dominant trends of modern business is business convergence or consolidation—the merging of company after company, including advertising agencies and media companies. In the area of retail advertising, consolidation has caused great changes. Brand consolidation has allowed the implementation of national advertising strategies, and provided the opportunity to move into national media and promote its in-store, exclusive brands on a national basis. This move also has significant ramifications for newspapers and local radio stations, as advertisers turn to using more national media.

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Content is the primary expense of most communication companies. Whether it is a network showing reruns to amortize its investment in its programs or an advertising agency using clip art or sharing footage with its global partners, with content convergence companies try to stretch the use of communication content.

2. How has the emphasis on return on investment changed the relationship between advertising and the media?

The value of a particular marketing function is often expressed as return-on-investment (ROI), that is, how many dollars are produced for every dollar spent. Clients are increasingly demanding that media and advertising agencies measure advertising success on the basis of effective communication rather than on audience exposure (i.e., circulation or ratings). In 2005, a joint task force of major advertising trade associations announced an initiative that would replace the concept of audience delivery with one that measured audience engagement. However, there is a lack of consensus on how to define and/or measure it. The demand for accountability and a focus on ROI are becoming part of the media/advertiser relationship. For example, in the fall 2006 television season, Court TV guaranteed a certain audience level but also offered to rebate advertisers if the network fell short of a previously guaranteed level of engaged viewers. The figure was determined by a formula that included measures of viewer attentiveness, engagement, and recall.

3. How does advertising complement other elements of marketing communication?

The four components of marketing communication include personal selling, sales promotion, public relations, and advertising. Advertising complements these other elements as follows:

In business-to-business marketing, advertising opens doors for personal salespeople, and in consumer marketing it introduces brands and retailers, which allows salespeople to make the final sale.

Consumer sales promotions such as sales prices, cents-off coupons, and sweepstakes often use advertising to reach the consumer.

The key to successful public relations is to view it as a complement rather than a competitor to advertising. Ideally, advertising and public relations should work in concert to get the brand message to as many prospects as possible. Public relations and especially word-of-mouth advertising tend to work best at the

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introductory stage of building brand awareness with advertising taking over to build long-term brand loyalty.

4. Discuss public relations from the standpoint of audience credibility and message control.

Because public relations is usually seen as news, it has credibility that is lacking in most advertising. Furthermore, unlike advertising, a public-relations message is ultimately controlled by the media. The media makes decisions concerning when, where, and if a particular product story will be carried. The elements of message control and credibility most distinguish public relations and advertising.

5. What role does brand equity play in a product’s long-term success?

An established brand name that customers recognize and respect is one of the most valued assets of a company. Studies have shown that anywhere from one-third to one-half of the value of some companies comes from the brand names they own. James Spaeth, past president of the Advertising Research Foundation, said that “A brand name is the intangible benefit that differentiates an otherwise readily substitutable product in a highly consumer relevant way.” For example, a primary difference between McDonald’s and the thousands of other fast-food restaurants that compete for consumers’ dollars is its name.

In product categories that have little inherent product differentiation and are easily duplicated by competitors from a functional standpoint, brand equity is especially important. What competitors cannot duplicate are the years of successful brand building that the parent companies have invested in their brands. A study of 25 popular product categories and the dominant brands in these categories over the past 80 years shows how difficult it is for competitors to compete against established brands. Only five product category leaders have been replaced among twenty-five product types over the last 80 years.

6. Why has integrated marketing communication become even more important in a period of media fragmentation?

The complexity of contemporary marketing communication plans has resulted in a demand for programs that speak with one voice, which refers to the fact that companies are demanding that all communication from their letterheads to product packaging demonstrate a consistent look and theme. A primary outcome of the integrated

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marketing communication approach is less concern with how a message is delivered (e.g., advertising, public relations) and more emphasis on the effectiveness of the total marketing communication plan. Media fragmentation multiplies the choices marketers have for reaching their audiences. Major marketers are much more interested in the efficiency and benefits of their total marketing communication program than with the specific means of achieving these results. Demands for marketing efficiency combined with new marketing communication channels and an increasingly diverse audience will combine to force greater integration and coordination of all aspects of the marketing function, especially those involved in the communication process.

7. Discuss the primary advantages and disadvantages of brand extension.

Brand extensions are new product introductions under an existing brand to take advantage of existing brand equity. Advantages of a brand-extension strategy are:

1. Saving money by not needing to build awareness for a new and unknown brand name.

2. Adding equity to an existing brand name with a successful extension.

Disadvantages of a brand-extension strategy are:

1. Damaging a core brand in the minds of loyal consumers with a failed introduction.

2. Losing marketing focus on your existing brand and/or diluting marketing efforts and budget across several brands.

8. A product is a bundle of benefits. Discuss.

A product is a bundle of benefits put together to meet the need of some consumer segment and to solve a consumer problem better and/or more economically than an available alternative. Product differentiation is the circumstance in which a target audience regards a product as different from others in the category. While this difference may be the result of some tangible attribute of the physical product, it also is often based on some intangible elements about the product including a brand image created in part by advertising. Product differentiation often involves minor changes in either a product or the position communicated by advertising.

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9. Discuss product differentiation in terms of target market segmentation.

