Contemporary Advertising, 8/e

Contemporary Advertising, 8/e

William F. Arens

Marketing and Consumer Behavior: The Foundations of Advertising

I. The Assumption Syndrome

A. You can't assume anything about a market. Respect the importance of marketing and know how to interpret the data uncovered by research.

B. Even superior advertising can't save a product that isn't marketed correctly.

II. The Larger Marketing context of Advertising

A. Advertisers must understand the relationship between the product and the marketplace.

B. Every business organization performs a number of diverse activities which are typically classified into three broad functional divisions:

Operations (production/manufacturing)

Administration/finance

Marketing

C. Marketing is the only function whose primary role is to attract revenues into the company, to recover the initial investment capital, and to earn consistent profits.

D. Advertising helps the organization achieve its marketing goals. Therefore, an effective advertising specialist must have a broad understanding of the whole marketing environment in which advertising operates.

III. Defining marketing

A. Marketing is the business process (a series of actions or methods that takes place sequentially) of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy the perceived needs, wants, and objectives of individuals and organizations.

B. Advertising is just one of the numerous tools used in the promotion or communication, aspect of marketing.

Customer Needs and Product Utility

a. A main element of marketing is its focus on the special relationship between a customer's needs and the product's problem-solving potential. This is generally referred to as the product's utility.

b. Utility extends to the product's ability to satisfy both symbolic (or psychological) wants.

Marketers use research to discover what needs and wants exist in the marketplace and to define a product's general characteristics in the light of economic, social, and political trends.

The goal is to use this information for "product shaping" - designing products, through manufacturing, repackaging, or advertising, to satisfy more fully the customer's needs and wants.

C. Marketing aims to create exchanges that satisfy the perceived needs, wants and objective of individuals and organizations.

Three important concepts are:

a. Exchanges: The purpose of marketing and advertising. An exchange is any business transaction in which one person trades something of value to another person. Exchange is the traditional, theoretical core of marketing. It is important that the seller reassures the buyer - perhaps through advertising - that an equal exchange is possible. There must be a perceived equal-value exchange or the likelihood of an exchange is remote.

b. Perception is everything: People about to engage in a business exchange sometimes feel apprehensive, worrying that the exchange may not be equal - even though it may be more than fair. The perception of inequality is most likely based on the fact that the customer lacks knowledge about the product.

1. Two levels of customer perception

a. The perception of the product or service

b. The perception of needs, wants, and objectives

2. Advertisers must first develop customers' perception of the product (awareness, attitude, interest), and then a perception of its value in satisfying a want or need (utility). The greater the customer's need, the greater the potential value or utility of the need-satisfying product.

c. Satisfaction: Customers must be satisfied that their needs are met by their actual use of the product, or they won't perceive that an equal-value exchange took place. Satisfaction leads to more exchanges.

IV. The key participants in the marketing process

A. Customers - the people or organizations who consume products and services. They fall into three general categories:

Current customers - those who have already purchased something from a business and who may purchase on a regular basis

Prospective customers - people about to make an exchange or are considering it.

Centers of influence - customers, prospective customers, or opinion leaders whose opinions and actions others respect.

B. Market - a group of current and prospective customers who share a common interest, need, or desire, who can use a specific product or service, and who have the authority to make expenditure decisions. Companies advertise to four broad classifications of markets:

Consumer markets - include people who buy goods and services for their own use.

Business markets - are composed of organizations that buy natural resources, component products, and services that they resell, use to conduct their business, or use to manufacture another product. There are severe subtypes of business markets, the two most important being:

a. Reseller markets - buy products for the purpose of reselling them.

b. Industrial markets - buy products used to produce other goods and services.

Government markets - buy products for municipal, state, federal, and other government activities.

Transnational (or global) markets - include any of the other three markets that are located in foreign countries.

C. Marketers - include every person or organization that has products, services, or ideas to sell.

V. Customer Behavior: the Key to Advertising Strategy

A. Advertisers need to understand what makes potential customers behave the way they do. Advertisers must study:

Consumer behavior - the mental and emotional processes and the physical activities of people who purchase and use goods and services to satisfy particular needs and wants.

Organizational buyers - the people who purchase products and services for use in business and government is also important.

B. Advertising's primary mission is to reach prospective customers and influence their awareness, attitudes, and buying behavior. To do this, an advertiser must make the marketing communications process work efficiently.

C. Consumer decision-making process (44.0K) - The fundamental building blocks are:

Personal processes govern the way we discern raw data (stimuli) and translate them into feelings, thoughts, beliefs, and actions. These are the "perception," the "learning," and the "motivation processes."

