10.5 Promotional Mix: Advertising

Introduction

Undoubtedly, advertising is the promotional element that most consumers feel they know the best and hold strong opinions about. This is a result of the visibility and intrusiveness of advertising. In fact, most people have little understanding of advertising.  There are, within the advertising industry, a wide variety of means by which advertising is created and placed in media. At one extreme, an individual might write and place his own classified ad on social media in the hope of selling his daughter’s canopy bed. At the other extreme, the advertiser employs a full-service advertising agency to create and place the advertisement, retaining only the function of final approval of plans developed by that agency. Significant specialization is developed within the full-service advertising agency to discourage clients from hiring any outside vendors or other parties to perform any of the various functions involved in planning and executing advertising programs for the various advertisers that the agency serves. Another organizational possibility is a full-scale, in-house advertising department. This department may have total responsibility for all aspects of the advertisement, or some of the tasks might be optioned out to ad agencies or other types of specialty organizations, e.g. production, talent, media placement. It is not unusual for a large corporation to employ all of these possibilities or to use different agencies for different products or for different parts of the country.

Whether or not the advertiser uses an advertising agency, does their advertising in-house, or uses some combination of the two depends upon a host of factors unique to each organization: available funds, level of expertise, expediency, and so forth. Regardless of the influencing factors, a number of basic functions must be performed by someone if creative and effective advertisements are to be placed:

• what products, institutions, or ideas are to be advertised;
• who is to prepare advertising programs;
• who the organization engages and gives policy and other direction to the advertising agency, if any agency
is used;
• who in the organization has the authority to develop advertising work and/or approves the advertising
programs presented by the advertising agency;
• who pays the advertising bill;
• who determines the extent to which advertisements help reach the stated objectives.¹

Types of Advertising

Corporate / Institutional Advertising

The primary purpose of advertising is to communicate a message to the target audience. Many times the goal of that communication is to increase demand for products or services. The company pays a fee or expense to have a message that simultaneously explains its brand or product distributed to as many people as possible. But sometimes it is designed to do something else: to build or solidify an image of the company. Such advertising is called institutional or corporate advertising.  Advertising can be national or local; it can address itself to any kind of audience; it can use any medium. Often such advertising is an exercise in self-praise. It attempts to build a favorable image for its sponsor.

When Wells Fargo Bank in California merged with American Trust Company, company officials were ready to go with the name “American Trust,” but designer Walter Landor convinced them that “Wells Fargo” would give them a more distinct image as the bank of the West. With an easily recognized symbol – a stage coach encased in a diamond shape – and some skillful advertising infused with an Old West flavor, the bank tends to appeal to newcomers, who pick it simply because it seems to come with the territory.

Image is particularly important among organizations whose products or services are relatively uniform. How a company advertises projects that image. The image must be concise, express the mission of the company, and its delivery must be consistent each time it is used.

If an attempt to sell a product creeps into institutional advertising, it does so in a passive voice. It can be aimed at a business, a consumer, or involve two businesses and slanted as a cooperative advertising.

Advocacy Advertising

Advocacy advertising is related to institutional advertising. The difference is that in advocacy advertising, the sponsor pushes a point of view that may have nothing to do with selling the product or building an image.

According to Professor Robert Shayon of the University of Pennsylvania Annenberg School of Communications, corporations have taken to advocacy advertising because they feel they are not getting a fair shake from what they believe to be a generally hostile press; and because they are convinced that the business world can make significant contributions to public debate on issues of great importance-energy, nuclear power, conservation, environment, taxation, social justice, and free enterprise, among others.

Some state legislatures have drafted laws to restrict this kind of advertising, and the Internal Revenue Service does not regard the advertising as a necessary business expense. However, sometimes it is difficult to identify the difference between advocacy advertising and institutional advertising, which is a tax-deductible expense.

Product Advertising

Product advertising occurs when the purpose of the promotion is to create awareness or build a preference for a specific offering of the company.  The stage in the Product Life Cycle (PLC) of which a product is in often determines the type of advertising that is used by advertisers. The types of product advertising that marketers can choose from are:

• Pioneering
• Competitive
• Comparative

Product Advertising: The type of product advertising a company chooses depends on where the product is in its life cycle.

