1 Advertising Chapter 15 © 2009, The McGraw-Hill Companies, Inc. All rights reserved.

2 CHAPTER OUTLINE Defining Advertising A Brief History of Advertising Advertising in the Digital Age Organization of the Consumer Advertising Industry Producing Advertising Economics Business-to-Business Advertising

3 DEFINING ADVERTISING Simple definition of advertising –Nonpersonal presentation/promotion of ideas, goods, or services –Paid for by identified sponsor This definition has become blurry –Many practitioners believe differentiating advertising from other forms of marketing is no longer useful

4 Functions of Advertising Marketing Education Economic –Reduces cost of personal selling and distribution Social

5 Types of Advertising Advertising can be classified in several ways –Target audience (consumer or business) –Geographic focus (international, national, or local/retail) –Purpose (sell a specific product/service or improve company’s image/influence public opinion) –Primary or selective demand –Direct or indirect action

6 A BRIEF HISTORY OF ADVERTISING (1 of 3) Examples date back thousands of years Printing press allowed creation of new ad media –Posters, handbills, newspaper ads (like today’s classified ads) 1800s – Consumer evolution –Railroad across US –US population doubled –New communication media –More disposable income

7 A BRIEF HISTORY OF ADVERTISING (2 of 3) Magazines enabled truly national advertising Advertising agencies appeared 1920s – radio advertising; sponsors supplied programs Depression curtailed growth in advertising Advertising fortunes parallel social mood of the times

8 A BRIEF HISTORY OF ADVERTISING (3 of 3) Contemporary advertising –Coping with technological and social change Consumer taking more control over media choices –Traditional advertising model harder to justify –Guerilla marketing: non-traditional marketing techniques –Online advertising Not as effective as initially hoped Becoming more targeted, more interactive, more engaging As Internet advertising becomes more effective, more ad dollars will be spent online

9 ADVERTISING IN THE DIGITAL AGE Birth of online advertising –1994, HotWired web site, banner ads

10 Audience Control Audience continues to take control over media choices –Avoid advertising Advertisers reach audiences in other ways –Product placement –Viral advertising –Target search marketing –Buzz marketing

11 New Channels Digital revolution opens up new advertising avenues –Blogs –Podcasts –Cell phones –Web sites use ads more creatively

12 User-Generated Content User-generated content popular with advertisers Consumers submit home-made commercials –No cost to company –Consumers engage with product –Can create buzz

13 ORGANIZATION OF THE CONSUMER ADVERTISING INDUSTRY Three main components of advertising industry

14 Advertisers Two main types of advertisers –National –Retail (local) Basic advertising activities –Plan ads –Budget funds –Coordinate across the organization –Supervise outside agencies, if used –Follow up

15 Agencies Independent business organization to develop, prepare, place advertising Agencies can be classified by the range of services they offer –Full-service agencies –Media buying services –Creative boutiques The top 5 mega-agencies are Omnicom, WPP Group, Interpublic, Publicis, Dentsu

16 Media Four important dimensions vary by medium –Reach –Frequency –Selectivity –Efficiency Must consider the inherent characteristics of each medium

17 PRODUCING ADVERTISING A variety of people work to produce advertising

18 Departments and Staff Creative services Account services –Account executive (AE) Marketing services Administration

19 The Advertising Campaign (1 of 2) Chose market strategy –Positioning Select main appeal or theme Translate theme into various media

20 The Advertising Campaign (2 of 2) Produce ads –Print: rough layout; comprehensive layout –TV: Storyboard –Web: splash pages, skyscraper ads, floating ads, wallpaper ads; short versions of TV ads Buy space/time Execute/evaluate campaign

21 Advertising Research Formative research –Audience definition –Audience profiling Message research Tracking studies

22 ECONOMICS We will examine the economics of the overall industry, then look at how an ad agency makes money

23 Advertising Volume in Various Media About $280 billion spent in US on advertising in 2006 TV & newspapers account for about half the total amount spent

24 Agency Compensation Media commissions Agency charges Fees

25 BUSINESS-TO-BUSINESS ADVERTISING Multi-billion dollar industry, with advertising directed at business rather than general consumers Four categories –Trade –Industrial –Professional –Agricultural

26 Consumer Versus Business-to- Business Advertising Target audience much smaller Products are technical, complex, expensive Buyers are professional purchasing agents –Base decisions on reason and research Personal selling plays greater role

27 Media Personalized media are best Business/trade publications account for about 60% of advertising dollars –Horizontal trade magazines –Vertical trade magazines Other selective channels also effective –Direct mail & ; trade catalogs, web sites, mass media (well-placed ads)

28 Appeals Business ad copy is long, fact-filled, detailed, technical, accurate, complete –Little, if any, emotional appeal –Testimonials, case histories, new-product news, demonstrations –Some ads use humor, warmth, creativity