1. Overview of Advertising Management: Messages, Media, and Measurement
Chapter Nine
Overview of Advertising Management: Messages, Media, and Measurement

2. Chapter Nine Objectives
Understand the magnitude of advertising and the percentage of sales revenue companies invest in this marcom tool.
Recognize that advertising can be extraordinarily effective but that there is risk and uncertainty when investing in this practice.
Appreciate the various functions advertising is capable of performing.

3. Chapter Nine Objectives
Explore the advertising management process from the perspective of clients and their agencies.
Understand the functions agencies perform and how they are compensated.
Explore the issue of when investing in advertising is warranted and when disinvesting is justified.
Examine advertising elasticity as a means for understanding the contention that “strong advertising is an investment in the brand-equity bank.”

4. Is Advertising Rocket Science?
“The truth is that advertising is harder than rocket science. It’s news when a rocket launch FAILS.
It’s news when an ad campaign launch SUCCEEDS.”

5. Advertising
Advertising is a paid, mediated form of communication from an identifiable source, designed to persuade the receiver to take some action, now or in the future.

6. Magnitude of Advertising
2005
$280 Billion
U.S.
Worldwide
$900 spent on advertising for every man, woman, and child in the United States.
$550 Billion

7. Some Top Spenders in U.S. Advertising
Company
Advertising Dollars
General Motors
$3.43 Billion
Proctor & Gamble
$3.32 Billion
Time Warner
$3.1 Billion
Pfizer
$2.84 Billion
U.S. Government
$1.1 Billion

8. Advertising-to-Sales Ratios
Average 2 to 10%
Ranging from
1.4%
To 30.7%

9. Advertising
Effects
Are Uncertain

10. Advertising Effects Are Uncertain
“If you want your brand to be fit, it’s got to exercise regularly. When you get the opportunity to go to the movies or do something else instead of working out, you can do that once in a while—that’s [equivalent to] shifting funds into [sales] promotion. But it’s not a good thing to do. If you get off the regimen, you will pay for it later.”
Jennifer Lawrence, P&G

11. Advertising Functions
Informing
Influencing
Reminding and Increasing Salience
Adding Value
Assisting Other Company Efforts

12. Informing Make consumers aware of new brands.
Increase TOMA (Top of Mind Awareness)
Teach new uses for existing brands (called usage expansion advertising)
Campbell’s soup for formal family dinners and for breakfast
Special K for afternoon or late-night snacking

13. Influencing

14. Reminding and Increasing Salience
Making a brand more salient: enriching the memory trace for a brand so that the brand comes to mind in relevant choice situations.
Increasing the customer’s interest in mature brands and the likelihood of choosing brands that might have otherwise not been chosen.

15. Adding Value Three ways a company can add value to its offerings:
Innovating
Improving quality
Altering consumer perceptions

16. Assisting Other Company Efforts
Advertising may be used as a vehicle for delivering coupons and sweepstakes
Assisting sales representatives
Pre-selling a company’s products by introducing the product and legitimizing salespeople’s claims.
Augment the effectiveness of price deals.

17. The Advertising Management Process

18. The Role of Advertising Agencies
Three alternative ways to perform the advertising function:
Use an in-house advertising operation
Purchase advertising services on an ad-as-needed basis
Select a full-service advertising agency

19. Top-25
U.S.
Advertising
Agencies in
Ad Revenue,
2003

20. Alternative ways to perform the advertising function
In-house advertising operation
Necessitates employing an advertising staff and absorbing the operation costs
Unprofitable unless a company does a large amount of continual advertising

21. Alternative ways to perform the advertising function
Full-service advertising agency
Advantages
In-depth knowledge and skills
Obtaining negotiating muscle with the media
Coordinating advertising and marketing efforts
Disadvantages
Some control is lost
Larger clients are favored over small clients
Occasionally inefficient in media buying

22. Alternative ways to perform the advertising function
A la carte
Advantages
Use services only when they are needed
Availability of high-caliber creative talent
Potential cost efficiencies
Disadvantages
Specialists approach client problems in a stereotyped fashion
Lack of cost accountability
Financial instability of smaller boutiques

23. Advertising Agency Organization
Creative Services
Develop advertising copy and campaigns
Copywriters, production people, and creative directors
Media Services
Research Services
Account Management

24. Advertising Agency Organization
Creative Services
Selecting the best advertising media
Media planners develop overall media strategy
Media buyers procure the selected media
Media Services
Research Services
Account Management

25. Advertising Agency Organization
Creative Services
Study clients’ customers’ buying habits, purchase preferences, and responsiveness
Focus groups, mall intercepts, acquisition of syndicated research data
Media Services
Research Services
Account Management

26. Advertising Agency Organization
Creative Services
Link the agency with the client
Act as liaisons so that the client does not need to interact directly with several different service departments and specialists
Media Services
Research Services
Account Management

27. Agency Compensation Three Sources Commissions from media (15%)
Reduced commission system(<15%)
Three
Sources
Labor-based fee system
Outcome-based

28. Ad Investment Consideration
Profit=Revenue –Expenses
Revenue =Price X Volume
Volume = Trial + Repeat

29. Which Position is More Acceptable?
The Case for Investing: the belief that advertising can increase profitability by increasing sales volume, enabling higher selling prices, and thus increasing revenue beyond the incremental advertising expense.
The Case for Disinvesting: Firms often choose to reduce advertising expenses either when a brand is performing well or during economic recession. The belief is that an expense reduction, with all else held constant, will result in increased profits.

30. Elasticity
A measure of how responsive the demand for a brand is to changes in marketing variables such as price and advertising.

31. How to Increase Profit Maintain status quo Build Image Via Advertising
Grow Volume via Price Discounting
Increase Advertising and/or discount prices

32. Ad Spending