1 Module - 1 Chapter - Advertiser & Perspectives on Advertising

7/29/2019 1 Module - 1 Chapter - Advertiser & Perspectives on Advertising

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MODULE 1: FIELD OF ADVERTISING MANAGEMENT

Chapter 1.1: Introduction

The trade of advertising is now so near to perfection that it is not easy to

propose any improvements.

---Samuel Johnson

The competent advertising man must understand psychology. The more

he knows about it the better. He must learn that certain effects lead to

certain reactions & use that knowledge to increase results & avoid

mistakes. Human nature is the same today as in the time of Caesar. So

the principles of psychology are fixed & enduring. We learn, for

instance, that curiosity is one of the strongest of human incentives.

--- Claude Hopkins

The field of advertising management is made up of a system of

interacting organizations & institutions, all of which play a role in the

advertising process. At the core of this system are advertisers, the

organizations that provide the financial resources that support

advertising. Advertisers are private or public sector that uses mass

media to accomplish an organizational objective. It is the decision to

invest resources in purchasing time or space in such mass media as TV,

radio, newspapers or magazines that basically distinguishes advertisers

from non-advertisers. Advertisers make use of mass media. Non-

advertisers do not.

---An Introduction

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Chapter 1.2: Introduction to Advertising

Advertising is a paid form of non-personal communication.

Advertising promotes ideas, goods & services of an identified

sponsor. The main purpose of advertising is to create sales.

The five important messages from the above definition are as

follows:

1. Advertising is a paid form of communication. It is paid bec the

advertiser has purchased time & space.

2. It is non-personal in nature, bec it is not directed towards anindividual, i.e., no face-to-face presentation.

3. Purpose of advertising is to promote ideas about products &

services.

4. Advertising is done to create interest in goods & services.

5. Advertising is issued by an identified sponsor; advertising is done

by the source.

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Chapter 1.3: Brief History to Advertising

History informs that advertising is about 5000 years old. There

were 3 forms of advertisements before the print form came into

being:

1. Trade mark

2. Town criers

3. Signs

Trade mark: Artisans & craftsmen placed their mark on thegoods to get identified with respect to the skill they possess. Even

today, we can see this practice.

Town criers: The town-criers are paid to go around streets of thetown & make announcements. This practice is followed even

today in some parts of rural India. The announcers use the drums

to do the job.

Signs: In this method, the product name is displayed on a rockthro painting. People, who pass by, notice it. This type of outdoor

advertising is common even today (wall paintings, shop painting).

Handbill was the first printed form of advertisement across UK.

The first ad in the USA was printed in Boston Newsletter.

Presently, there are 3 professional bodies in India which represent

the advertiser, the agency & the media. They are:

1. Indian society of Advertisers ISA

2. Indian Newspapers Society INS

3. Advertising Agencies association of India AAAI

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Chapter 1.4: The Advertiser

The advertiser is the core institution of the field of advertising

management & expenditures of advertisers provide the basis for

estimates of the size of the advertising industry.

Most are small, private or non-profit organizations utilizing

broadcast or print media on a local basis in the immediate region

or metropolitan area in which they are located.

Small & large-scale advertisers can be distinguished according to

the degree to which they use the facilitating institutions. Private

Citizens & many local small-scale advertisers, for ex, buy media

time or space directly & do not use an ad agency.

The typical large national advertisers will have one or more

advertising agencies under contract & will buy numerous types of

research services.

Advertisers differ according to the markets they serve, the goods

& services they produce & the media they use. In the private

sector, advertisers can be distinguished according to whether they

are predominantly consumer, industrial or retailadvertisers.

In many instances, advertising management is done by a brand

manager who is responsible for managing all marketing-related

aspects of the brand.

Consumer product manufacturers (non-durables) use TVs, radio

while that of durable manufacturers use print media, as the

products are technical & need time for going thro &

understanding the ads. Print is also made use of retailers.

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Non-profit organizations, such as schools, churches, hospitals &

libraries are increasingly making use of local advertising.


Chapter 1.5: Brand Manager

The brand manager makes the advertising policy decisions &

interacts with the ad agency. He is responsible for all marketing

aspects of the brand & internally, draws upon the full range of

line & staff resources of the organization.

In recent years, however, some large client companies have moved

away from traditional brand management organizational

structures. Many companies that market multiple brands within

the same product category have introduced a higher-level post of

category-manager.

The brand manager role is particularly important in the study of

advertising management.