Mental processes and behavior affected by two sets of influences:

a. Interpersonal influences - which includes our family, society, and culture.

b. Non personal influences - factors often outside the consumer's control e.g., time, place, and environment.

The final step typically requires yet another process, the evaluation of alternatives, in which we choose brands, sizes, styles, and colors. If we do decide to buy, our post purchase evaluation will dramatically affect all our subsequent purchases.

D. Personal processes in consumer behavior.

Steps in promoting a new product

a. The first task in promoting any new product is to create awareness (perception) that the product exists.

b. The second is to provide enough compelling information (learning and persuasion) about the product for prospective customers to make an informed decision.

c. Finally, advertising needs to be persuasive enough to stimulate customers' desire (motivation) to satisfy their needs and wants by trying the product.

Perceptiion (57.0K) is the personalized way we sense, interpret, and comprehend stimuli. The perception challenge is the first and greatest hurdle advertisers face.

a. Stimulus is the physical data we receive through out senses.

b. Perceptual Screens - the subconscious filters that shield us from unwanted messages before any data can be perceived, it must penetrate a set of perceptual screens.

1. Physiological screens - comprise the five senses, detect the incoming data, and measure the dimension and intensity of the physical stimuli.

2. Psychological screens - evaluate, filter and personalize information according to subjective emotional standards. These screens evaluate data based on:

a. innate factors, such as the consumer's personality and instinctive human needs,

b. learned factors, such as self-concept (the image we have of who we are and who we want to be), interests, attitudes, beliefs, past experience, and lifestyle.

c. Selective perception We unconsciously screen out or modify many of the sensations that bombard us, focusing on some and ignoring others.

Cognition - the concept of comprehending the stimuli.

Mental Files - We store memories in our minds according to a mental filing system:

a. We rank files by importance, price, and quality features.

b. We resist opening new files.

c. We avoid filing new information that is inconsistent with what is already filed.

d. Mental files drive the perceptual screens - a major challenge to advertisers.

E. How consumers process information

Learning is a relatively permanent change in thought process or behavior that occurs because of a reinforced experience.

a. Learning is the mental process of memory, thinking and rational application of knowledge to practical problems.

b. Learning is a trial-and-error process.

Persuasion is linked to learning and is a change of belief, attitude, or behavioral intention is caused by promotional communication.

The Elaboration Likelihood Model (78.0K)

a. The Elaboration Likelihood Model portrays the two ways promotion communication persuades:

1. Central route to persuasion - When consumers are considering an expensive or complicated product purchase, they have a higher level of involvement with the product or the message. Under these conditions, they are motivated to pay attention to the central, product-related information (such as product attributes, benefits, or positive functional or psychological consequences. Their higher involvement leads to a deeper level of understanding.

b. Peripheral route to persuasion - consumers with little or no reason to pay attention to the communication will be will be more likely to stop and absorb some peripheral aspects of the promotion communication (actors in a TV commercial, exciting photo in a print ad, etc.) than central product attributes.

c. As most mass advertising is not seen by a majority of people at a given time and as most ads not very relevant to most people's goals or needs, most ads receive peripheral processing.

d. When a product has a distinct advantage, the advertiser's goal should be to encourage central route processing by increasing the consumer's involvement with the message (e.g., comparative advertising).

e. Repetition can have a positive influence by rekindling memories of information from prior ads.

F. Learning produces attitudes and interests

Attitude - acquired mental position regarding some idea or object. To advertisers, gaining positive consumer attitudes is critical to success.

Brand interest - an individual's openness or curiosity about a brand. For mature brands in categories with familiar, frequently purchased products, brand interest is even more critical for motivating action.

Learning leads to habits and brand loyalty.

a. Habit - the acquired behavior pattern that becomes nearly or completely involuntary - is the natural extension of learning. Most consumer behavior is habitual because it is safe, simple, and essential.

1. Breaking habits - to get consumers to unlearn an existing purchase habit to lure them to try a new product.

2. Acquiring habits - to help consumers learn to repurchase their brand

3. Reinforcing habits - to remind current customers of the value of their purchase and to encourage them to continue purchasing.

b. Brand loyalty - the consumer's conscious or unconscious decision to repurchase a brand continually. It occurs because the consumer "perceives" the brand offers the right product features.

Learning defines needs and wants - a need may become a want as we file perceptions.

