1.  2007 Thomson South-Western Overview of Advertising Management: Messages, Media, and Measurement Chapter Nine

2. 2 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.”

3. 3 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. Contrast this with a PSA, PR and Product Placement

4. 4 Magnitude of Advertising 2005 $280 Billion $550 Billion Worldwide U.S. $900 spent on advertising for every man, woman, and child in the United States.

5. 5 Some Top Spenders in U.S. Advertising http://adage.com/images/random/lna2007.pdf http://adage.com/images/random/lna2007.pdf CompanyAdvertising Dollars (bn.USD 2006) Proctor & Gamble4.89 AT&T3.34 GM3.29 Time Warner3.08 Verizon2.82 Some Top Spenders in U.S. Advertising http://adage.com/images/random/lna2007.pdf http://adage.com/images/random/lna2007.pdf

6. 6 Advertising-to-Sales Ratios Average 2 to 10% Ranging from 1.4% To 30.7%

7. 7 Advertising Effects Are Uncertain

8. 8 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

9. 9 “I know that half the amount I spend on advertising is wasted; The trouble is, I don’t know which half” Chairman, Unilever Group

10. 10 Advertising Functions 1.Informing 2.Influencing 3.Reminding and Increasing Salience 4.Adding Value 5.Assisting Other Company Efforts

11. 11 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

12. 12 Influencing

13. 13 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.

14. 14 Adding Value Three ways a company can add value to its offerings: –Innovating –Improving quality –Altering consumer perceptions

15. 15 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.

16. 16 The Advertising Management Process

17. 17 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

18. 18 TOP 10 CORE AGENCIES WORLDWIDE By worldwide revenue from traditional advertising in millions of dollars RANKWORLDWIDE REVENUE 200 6 200 5 AGENCYHEADQUARTERS20062005 % CHG 11Dentsu [Dentsu Inc.]Tokyo $2,213. 0 $2,165. 9 2.2 23BBDO Worldwide* [Omnicom]New York1,539.91,425.88.0 32 McCann Erickson Worldwide* [Interpublic] New York1,479.21,461.11.2 44JWT* [WPP]New York1,286.51,245.03.3 55 DDB Worldwide Communications* [Omnicom] New York1,263.91,190.66.2 66Publicis* [Publicis] New York/Paris, N.Y./France 1,177.81,154.22.0 77TBWA Worldwide* [Omnicom]New York1,135.0950.219.4 88Leo Burnett Worldwide* [Publicis]Chicago909.0889.12.2 910Y&R* [WPP]New York820.0788.04.1 109Hakuhodo [Hakuhodo DY Holdings]Tokyo780.0788.0 Notes: Dollars are in millions. (*)Revenue is Ad Age estimate and represents worldwide core-level returns from advertising only for the global network. Figures exclude revenue from non-advertising operations such as direct marketing, sales promotion, interactive, media buying and planning.

19. 19 Ad Agency Lists http://adage.com/datacenter/article?article _id=116344http://adage.com/datacenter/article?article _id=116344

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

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

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

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

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

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

26. 26 Advertising Agency Organization 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 Creative Services Account Management Media Services Research Services

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

28. 28 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.

29. 29 Elasticity A measure of how responsive the demand for a brand is to changes in marketing variables such as price and advertising.

30. 30 How to Increase Profit 1.Maintain status quo 2.Build Image Via Advertising 3.Grow Volume via Price Discounting 4.Increase Advertising and/or discount prices