A product or a specific version of a product a brand is thus a

major reference point for the study of advertising management.

We use the term product o r object in a general sense

throughout to refer to the reference point of advertising.

It can be something tangible like a product, a service like

insurance or even an idea like Just Say No in an anti-drug

campaign. As noted, the organizational role most often used to

identify the manager of day-to-day advertising operations in a

great # of cases is that of the brand manager.

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Chapter 1.6: Facilitating Institutions

All advertisers, by definition, use some form of media to

accomplish organizational objectives. Where significant amounts

of media expenditures are involved, the advertiser will also use

the services of an ad agency & one or more research suppliers.

Together, these 3 types of institutions make up the primary

facilitating institutions of advertising management.

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Advertiser Agency Media

Research Suppliers


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Much of the organizational dynamics of advertising management

is best understood by observing the role of the facilitating

institutions in relation to the advertiser, as shown in the figure

above.


Chapter 1.7: Facilitating Institutions (Contd)

First, note that the ad agency is represented in a position

between the advertiser & the media. A major role of the ad

agency is the purchase of media time & space. The agency, on one

hand, is interacting with the advertiser, & on the other hand, with

one or more media organizations.

Second, note the role of research. Most large firms, at each of the

levels of the advertiser, agency & the media, will have their own

internal research departments & will each will also be purchasing

research data externally from some outside research supplier.

The research output to the system is a vital aspect on which many

of the formal models, theories & decision aids are based.

Another aspect from the figure is that a typical ad campaign

evolves from the activities of a project or a planning group

composed of representatives of the advertiser, the agency & one

or more research suppliers.

Basically, many meetings of this group will take place over the

course of campaign development. Oral presentations of creative

ideas & media plans will be made by the agency reps.

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Similarly, research suppliers will make oral presentations on the

results of a consumer survey, a copy test & so on. Much written &

telephone communication also takes place during this process.


Chapter 1.8: The Ad Agency/the Media/Research Suppliers

A unique aspect of advertising is the advertising agency, which, in

most cases, makes the creative & media decisions. It also often

supplies supportive market research & is even involved in the

total marketing plan. The fixed-commission method of

compensation is still the one used most often in the ad agency line.The basic compensation for most agencies is a fixed 15%, which

they receive from the media in which the ads are placed.

On non-commissionable (non-media) services ( such as

preparing brochures & collateral materials), an agency usually

marks up the suppliers invoice cost by 17.65% so that it still

keeps 15% of the total cost to the client company (of $ 85, a cut of

17.65% results in the agency getting its original 15%

commission).

Media developments have dramatically influenced the thrust of

advertising thro the years. The largest media category has been

newspapers. The newspaper is really the domain of the local

merchant.

Next the radio has emerged as an exciting ad-tool. In the 1960s,

radio started to make a comeback, finding a useful niche for itself

by providing entertainment, news & companionship particularly

for those in a car.

TV, delayed by the World War, began in 1940s. The advent of

cable TV, pay TV, video recorders & videodiscs promises to bring

to TV same level of special audiences that magazines now deliver.

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Various types of sales promotions can also be considered by the

advertiser & represent yet another kind of media.

The final type of facilitating institution is made up of companies

that supply research services to advertisers, ad agencies & themedia. There are many research agencies that supply all kinds of

research information for ad-planning purposes & for specific

decisions, such as copy & media decisions.


Chapter 1.9: Perspectives on Advertising

In addition to handbooks & historical perspectives, advertising

has been approached thro a variety of paths & tradition. Several

books with an economic perspective were published in the 1920s.Critics argued that advertising inhibits competition. The evolution

of advertising as an economic force in society has continued to

receive attention over the years.

The writings of sociologists, religious leaders, philosophers &

politicians are also extensive, many reflecting critical views of

advertising.

Another approach to advertising, descriptive in nature, typifiesthe introductory texts covering the principles of advertising that

have appeared from the early 1900s to present. They describe

such institutions of advertising as ad agencies & the various

media, often from a historic perspective.

Since 1913, there has been a steady stream of books firmly tied to

the behavioral discipline. This approach is largely concerned with

the analysis of the communication process, using behavioral

science theory & empirical findings.

The research tradition in advertising parallels the development of

the various media research services. It has also done much to

motivate academic work on basic advertising research & studies

of advertising effectiveness.

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The managerial tradition is really more recent in origin. Here, the

nature & role of advertising institutions & advertising techniques

tended to be the points of emphasis.