G. The Consumer Motivation Process

Motivation - the underlying drives that contribute to the individual's purchasing actions stemming from the conscious or unconscious goal of satisfying our needs and wants:

a. Needs - the basic, often-instinctive, human forces that motivate a person to do something.

b. Wants - "needs" we learn during our lifetime.

To better understand what motivates people, Abraham Maslow developed the classic model called the Hierarchy of Needs (49.0K) . Maslow's theory states that the lower, physiological and safety needs dominate human behavior and must be satisfied before the higher, socially acquired needs (or wants) become meaningful. The levels are identified as:

a. Physiological needs - base needs; such as, water, food, shelter, etc.

b. Safety needs - avoidance of situations that are unfamiliar, threatening, or might lead to injury or illness.

c. Social needs - friendship, affection, a sense of belonging.

d. Esteem needs - self-respect, recognition, status, success.

e. Self-actualization - fulfillment of lower needs and knowing one's true self (self-fulfillment)

The promise of satisfying a certain level of need is the basic promotional appeal for most ads.

To be motivated,

a consumer must first have a chosen goal. Typically, a consumer first evaluates the need (and the product's utility to resolve the need) and either accepts or rejects the product or need as being worthy of action.

a. Acceptance converts satisfaction of the need into a goal, which in turn creates dedication (motivation) to reach a particular result.

b. Rejection removes the necessity for action, thereby eliminating the goal and the need to be motivated.

H. Negatively originated (informational) motives

Most common energizers of consumer behavior:

a. Negatively originated motives - problem removal or problem avoidance (relief motives). Once a product is purchased and resolves the problem, drive or motivation is reduced.

b. Also called informational motives because the consumer actually seeks information to reduce the negative mental state.

I. Positively originated (transformational) motives

Positively originated motives - buy a product for some benefit or reward rather than removal or reduction of a negative situation.

Positively originated motives exist in three basic forms that are also called transformational motives:

a. Sensory gratification

b. Intellectual gratification

c. Social approval

VI. Relationships with other humans, affect consumer behavior.

A. Family Influence - from an early age, family communication affects our socialization as consumers - our attitudes toward many products and our purchasing habits, a child learning the "right" products to buy.

B. Society's Influence - when we affiliate with a particular societal division, or identify with some reference group, or value the opinions of certain opinion leaders, it affects our views on life, our perceptual screens, and eventually the products we buy.

Societal Divisions: The group we belong to. Sociologists traditionally divided society into social classes: upper, upper-middle, lower-middle, etc. However, these are no longer functional and marketers seek new ways to classify societal divisions and new strategies for advertising to them.

Reference Groups: To whom we relate. People we try to emulate or whose approval concerns us.

Opinion Leaders: The people we trust. A person or organization whose beliefs or attitudes are respected by people who share an interest in some specific activity. Choosing an opinion leader as a spokesperson must be done with a complete knowledge of the company's target market.

C. The Influence of Culture and Subculture.

Culture - a homogeneous group's whole sets of beliefs, attitudes, and ways of doing things, typically handed down from generation to generation.

Subculture - a segment within a culture that shares a set of meanings, values or activities that differ in certain respects from those of the overall culture. Subcultures tend to transfer their beliefs and values from generation to generation.

VII. The most important nonpersonal influences on consumer behavior are:

A. Time - all marketing activities must be planned with the consumer's time clock in mind e.g., when the timing is right for purchase.

B. Place - marketers carefully weigh consumer demand when deciding where to build stores or offer their products. If a product appears "everywhere," consumers may not consider it to be special.

C. Environment - many environments (ecological, social, political, technical, economic, household, and point-of-sale location) can affect the purchase decision.

A recession may make buyers too poor to afford the product.

International Environments - global marketers are especially concerned with the purchase environment. Of all business functions, marketing activities are the most susceptible to cultural error. When creating ads for foreign consumption, marketers must consider many environmental factors: cultural trends, social norms, changing fads, market dynamics, product needs, and media channels.

D. The purchase decision and postpurchase evaluation

. Evaluative criteria - the standards used to judge the features and benefits of alternative products. Not all brands make it to the evoked set.

A. Post purchase evaluations

A. A key feature of the post purchase evaluation is cognitive dissonance. The theory of cognitive dissonance (also called post purchase dissonance). It holds that people strive to justify their behavior by reducing the dissonance, or inconsistency, between their cognition (their perceptions or beliefs) and reality.

A. The consumer may experience satisfaction from the product, reinforcing the decision to purchase, or the purchase may prove unsatisfactory. In either case, feedback from the post purchase evaluation updates the consumer's mental files, affecting perceptions of the brand and future purchases.

