HOW ADVERTISING WORKS JOMC 170 04HowAdvWorks.ppt

Readings How Advertising Works: A Planning Model Revisited By: Vaughn, Richard. Journal of Advertising Research, Feb/Mar86, Vol. 26 Issue 1, p57. How Advertising Works: What Do We Really Know? By: Vakratsas, Demetrios; Ambler, Tim. Journal of Marketing, Jan99, Vol. 63 Issue 1, p26-43. Advertising's Role in Capitalist Markets: What Do We Know and Where Do We Go from Here? By: Tellis, Gerard J.. Journal of Advertising Research, Jun2005, Vol. 45 Issue 2, p162-170.

How Advertising Works: A Planning Model Revisited Classic model used by Foote, Cone & Belding. First proposed in 1980. Notes that context determines effects.

FCB Grid (Richard Vaughn, 1980) THINK FEEL 1 2 HIGH INVOLVEMENT 3 4 LOW INVOLVEMENT

FCB Grid INFORMATIVE (economic) Classical hierarchy-of-effects: Quadrant 1: THINK / HIGH INVOLVEMENT INFORMATIVE (economic) Classical hierarchy-of-effects: Awareness Knowledge Liking Preference Conviction Purchase Learn Feel Do.

FCB Grid AFFECTIVE (psychological) Quadrant 2: FEEL / HIGH INVOLVEMENT AFFECTIVE (psychological) Products fulfilling self-esteem, subconscious, ego-related impulses. Requires perhaps more emotional communication. Feel Learn  Do.

FCB Grid HABITUAL (responsive) Routine consumer behavior. Quadrant 3: THINK / LOW INVOLVEMENT HABITUAL (responsive) Routine consumer behavior. Learning occurs most often after exploratory trial purchase. Learning by doing. Do  Learn  Feel.

FCB Grid SATISFACTION (social) Personal taste Quadrant 4: FEEL / LOW INVOLVEMENT SATISFACTION (social) Personal taste “Life’s little pleasures” Peer-oriented items. Do  Feel Learn.

FCB Grid THINK FEEL 1 2 HIGH INVOLVEMENT 3 4 LOW INVOLVEMENT

2 3 4 FCB Grid THINK FEEL INFORMATIVE (economic) Learn Feel Do HIGH INVOLVEMENT 3 4 LOW INVOLVEMENT

1 3 4 FCB Grid THINK FEEL AFFECTIVE (Psychological) Feel  Learn Do HIGH INVOLVEMENT 3 4 LOW INVOLVEMENT

1 2 4 FCB Grid THINK FEEL HIGH INVOLVEMENT HABITUAL (Responsive) Do  Learn Feel LOW INVOLVEMENT

1 2 3 FCB Grid THINK FEEL HIGH INVOLVEMENT SATISFACTION (Social) Do  Feel  Learn LOW INVOLVEMENT

FCB Grid THINK FEEL INFORMATIVE (economic) Learn Feel Do AFFECTIVE (Psychological) Feel  Learn Do HIGH INVOLVEMENT HABITUAL (Responsive) Do  Learn Feel SATISFACTION (Social) Do  Feel  Learn LOW INVOLVEMENT

FCB Grid “We may not now, or ever, know definitively how advertising works.” “But we do know it works in some definable ways well enough to make more effective advertising.”

How Advertising Works: What Do We Really Know? Reviews 250+ articles / books 7 types of models & findings Example: FCB Grid would be an integrative model ([C][A][E]) 5 generalizations about how advertising works Directions for future research

Generalization 1 Experience (E), affect (A), and cognition (C) are the three intermediate advertising effects, and the omission of any one can lead to overestimation of the effect of the others Demonstrated in the evolution of models from simple (C) to more complex ([C][A][E]).

Generalization 2 Short-term advertising elasticities are small and decrease during the product life cycle. Lower than promotions Weaker than product usage (E) effects Greater for new brands

Generalization 3 In mature, frequently purchased packaged goods markets, returns to advertising diminish fast. A small frequency, therefore (1-3 per purchase cycle), is sufficient for advertising an established brand. Diminishing returns First exposure is most influential.

Generalization 4 The concept of a space of intermediate effects is supported, but a hierarchy (sequence) is not. Significance of intermediate effects (C, A, and E) depends on context. Hierarchy framework does not allow for interactions between effects.

Generalization 5 Cognitive bias interferes with affect measurement. Affect can be more important than cognition. Cognitive bias understates the role of affect and misreports reality.

Advertising's Role in Capitalist Markets: What Do We Know and Where Do We Go from Here? 9 misconceptions about advertising. Advertising is essential for free markets. Where do we go from here?

Some advertisements are. Potential is there. Misconception 1: Advertising is a powerful force in shaping consumer preferences. Some advertisements are. Potential is there. Most advertising is lost in the noise (or worse, adds to the noise). Even success is quickly imitated. This is the nature of a free, competitive market.

Consumers haven’t seen it, they need more time, etc. Misconception 2: Even if advertising does not work immediately, repetition will ensure its ultimate effectiveness. Consumers haven’t seen it, they need more time, etc. “Escalation of commitment” If advertising doesn’t work in a reasonably short time it is unlikely to ever work.

Misconception 3: Advertisements take time to wearin. “Wearin” = improvement of effectiveness during first few weeks. “Wearout” = decline in effectiveness as campaign ages. “Wearin” is short or nonexistent and “wearout” starts right away.

Old research used inappropriate data. Misconception 4: The effects of advertising last for years and even decades. We remember old ads. Old research used inappropriate data. Effects of advertising are rather fleeting.

Argue that suspension could be disastrous. Misconception 5: Even if advertising seems ineffective, stopping would be dangerous. Argue that suspension could be disastrous. Or that competitors’ ads would be more effective. Argument is not tested.

Misconception 6: Weight (or intensity or frequency) is critical. The most expensive item in the ad budget is the advertising buy expressed as weight. Big changes in weight may not result in even small changes in effectiveness. Changes in target segments, media, message, and especially creative content result in biggest change in effects. Ad response is highest for product improvement or new products.

Misconception 7: Advertising is highly profitable. Spurious correlation between advertising intensity and market share. Because of the competitive activity, much advertising cancels out. Beware over-advertising: adding to costs more than to profits.

Misconception 8: Logic or argument is the most effective advertising appeal. Consumers like to think of themselves as rational decision makers who make good if not wise decisions. Emotional ads are more interesting, more easily remembered, more prone to lead to action, and less likely to arouse consumers’ defenses.

Misconception 9: Advertising is amoral in its practice, corrupts people’s values, or is unnecessary for free markets. As a relatively weak market force (see misconceptions 1-8), advertising probably has little effect on values. Essential for free markets: the means by which an innovative firm can communicate its brands competitive superiority to consumers.

Where do We Go from Here?

Effects on mental processes Multiple routes to persuasion ELM (central vs. peripheral processing) Power of emotional appeals. Consistency of cues enhances persuasion. Difficult translating/integrating lab results to the field.

Effect on sales / market share Move away from aggregate data. Focus on content, message, cues, and creativity rather than message weight.

Versus sales promotion Misses two key points: How to use both jointly. Discount price may be competitive price.

Advertising and pricing Advertising may Increase price competition. Lower prices. Increase consumers’ price elasticity.

Advertising and brand equity How and when does this process work?