Still another approach to advertising, even more recent in origin,is the model-building perspective originating from the fields of

OR & Statistics. Although it had early predecessors, it really

began in the late 1950s with the development of decision models

concerned with allocating the media budget.


Chapter 1.10: Benefits of Advertising

Benefits to the advertiser:

1. An advertiser is able to establish a link bet the consumer &

himself thro ads.

2. It enables manufacturers introduce new products/services.

3. Ads help the manufacturer keep the consumers well-informed.

4. It helps in brand building exercise.

5. It helps in product adoption process.

Benefits to the consumers:

1. Acts as a guide in choosing the product.

2. It saves time.

3. Many products & services contribute to customer welfare.

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4. Provides necessary information with regard to availability &

price of the product.


Chapter 1.11: Role of Advertising

Communication with the consumers: Advertising is a majorway of establishing communication bet the firm & the consumer.Advertising acts as a reminder to the existing consumers &

attracts new consumers. Ads act as an effective communication

vehicle with the target audience.

Persuasion: Ads attempt to persuade the buyers.

Catalyst for change: Create ads lead to the change in perceptionof the consumer. Ads induce the consumer to change the brand.

Contribution to economic growth: Ads help in developingnewer market segments. These developments result in more

demand, more production, more income & employment

opportunities. Therefore, ads are potential weapons to improve

the economic growth of the country.

Need for non-commercial ads (NCA): The non-commercialads are mainly done in the public interest: Indian Cancer Society

campaigns with respect to How to prevent cancer. Advertisingfor a social cause is a part of non-commercial advertisements.

Normally NCAs are released in the press, cinemas & outdoor

events. Many business organizations support this type of ads &

fund them in a big way.

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The social cause may be to collect funds for a particular activity.

Advertising is a very effective method of communicating to the

public with regard to the purpose for which it is advertised such

as:

Children immunization against polio

Anti-dowry campaigns


Chapter 1.12: Functions of Advertising

There are 3 basic functions of advertising:

1. Social function

2. Psychological function

3. Economic function

Social function: Consumer protection is achieved by educating

thro ads. Ads help solve social causes, such as fighting chronic

diseases etc.,

Psychological function: Ads appeal to psychological motives of

human being such as soft drink companies ads trying to meet the

psychological needs of the consumers like thirst.

Economic function (value/price equation conveyed to customers):

Brings attitudinal change in the customer to make him buy

products offered by the firm.

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It helps sales in an indirect manner.

It establishes a rapport with the customer.


Chapter 1.13: Types of Advertisement

Types of advertisement focus on:

Target group

Type of impact required

Geographical area

Target group: Following are the types of advertising:

Consumer advertising (includes surrogate indirect -

advertising)

Industrial advertising (to ensure consumers ask for their

product Exide)

Trade advertising (retailers/wholesalers)

Non-profit advertising (polio ads)

Geographic area:

National advertising: There are firms which advertise across

the nation. It encourages customers to buy their products

wherever they are sold. Most national ads concentrate on

the overall image.

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Local advertising: This is generally done by retailers &

wholesalers. This is practiced to give a specific location

where the promo is being undertaken.

Global advertising: This is resorted to by companies, whichare globally present, such as IBM, Intel, Compaq etc., IBM

advertises Men should think; machines should work This

highlights the company or the technology with which it is

associated.

MODULE 1: FIELD OF ADVERTISING MANAGEMENTChapter 1.14: Advertising & Marketing Mix

Advertising & Product: When a firm develops a product, it isnecessary to keep the bundle of benefits expected by the target

segment. The classification of its product is important in defining

the marketing mix. There are several ways of classifying the

product, like buyers, use, usage etc.,

Advertisement & Place: For distribution of the product, 2 basicmethods are employed: direct & indirect. The role of

advertisement depends on the variety of distribution carried out:

(a) Intensive distribution soft drinks, (b) Selective distribution

cooperative ads & (c) Exclusive distribution company

showrooms.

Advertising & Promotion: Promotion relates to thecommunication bet seller & buyer. Promotion mix constitutes

personal selling, advertising, sales promos, PR etc.,

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Advertising & Price: Price influences advertising. It isimportant to know how prices determine a product. Factors such

as competition, demand, cost of promotion, distribution have its

bearing on price.


Chapter 1.15: Influence of Pricing Strategy on Advertising

Skimming strategy: Assume you are the only firm selling a

product. Till it faces competition, you can keep a high price &

skim the market. The ad released for the product will feature

convenience as the key to promote the same.