As companies set about to differentiate their products, they should remember that product differentiation is also a means of target marketing. As they position their brands to appeal to a specific market segment, they often simultaneously surrender those consumers looking for features not emphasized in their brands to other manufacturers. Before embarking on a specific product-differentiation strategy, companies must make sure that their brand position is important to enough prospects that they will be able to sustain a profitable niche.

10. Discuss price strategy as a means of marketing strategy.

A major part of positioning a product in the market and in the minds of consumers is setting the price. At least some segment of consumers in each product category equates price with value; and, especially at the retail level, price plays an important role in maintaining sales. Price also defines who your competitors are.

11. Compare and contrast business-to-business and consumer advertising in terms of audiences, media, and promotional techniques.

Business-to-business (B2B) advertising is not seen by the average person because it is aimed at retail stores, doctors, home builders, wholesalers, and others who operate at various stages of the marketing channel. Business publications are a primary tool of B2B marketing, but personal selling, telemarketing and other forms of direct response, and the Internet occupy a much higher share of expenditures directed to businesses compared to traditional media. Another major difference between B2B and consumer advertising is the messages used in each. B2B tends to be fact-oriented with a few of the emotional appeals found in consumer advertising. B2B messages are addressed not only to specific industries but also often to particular job classifications and they tend to be profit-oriented. B2B advertising also has to consider major differences in the buying process compared to consumer purchase behavior. Consumer purchases tend to be fairly straightforward. In the B2B market, purchase decisions frequently involve many people, including those who do the actual buying, those who directly or indirectly influence this decision, and the employees who will actually use the product or service. In addition, B2B products are often bought according to precise, technical specifications that require significant knowledge about the product category on the part of both buyers and sellers. Impulse buying is rare and the dollar volume of purchases is often substantial.

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Class Projects and Exercises

1. (*) Gather examples of advertisements that make primarily utilitarian appeals and those that make primarily hedonistic appeals. Discuss their characteristics in relation to the products and services they promote. What products and services seem to typically use primarily utilitarian? Primarily hedonistic? Do some advertisements take a surprising approach, given the product or service (such as a product whose benefit is to give pleasure, but whose advertising stresses utilitarian benefits)?

2. (*) Find three current articles about measuring advertising ROI. In a short memo to your teacher, outline the current issues and challenges in this area.

3. (**) Select samples of advertisements that address the distribution channel, employees, stockholders, the community at large. Describe the techniques they use to address each.

4. (**) Select samples of two advertisements for the same product category and describe how each company has differentiated its product clearly from the competition.

5. (***) Review examples of business, industry, trade, and professional publications. Select examples of advertisements for providers of equipment or office equipment targeted to: 1) a corporate manufacturer, 2) a retailer, and 3) a professional. Discuss the rationale and selling platform used in each case.

6. (***) To illustrate integrated marketing communication select a company and find examples of how it uses advertising in conjunction with the other parts of the communication component of the marketing mix. Analyze these examples and explain to the class how they illustrate an integrated marketing communication strategy.

Internet Exercises

1. (**) Search various Internet commercial and noncommercial websites. Find, list, and describe examples of Internet forms of direct-response advertising. Given the apparent intended target market of each website you use, assess the effectiveness of the chosen form of direct-response advertising. Rank the various forms you find in terms of likely effectiveness; justify your ranking.

2. (**) Using an Internet search engine (Google, Yahoo, AltaVista, etc.), find examples of Web sites which are designed to serve each of the three categories of business advertising discussed in the text: 1) trade advertising; 2) industrial advertising; and 3) professional advertising. Describe the advertising objective of each site and briefly describe the services offered through each Web site. Attach a copy of the home page for each of the three categories.

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3. (***) Analyze the Proctor & Gamble (P&G) Web site (www.pg.com) in terms of how P&G uses its Web site to advertise to its diverse publics. What publics does P&G try to reach through its Web site? What specific content or functionality is offered to each public? What messages are sent to each public and what are their purposes? Do you think that P&G needs to consider the effect of their messages on any publics that the messages are not primarily intended for? Deliver your findings to the class through an oral presentation. Illustrate your presentation with a demonstration of the P&G Web site.

Term Projects for the Semester or Quarter

1. (**) Students consult the trade press and company information to conduct research on “click-through” (when an Internet user clicks a link to take them to the company’s website) and other online activity as a source of marketing research. What kinds of data are gathered from online activity? How is this data used? What are the advantages of such data for marketing? Disadvantages?

2. (**) Students will select a full-page ad from Newsweek or U.S. News & World Report, which is directed toward the business/industrial market. Students will apply their knowledge of advertising techniques in preparing an analysis of the ad. A written analysis will be submitted that addresses the following content issues, which are evident: 1) identifies the promise made by the advertisement; 2) describes techniques used to support the promise; 3) determines the target audience; and 4) describes the visual images and explains how they make the ad more appealing. Finally, students will state if the ad’s promise is one which they accept or reject and explain their reasoning.

3. (***) Develop a Marketing Plan—Following the steps outlined in this chapter, or found through researching other resources, students will develop a marketing plan for a nationally branded product or a local retailer of products or services attempting to break in the community market. Students will need to do considerable research through national publications, search the Internet for leads, and/or explore local mass-media publication archives in order to fully understand the product attributes, the positioning platform selected by the company, and the intended market.

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