Market Segmentation and the Marketing Mix: Determinants of Advertising Strategy

I. The Market Segmentation Process

A. A two-step strategy of:

Identifying groups of people (or organizations) with certain shared characteristics within the broad markets for consumer or business products.

Aggregating (combining) these groups into larger market segments according to their mutual interest in the product's utility.

B. The concept of shared characteristics is critical to market segmentation. Marketing and advertising people try to find a particular "niche"- or space in the market - where the advertiser's product or service will fit. Marketers group variable characteristics into a several categories to identify and segment consumer markets. The purpose is to identify those likely to respond and to create rich descriptions of them so as to be able to design effective messages.

The four categories are:

a. Behavioristic Segmentation - consumer grouping by their purchase behavior. Behavioral segments are determined by many variables, but the most important are:

1. User-status variables - Stephan and Tannenholz identified six categories of consumers based on user status:

a. Sole users are the most brand loyal and require the least amount of advertising and promotion.

b. Semisole users typically use brand A, but have an alternate selection if it is not available or if the alternate is promoted with a discount.

c. Discount users are the semisole users of competing brand B. They don't buy brand A at full price, but perceive it well enough to buy it at a discount.

d. Aware non-triers are category users, but haven't bought into brand A's message.

e. Trial/rejecters bought brand A's advertising message, but didn't like the product.

f. Repertoire users perceive two or more brands to have superior attributes and will buy at full price. These are the primary brand switchers; therefore, the primary target for brand advertising.

2. Usage-Rate variables (volume segmentation) - In volume segmentation, marketers measure usage rates to define consumers as light, medium, or heavy users of products. Remember 20% of the population consumes 80% of the product. By finding common characteristics among heavy users, advertisers can focus messages more effectively.

3. Purchase occasion variables - when the product or service is bought or used

4. Benefits sought variable - consumers seek benefits in the products they buy - high quality, low price, status, sex appeal, etc.

b. Geographic Segmentation - needs, wants, and purchasing habits vary by region of the country and from country to country.

c. Demographic Segmentation - demographics are characteristics such as age, sex, ethnicity, education, occupation, income and other quantifiable factors. Demographics are often combined with geographic segmentation to select target markets for advertising - geodemographic segmentation.

d. Psychographic Segmentation - consumers likely to be swayed by appeals to their emotional and cultural values, based on their psychological make-up i.e., values, personality, attitude and lifestyle (psychographics). VALS and trade I and II (41.0K) divides consumers into eight groups based on their resources and self-orientation. Each group exhibits distinctive behavior, decision-making patterns, and product/media usage traits.

Limitations of consumer segmentation methods:

a. Advocates of VALS and other psychographic methods claim these methods help them address the emotional factors that motivate consumers.

b. However, since the markets for many products comprise a broad cross section of consumers, psychographics may offer little real value - especially since they oversimplify consumer personalities and purchase behavior.

c. Critics say VALS is complicated and lacks the proper theoretical underpinnings.

C. Many of the variables used to identify consumer markets can be used for business markets. But business markets also have several special characteristics. They may be classified by North American Industry Classification (NAICS) codes; may be concentrated geographically; may have a relatively small number of buyers; and they normally use a systematic purchase procedure.

Business purchasing procedures:

a. The business purchase decision is more complex, rational, and rigid than the consumer purchase decision and may depend on factors besides product quality or price. Professional buyers do show brand-equality behavior. Large firms have purchasing departments that act as professional buyers who analyze and structure purchases.

b. The purchase decision normally takes longer - weeks, months, and sometimes years.

c. In segmenting business markets, the purchase decision process of various segments must be considered to determine the appropriate target market.

NAICS codes are based on broad industry categories, subdivided into major divisions and subgroups, and detailed classes of firms in similar lines of business. Market concentration a. The market for industrial goods in the United States is heavily concentrated in the Midwest, the South and California, concentrating the geographic targets of advertisers.

b. Business marketers (as opposed to consumer marketers) deal with a limited number of buyers - 15% of U.S. manufacturers in the U.S. employ more than 80% of all production workers and account for over 80% of the manufacturing dollars

c. Customer size is critical for market segmentation

d. Business markets may further be segmented by who the end users are (e.g. software developed for a particular industry such as banks)

D. Once marketers identify and locate broad product-based markets with shared characteristics (geographic, demographic, behavioristic, or psychographic), they determine the primary demand trend - overall market potential for the product category using marketing research techniques

E. Selecting groups that have a mutual interest in product utility. Marketer must estimate profits if it:

Aims at the whole markets

Or caters only to a specific market segment

F. Combining groups into larger market segments

Important to first find groups that are homogenous based on their potential for sales and profit.