Penetration pricing: To penetrate the market & to boost the sale,

penetration pricing low price -- is adopted. Once the product is

stabilized, the prices will increase. Therefore, initial ads may

emphasize low prices, while subsequent ads promote the product

quality, service, choice & location advantages.

Comparative pricing: You run ads for audio & video equipments.

You can show the regular offer with special package. By

comparing the two, the customer gets the impression that thestore offers discount prices on everything.

Competitive pricing: The ads will show wide range of products

with price of each item in bold format. Example like Big bazaar is

one such type.

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Promotional pricing: Promotion drive could clear the old stock at

the cost of a new product. Buy 1 , take 2 is one such type. Most

consumer durable companies follow this during the festive time.

Prestige pricing: In this method, the retailer of AV equipmentdoes not compete with prices. He may like to offer finest

equipment, best service & very good ambience. In this case, the ad

will not mention the price. The retailers want only those

customers who could pay higher prices in exchange for quality &

better services.


Chapter 1.16: Influence of PLC on Advertising

All products pass thro # of stages such as introduction,

growth, maturity & decline. The entire cycle thro which

a product goes thro is called PLC. The extent at each

stage in PLC is conditioned by factors like:

1. Benefit derived over competitive products

2. How much of consumer needs does the product fulfill

3. Substitute product availability

4. Change in taste, preference & lifestyle

Similarly, when a strategy is developed, some questions

need to be answered:

1. What is the product worth in the eyes of the consumer?

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2. What need does the product satisfies the customer?

Lifecycle model of advertising has 3 stages:

1. Pioneering stage

2. Competitive stage

3. Retentive stage


Chapter 1.17: Ad PLC: Pioneering Stage

Manufacturer often thinks to introduce new products or modify

the products, customers to attract. Many times consumers may

not even bother bec they dont feel the need of it. Unless

consumer recognizes the need, they wont buy. This stage of

product is calledpioneering stage.

Advertising mode in the pioneering stage must impress that this is

an improved product. What was once thought to be a product

with limitation has been overcome. Advertising at pioneering

stage should not just present the product but must suggest any of

the following:

New usage & Habit change

In this stage, the pioneer advertiser spends money to educate the

public regarding the advantage of new product. Advertiser at

pioneering stage risks more bec if the ad is successful, will jump

into the fray.

Whether to pioneer the advertisement or wait for others to

advertise will depend on his being the leader or not. If he is a

leader, people will remember him very well. Ex: Despite several

insurance companies, LIC still scores over others.

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In simple terms, pioneering advertisement is done:

To educate consumers about the product/service

To convey the message that the new product meets theneed

Some unmet needs get fulfilled

In the pioneering stage, the consumer asks:

What the product will give him?

Is the change significant?

Consumer acceptance will take a long time.


Chapter 1.18: Ad PLC: Competitive Stage

When pioneering product gets customer acceptance, more people

will enter leading to acute competition.

The consumer knows the benefit from the product. The question

before him is which brand to buy?

When this happens, we say that the product has reached the

competitive stage & advertising done so is called competitive

advertisement.

Generally speaking, the pioneer will have the advantage of

leadership.

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There are many products of daily use which compete heavily, like

toothpaste, cosmetics, food items etc.,

The purpose of competitive advertising is to communicate the

product difference to the consumer.

It shows the unique product features.

These ads wont advocate the customer to use them but tell him

why they should select a particular brand?


Chapter 1.19: Ad PLC: Retentive Stage

This is at the maturity stage of a product. Reminder advertising

will find useful at this stage. When a product is accepted, the likes

or dislikes of product is known, then, why should they advertise?

The main objective of advertising is to hold on to those customers,

as there is a tendency among consumers to forget the product if it

is not advertised & reminded to them. The ad reminds them that

the brand still exists.

This type of advertisement banks on high visual content and the

name of the brand being emphasized. The ad uses very few words.The body copy will be missing bec consumers dont need this

information.

Very few companies can think of reaching a point where their

product has reached the reminder stage. Usually, there will be

products of other companies challenging the leadership position.

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The aim of reminder advertising is to prevent the customer from

moving on to other products/defect. Products in the retentive

stage are the most profitable since the development cost is already

recovered. Channel of distribution is established & the customerbase is steadied.

Advertising now is matter of routine nature. Companies prefer to

have their products as long as possible in retentive stage.

Retentive stage is the critical moment in the PLC, when important

decisions are taken by the management.