Pioneering Advertising

This form of advertising is  designed to stimulate primary demand for a new product or product category (McDaniel et al, 2006). It is heavily used in the introductory stage of product life cycle when a new product is launched.

This type of product advertising provides in-depth information of the benefits of using a product or service. It is often used to create interest and to increase the public’s awareness.

Competitive Advertising

The goal of using competitive advertising is to influence demand for a specific brand (McDaniel et al, 2006). The advertisers usually provide information regarding a product’s attributes and benefits which may not be available from competing products (Yeshin, 1998). Even when other brands own the same attributes or benefits, advertisers often create an impression that their products are somehow ‘much better’ than other, similar products available in the marketplace.  These benefits can be image based.  Competitive advertising is the most common product advertising done in the growth and maturity stages of the product life cycle.

Comparative Advertising

Comparative advertising compares two or more competing brands on one or more specific attributes, be it directly or indirectly (McDaniel et al, 2006). Comparative advertising gives consumers a logical decision factor as most of them do not want to make decisions (MacArthur and Cuneo, 2007). This way, by comparing one company’s brand with other competing brands in the advertisement, the company most likely helps the consumers to choose which brand they would prefer to use.  While comparative advertising is illegal in many countries, it is legal in the United States.  Companies have to be very careful about what they say say or imply regarding competitive product as lawsuits can be filed over perceived inaccuracies.

Designing the Advertising Campaign

Objectives

Researching the Target Market

When developing an advertising campaign, be it organization-wide or product-specific, a critical input is identifying the target market. Creating generic advertising campaigns for the entire population is usually not strategic, both in terms of focus and capital. Advertisers should instead narrow down the population to an ideal segment, based upon various factors. This target segment may be the same as the firm’s target market, it can be a sub-set – such as a specific demographic – or it can be a new segment.

Determining the Message

The Unique Selling Point or Proposition (USP) is a marketing concept that was first proposed as a theory to understand a pattern among successful advertising campaigns of the early 1940s. The term was invented by Rosser Reeves of Ted Bates & Company and states that certain campaigns make unique propositions to customers to convinced them to switch brands. Today the term is used in other fields to refer to any aspect that differentiates one object from similar objects.

The term USP has also been largely replaced by the concept known as a Positioning Statement. Positioning determines what place a brand (tangible good or service) should occupy in the consumer’s mind in comparison to its competition. A position is often described as the meaningful difference between the brand and its competitors.

Another consideration is the appeal to be used.  Whether the message is framed as informative, humorous, emotional, relatable, etc. determines how the message is received and will guide the medium best suited to conveying that appeal.

Choosing the Correct Medium

Developing the Media Plan

Advertising media selection is the process of choosing the most cost-effective media for advertising to achieve the required coverage and number of exposures in a target audience.

Although the media plan is placed later in this process, it is in fact developed simultaneously with the creative strategy. This area of advertising has gone through tremendous changes; a critical media revolution has taken place.

The standard media plan covers four stages: (a) stating media objectives; (b) evaluating media; (c) selecting and implementing media choices; and (d) determining the media budget.

Stating Media Objectives

Media objectives are normally stated in terms of three dimensions:

1. Reach: The number of different persons or households exposed to a particular media vehicle or media schedule at least once during a specified time period.
2. Frequency: The number of times within a given time period that a consumer is exposed to a message.
3. Continuity: The timing of media assertions (e.g., 10% in September, 20% in October, 20% in November, 40% in December and 10% the rest of the year).

Evaluating Media

There are definite inherent strengths and weaknesses associated with each medium. In addition, it would require extensive primary research, either by the sponsoring firm or their advertising agency in order to assess how a particular message and the target audience would relate to a given medium. As a result, many advertisers rely heavily on the research findings provided by the medium, by their own experience, and by subjective appraisal.

Selection and Implementation

The media planner must make media mix decisions and timing directions, both of which are restricted by the available budget. The media mix decision involves putting media together in the most effective manner. This is a difficult task and necessitates quantitatively and qualitatively evaluating each medium and combination thereof.  Common media choice include, but are not limited to, social media, television, mail, email, radio, outdoor advertising, and product placement.  Product placement occurs when a company pays a production company to include their product in a television show, movie, video game. etc.