Market data can reveal a large number of demographic and lifestyle groups, including ethnically diverse families, young singles, and seniors with lower education and income, and more.

II. The Target Marketing Process will determine the content, look, and feel of a company's advertising.

A. Target Market Selection - The first step in target marketing is to assess which of the newly created segments offers the greatest profit potential and which can be most successfully penetrated. The company designates one or more segments as a target market, that group of segments the company wishes to appeal to, design products for, and aim its marketing activities toward.

B. The Marketing Mix: A Strategy for Matching Products to Markets. A company uses the Four P's (4 Ps) - Product, Price, Place and Promotion - to shape the product into a total product concept (the consumer's perception of a product as a bundle of utilitarian and symbolic values that satisfy functional, social, psychological, and other wants and needs.

III. Advertising and the Product Element In developing a marketing mix, marketers generally start with the product element, the way the product designed, classified, positioned, branded, and packaged.

A. Product Life Cycle (35.0K)- marketers theorize that just as humans pass through stages in life from infancy to death, products and product categories also pass through a product life cycle. A product's position in its life cycle influences the kind of advertising used.

When a company introduces a new product category, the company has to stimulate primary demand - consumer demand for the whole product category, not just its own brand. This pull strategy pulls the product through the channels of distribution. Then advertising educates consumers about this new category of product which encourages distributors and dealers to stock, display and advertise the new product. Sales promotion aimed at this retail trade helps move the product out through the channel (push strategy).

Once primary demand is established, the product begins the stages of the product life cycle:

a. Introductory (or pioneering) stage - companies incur considerable costs for educating customers, building widespread dealer distribution, and encouraging demand. They must spend significant advertising sums at this stage to establish a position as a market leader and to gain a large share of market before the growth stage begins.

b. Growth stage - characterized by rapid market expansion. Emergence of competitive products and heavy advertising (although advertising as percent of sales may actually drop) and individual firms will realize their first substantial profits.

c. Maturity stage - as the marketplace becomes saturated with competing products and the number of new customers dwindles, industry sales reach a plateau. Competition intensifies, and profits diminish. Companies increase their promotional efforts but emphasize selective demand to impress customers with the subtle advantages of their brand. Sales increase only at the expense of competitors (conquest sales).

d. Decline stage - due to obsolescence, changing technology, or new consumer tastes. Sales drop to marginal or below profitability levels. Companies may cease all promotion and phase the products out quickly.

B. Product Classifications - the way a company classifies its product - is important in defining both the product concept and the marketing mix.

Tangible goods: many ways to classify - by markets, by the purchasing habits of buyers, by the rate of consumption or degree of tangibility, or by physical attributes.

A service is a bundle of intangible benefits that satisfy some need or want, are temporary in nature, and usually derive from completion of a task. They provide "task utility."

a. Equipment-based services - companies/industries that rely on the use of specialized equipment

b. People-based services - companies such as law firms which rely on the talents and skills of individuals.

C. Product Positioning - The basic goal of positioning strategy is to own a word in the prospect's mind, i.e., Levi Strauss owns "jeans." The ultimate goal is to position the product in the consumer's mental files by claiming the number one position over the competition.

D. Product Differentiation - The process of creating a product difference that appeals to the preferences of a distinct market segment.

Perceptible differences - differences between products that are readily apparent to the consumer

Hidden differences - differences not so readily apparent, i.e., the difference between the sweeteners in chewing gum or between Classic Coke and Diet Coke (advertising and labeling make the hidden difference perceptible).

Induced differences - differences created by advertising for many product classes, such as aspirin, salt, gasoline, packaged foods, liquor, and financial services, where only the brand name, slogan or package design become the essential difference.

E. Product Branding - the fundamental differentiating device for all products is a combination of name, words, symbols, or design that identifies the product and its source and distinguishes it from competing products. Types of brands:

Individual brand (Close-up toothpaste) - name for each product.

Family brand (Heinz) - umbrella name for a group of products.

National brand (manufacturer's brand) (Buick) - manufacturer brands the product for national sales.

Private label (Craftsman) - manufacture lets distributors or dealers brand the product.

Licensed brand (Sunkist) - fee paid to use a brand name owned by another company or organization.

F. Role of branding - to offer instant recognition and identification. They also promise consistent, reliable standard of quality, taste, size, durability, or even emotional satisfaction which adds value to the product for both the consumer and the manufacturer. The ultimate goal of all brand advertising and promotion is to build greater brand equity, the totality of what consumers, distributors, dealers - even competitors - feel and think about the brand over an extended period of time.