Here, the company manages to maintain market share. Products

in the retentive stage need not cut marketing & promotion

strategies than pioneering or competitive stages.


Chapter 1.20: Ad Spiral

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Competitive

Pioneering

Retentive

New New NewRetentive Competitive Pioneering

Pion


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The bottom half of the ad spiral needs absolute creativity.

New pioneering stage: This stage attempts to make more people

use the product in 2 ways: the 1st

method is by productmodification. This is relatively minor, which involves changing the

shape, color, flavor, packaging, ingredients etc., this can be seen in

ice creams, chocolates, and shampoos.

In the 2nd method, there is a complete change of product such as

model in a car, a/cs, fridge etc. Sometimes advertising alone may

drive new consumers to the product. Archie cards started off as

wedding anniversary & birthday cards but graduated into other

occasions.


Chapter 1.21: Ad Spiral Beyond New Pioneering Stage

At this point, advertising may enter another cycle called new or

pioneering stage and it may ask more people to use the product.

The biggest challenge at this stage is How to make the non-user

use the product. To do this effectively, we should know Why

people were not using our product earlier? Pepsi & Coke came out

with Diet Pepsi, Diet Coke at new pioneering stage.

The focus of advertising in the new competitive stage is to get to

more people buy the brand. Saffola cooking oil moved fromretentive to new pioneering with an advertising position rather

than to product adoption.

It was positioned as low cholesterol cooking oil. The product took

advantage with more people joining the health-conscious segment,

by promoting the product qualities.

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New pioneeringcan be the result of reworking of original product

or even a line extension with a new formula. Ex: Clinic Plus. This

is related to original product clinic All Clear. Some of the phrases

used in new pioneering stage ads are Newly introduced, Micro-cleaning quality, Advanced new formula etc.,

It is not easy for a product manufacturer to move from new

pioneering to competitive or retentive stage. Either he must go for

product innovation or practice positioning strategies & make the

product look different in the eyes of the customer.

As the product moves into new stage, # of prospects will decrease.

It is also true that the product entering additional stages does not

return to the point from where it started.


Chapter 1.22: Significance of Advertising in Marketing

Importance of advertising:

Advertisement creates an

awareness of product & services.

Advertising acts as a

promotion tool in marketing. Advertising provides support

to sales.

Advertising contributes for

strong customer base.

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Advertisements influence to

achieve market leadership.

Advertisement action process --- a cycle:

The manufacturer gives the

advertising segment to an ad agency.

Design & preparation of

effective campaign content & selection of media.

Preparation of suitable ad to

reach the target group thro various sections of the

media.

Persuade the target group

toward point of purchase.

Payment realization (monitory

commitment of the ad).


Chapter 1.23: Advertisement in Action

A product idea has to be conceivedand manufactured. It must

be put to use to meet the customer needs from the time of concept

to get acquainted with the product, thro 3 stages:

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Stage1: From a product idea, new product is made ready. At this

stage, first advertisement tells the customers: (we should

remember the customer still uses the old product)

How the new product is different in features? What are the advantages in buying the new

product?

Ex:Roll over from pagers to mobile phones.

Stage 2: By now, the usefulness & benefit of the product is known

with competitive market the producers still fight to establish. Ads

at this stage would try to establish on the ground, Why customer

should prefer this product?

Ex: Gradual switching on to mobile phone from pager & landline

phone.

Stage 3: Now the product is established. Customers are convinced.

Affordability in terms of price is established. The role of

advertisement at this stage would be to snatch the share from

competition.

Ex:Many mobile phone companies compete to get market share.


Chapter 1.24: Summary

Advertisement is an integral part of the marketing

process

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Appropriate message is a communication intended to

make the customer act in a desired or pre-determined

manner.

There are several formulae thro which the customer is

lured to buy products.

Ads benefit the marketer as well as the consumers.

There are several impacts of advertising such as the

impact on the product, price, promotion, competition,

consumer preference, value addition etc.,

Advertising also spans over social, psychological,

economic functions.

There are several types of advertisements each havingunique features.

The elements of marketing mix must be integrated with

advertising decision to achieve the desired goals.

Life cycle model in advertising allows the product pass

thro various stages of advertising spiral as a

management tool.

Advertising makes the consumer pass thro several

stages. Advertiser uses several strategies such as pull or push

depending on the circumstances.

Documents

1 Module - 1 Chapter - Advertiser & Perspectives on Advertising