Unfortunately, there are very few valid rules of thumb to guide the media selection process, and the supporting research is spotty at best. For example, in attempting to compare audiences of various media, we find that A C Nielsen measures audiences based on TV viewer reports of the programs watched, while outdoor audience exposure estimates are based on counts of the number of automobile vehicles that pass particular outdoor poster locations.

The timing of media refers to the actual placement of advertisements during the time periods that are most appropriate, given the selected media objectives. It includes not only the scheduling of advertisements but also the size and position of the advertisement.

Another common consideration is to follow the AIDA model (attention, interest, desire, and action). AIDA objectives typically are achieved in steps. First, companies focus on attention and awareness of a product or service, which is especially important for new offerings. If a consumer or business is not aware of a product or service, they won’t buy it. Once consumers or businesses are aware of products or services, organizations try to get consumers interested and persuade them that their brands are best. Ultimately, companies want consumers to take action or purchase their products or services.  AIDA can be applied in one advertisement, such as a commercial, where it will try to accomplish all the steps in a short period of time, or AIDA can be applied sequentially with one ad creating attention, another interest, the third building desire and finally, an advertisement encouraging action.  AIDA can also be applied in a hybrid of the two approaches just mentioned.

Evaluation

With the massive growth in online activity and potential channels of promotion, the measurement of marketing and advertising efforts consists of more tools and possibilities than ever before. Understanding the opportunities for measurement within the field of performance-based marketing is the first step to accurately planning campaigns which can be measured effectively.

This list of potential metrics is a great starting point for performance-based marketers to consider, particularly online marketers:

Cost Per Click (CPC) – Simply put, the organization can look at an online campaign’s overall costs and overall clicks. By dividing the overall cost by the overall quantity of clicks, the advertising team can determine how much each click is worth. Keep in mind, a click is not necessarily a sale! So other metrics may be required to make financial sense of a CPC data point.

Cost Per Impression (CPI) – Also referred to as CPM, the cost per impression is usually measured in the cost per thousand impressions (due to the massive volume of online distribution). If a campaign costs $10,000 and reaches 1,000,000 people, the cost per thousand impressions (CPI) is $10.

Reach – A simple metric, reach determines the overall volume of potential consumers an ad will engage. This is a useful input variable for a variety of other metrics, as well as a viable metric in and of itself.

Gross Rating Point (GRP) – With an understanding of CPI in place, this metric expands on that data point by comparing it to the overall penetration of the target market. That is to say, a GRP is going to measure the total number of impressions relative to the overall size of the target population, or GRPs (%) = 100 * Impressions (#) ÷ Defined population (#).

Click-through Rate (CTR) – The click-through rate (CTR) is related to the CPC and CPI, but measures a relative percentage of impressions to clicks. This is a bit different than the other calculations, as it implies relevance and quality from the eyes of the consumer between advertisements. So if advertising campaign A has a CTR of 2% and advertising campaign B has a CTR of 4%, it would appear that B is twice as relevant when it comes to engaging the target audience. However, this does NOT mean it is more effective financially (although it likely will be).

Cost Per Order (CPO) or Cost Per Purchase (CPP) – Finally, we get to the financial certainties. At a certain point, the organization will need to financially justify advertising campaigns. This is not always easy, as attributing a campaign to a purchase is not always completely clear. however, a CPO or CPP will track and measure users throughout the channel to see which advertising campaigns ultimately result in a purchase. This CPP must be lower than the margin per customer purchase, otherwise the campaign is losing money (at least in the short run).

Figure 10.5: Google search paid advertisements

In addition to these common methods, focus groups, interviews, and other research methods can be utilized to measure the effectiveness of a promotion.  Only focusing on sales as the key indicator of a successful campaign can be misleading as many factors can impact sales.

You Try It!

This interactive covers all sections of chapter 10.

¹Melanie Wells. “Many Clients Prize Agency Efficiency over Creativity,” Advertising Age, May 16, 1994, p.28