G. Product Packaging - a component of the product element. But it is also an "exhibitive medium" that can determine the outcome of retail shelf competition. Package designers must make the package exciting, appealing, and at the same time functional. These functions may even become copy points - copywriting themes in the product's advertising. The four considerations in package design:

Identification - high visibility and legibility needed to break physiological screens.

Containment, protection, and convenience - keeps product fresh and free of damage and infestation. Stacking and handling ease are convenience selling points.

Consumer appeal - a subtle color change can raise or lower sales by up to 20 percent. Humorous package design can improve sales.

Economy - good identification, protection, and art for customer appeal can leads to increased sales that offset the added cost of creating the best packaging.

IV. Advertising and the Price Element. Key Factors Influencing Price:

A. Market demand (law of supply and demand) - when product supply is static, but desire (demand) for the product is high, prices tend to rise. When demand drops below available supply, prices tend to drop.

B. Production and distribution costs (the advantages of mass production and distribution) - as the cost of production and distribution rise, the cost must be passed on to the consumer or the company will fail.

C. Competition - during periods of intense price competition, keeping the customer's perception of the product's value high is of great importance.

D. Corporate objectives and strategies - luxury products versus economy products. Positioning strategy can influence the product's price. So can life cycle stage of the product. Price must be consistent with brand image.

E. Variable influences - consumer income, tastes, government controls can influence pricing.

V. Advertising and the Distribution (Place) Element - before the first ad can be created, the distribution element, or place, must be decided. It must also be consistent with the brand's image.

A. Direct Distribution - selling directly to consumers from the manufacturer, e.g., Avon. Advertising burden is carried entirely by the manufacturer without any assistance from other members of the distribution channel.

B. Network marketing (multilevel marketing) - one of the fastest-growing methods of direct distribution today in which individuals act as independent distributors for a manufacturer or private-label marketer (Amway). Through a gradual, word-of-mouth process, they form a "buying club" of independent distributors who buy the products wholesale direct from the company, use them, and tout them to more and more friends and acquaintances.

C. Indirect Distribution - manufacturers usually don't sell directly to end users or consumers. Most companies market their products through a "distribution channel" that includes a network of resellers, middlemen that operate between the producer and the user. Consumer goods manufacturers traditionally use three types of distribution strategies:

Intensive distribution - mass merchandising of low profit, high volume products where sales burden is usually carried by national advertising. Ads in trade magazines push the product into the retail "pipeline" and in mass media they stimulate consumers to pull products through the pipeline

Selective distribution - limiting the number of outlets allows manufacturers to cut their distribution and promotion costs. The manufacturer may share part of the retailer's advertising costs through cooperative advertising

Exclusive distribution - exclusive rights granted to a wholesaler or retailer in one geographic region. What is lost in market coverage is often gained in the ability to maintain a prestige image and premium prices. Exclusive distributions agreements also force manufacturer and retailers to cooperate closely in advertising and promotion programs.

D. Vertical Marketing Systems (Franchising) - a centrally programmed and managed distribution system that supplies or otherwise serves a group of stores or other businesses. Advantages of franchising include:

Centralized marketing, continuity of advertising, and substantially lower ad costs (one local ad serves many stores).

Instant customer base.

There are many types of (VMS), but the greatest growth today is in franchising (e.g. McDonald's or Mailboxes, Etc.) in which dealers (franchises) pay a fee to operate under the guidelines and direction of the parent company or manufacturer (franchiser).

VI. Advertising's Role in the Communication (Promotion) Element. The communication element includes all marketing related communications between the seller and the buyer. A variety of marketing communication tools comprise the communication mix.

A. Personal communication includes personal contact with customers. Nonpersonal communication uses some medium as an intermediary for communicating. Includes advertising, direct marketing, certain public relations activities, collateral materials and sales promotion.

B. Advertising - sometimes called mass or nonpersonal selling, it's usual purpose is to inform, persuade, and remind customers about particular products and services. Advertising works best with differentiated products like cosmetics, not for undifferentiated products like salt, sugar, other raw materials and commodities.

C. The following are important for advertising success:

High primary demand trend.

Chance for significant product differentiation.

Hidden qualities highly important to consumers.

Opportunity to use strong emotional appeals.

Substantial budgets to support advertising.

D. Direct Marketing - selling process that is like taking the store to the customer (e.g. a mail-order house). It builds and maintains its own database of customers and uses a variety of media to communicate with those customers. Telemarketing is a direct marketing technique. Where person-to-person phone contact makes the sale.

E. Public Relations - such as publicity (news releases, media advisements, feature stories) and special events (open houses, factory tours, and grand openings) are used to inform various audiences about the company and its products and build corporate credibility and image.

F. Collateral Materials - booklets, catalogs, brochures, films, sales kits, and annual reports.

G. Sales Promotion - supplements the basic mechanisms of the marketing mix for short periods of time by stimulating channel members or prospective customers to some immediate, overt behavior (e.g., trade deals, free samples, displays, contests, sweepstakes, and cents-off coupons).

Contemporary Advertising, 8/e

William F. Arens

Information Gathering: Inputs to Advertising Planning

I. The need for research in marketing and advertising

A. What is marketing research?

Marketing research - the systematic procedure used to gather, record, and analyze new information to help managers make marketing decisions. (It should not be confused with "market research," which is information gathering about a particular market or market segment.)

Good research enables the company to devise a sophisticated, integrated mix of product, price, distribution, and communication elements, all committed to the three R's of marketing:

a. Recruiting new customers

b. Retaining current customers

c. Regaining lost customers.

B. Advertising researchis the systematic gathering and analysis of information to help develop or evaluate advertising strategies, ads and commercials, and media campaigns. A subset of marketing research.

II. Advertising research serves various purposes which are grouped into four categories (92.0K) : advertising strategy research, creative concept research, presenting of ads, and post testing of ads.

A. Category 1: Advertising Strategy Research. Companies develop advertising strategies by blending elements of the creative mix: the product concept, the target audience, the communication media, and the creative message.

Product concept definition -advertisers want to know how consumers perceive their brands and what qualities lead to initial purchases and eventually brand loyalty.

Target audience selection - Research finds the markets most important to product sales, helping to focus resources on these areas in order to reach advertising dominance (dominance concept).

Media selection - to develop media strategies, select media vehicles, and evaluate their results, advertisers use a subset of advertising research called media research. Agencies subscribe to syndicated research services (e.g., A.C. Nielsen, Arbitron, Simmons, and Standard Rate and Data Service).

Message-element determination - companies can find promising advertising messages by studying consumers' likes and dislikes in relation to brands and products.

B. Category 2: Creative Concept Research - using rough commercials (animatics) and other research techniques to determine consumer reactions to various advertising concepts.

C. Category 3 and 4: Testing and Evaluating Advertising - advertisers use testing to ensure their advertising dollars are being spent wisely.

Purpose of testing

a. Pretesting - diagnosis, increasing the likelihood of preparing the most effective advertising messages.

b. Posttesting evaluates an ad or campaign after it runs and provides the advertiser with useful guidelines for future advertising (ad tracking).

Testing helps make important decisions.

a. Merchandise - this is the product concept. Advertisers may pretest the package design or how advertising positions the brand or how well the ads communicate the product features.

b. Markets - advertisers may pretest advertising strategy and commercials with various market segments or audience groups. In posttesting, advertisers may want to know if the campaign succeeded in reaching its target markets.

c. Motives - pretesting helps advertisers find better ways to appeal to consumers' needs and motives. Posttesting reveals their effectiveness.

d. Messages - pretesting helps determine what a message says and how well it says it. Through posttesting, the advertiser can determine to what extent the advertising message was seen, remembered, and believed.

e. Media - pretesting can influence four types of media decisions:

1. Media classes (electronic, print, outdoor, and direct mail).

2. Media subclasses (radio/TV, news-papers/magazines etc.).

3. Media vehicles (particular program or publication).

4. Media units (size or length of an ad).

Posttesting is typically applied to:

a. Budgeting - determine optimum spending levels before introducing national campaigns.

b. Scheduling - test consumer response to a product ad during different seasons of the year or days of the week, etc.

c. Overall results - measure overall results to evaluate how well they accomplished their objectives.

III. There are five basic steps (39.0K)in the research process:

A. Step 1: Analyzing the Situation and Defining the Problem - the first step is analyzing the situation to identify and define the problem. A marketing information system can be most helpful.

Marketing information system (MIS) - a set of procedures for generating a continuous, orderly flow of information for use in making marketing decisions.

Good research on the wrong problem is a waste of effort.

B. Step 2: Conducting Informal (Exploratory) Research - in the second step, researchers use informal (exploratory) research to learn more about the market, the competition, and the business environment, and to better define the problem. There are two types of research data:

Primary data - information collected from the marketplace about a specific problem. Acquiring primary data is expensive and time-consuming.

Secondary data - information previously collected or published, usually for some other purpose, either by the firm or by some other organization. Readily available and can be gathered more quickly and inexpensively.

a. Assembling internal secondary data - company records (customer billings, warranty cards, sales, expenses, customer correspondence, etc.) are often a valuable source of secondary information.

b. Gathering external secondary data - much information is available - usually at little or no cost - from the government, market research companies, trade associations, various trade publications, or even computerized databases. However, the information may be obsolete, irrelevant, invalid, unreliable, or just overwhelming in amount. Frequently used sources of secondary data:

1. Library reference materials

2. Government publications

3. Trade association data

4. Research organization publications

5. Consumer/business publications

6. Computer database services

c. In developing countries, the research profession is not so sophisticated or as organized as in North American and Europe. The available secondary research statistics may be outdated or invalid.

C. Step 3: Establishing Research Objectives - once the exploratory research phase is completed, the company may need additional information - even primary data. The company must first establish specific research objectives which must be specific and measurable. The questions related and relevant, and the objectives should be formulated before a research project begins.

D. Step 4: Conducting Formal Research - collecting primary data directly from the field (marketplace). The two types of formal research are qualitative and quantitative.

To get people to share their thoughts and feelings, researchers use qualitative research that elicit in-depth, open-ended responses, rather than yes or no answers. Qualitative research is used more often to give advertisers a general impression of the market, the consumer, or the product. Some advertisers refer to it as motivation research. The methods used in qualitative research are usually described as:

a. Projective techniques - asking indirect questions to get consumers to project their underlying or subconscious feelings about a problem or product.

b. Intensive techniques - use of in-depth interviews and focus groups to probe the deeper feelings of the respondents. The focus group is one of the most common intensive research techniques.

Basic methods of quantitative (hard statistics) research are:

a. Observation method - researchers monitor the overt actions of the person being studied. The Universal Product Code (UPC) has greatly assisted this. They count traffic, use video cameras, research companies, etc. to collect data.

b. Experiment method - researchers use the experimental method to measure cause and effect. An experiment is a scientific investigation in which a researcher alters the stimulus received by a "test group" and compares the results with that of a "control group" that did not receive the altered stimulus. Used primarily for new products - the test conducted in an isolated area called a test market.

c. Survey (52.0K) - the most common method of gathering primary research data is the survey, in which the researcher gains information on attitudes, opinions, or motivations by questioning current or prospective customers.

Basic Methods for testing ads - advertisers often pretest and posttest for advertising success or failure. Likability and perception analysis using both qualitative and quantitative techniques are pretested.

a. Pretesting methods are:

1. Direct questioning - elicits a full range of responses from which researchers can infer how well advertising messages convey key copy points. It is especially effective for testing alternative ads in the early stages of development. Other methods are: focus groups, order-of-merit tests, paired comparisons, portfolio tests, mock magazines, perceptual meaning studies, and direct-mail tests.

2. Central location tests - respondents are shown videotapes of test commercials, usually in shopping centers, and questions are asked before and after.

3. Clutter tests - commercials are shown with noncompeting control ads to determine attitude shifts and detect weaknesses.

b. The challenge of pretesting - Different methods test different aspects, and each has its own advantages and disadvantages - a formidable challenge for the advertiser. Researchers encounter problems when asking people to rank ads. Respondents often rate the ones that make the best first impression as the highest in all categories (the halo effect).

c. Posttesting methods- posttesting is generally more costly and time-consuming than pretesting, but it can test ads under actual market conditions. Advertisers use both quantitative and qualitative methods in posttesting. Most posttesting techniques fall into five broad categories:

1. Aided recall

2. Unaided recall

3. Attitude tests - Attitude tests often measure sales effectiveness better than recall tests. An attitude change relates more closely to product purchase. 4. Inquiry tests

5. Sales testsd. Each posttesting method has limitations.

1. Recall tests reveal the effectiveness of ad components, such as size, color, or themes. But they measure what respondents noticed, not whether they actually buy the product.

2. Inquiry tests in which consumers respond to an ad for information or free samples examine an ad's attention-getting value, readability, and understandability, but may not reflect a sincere interest in the product, and responses may take months to receive.

3. Sales tests are a useful measure of advertising effectiveness when advertising is the dominant element, or the only variable, in the company's marketing plan. Sales response may not be immediate and sales tests, particularly field studies, are often costly and time-consuming.

Some considerations in conducting formal quantitative research

a. Validity and Reliability (47.0K)- depend on several key elements: the sampling methods used, the way the survey questionnaire is designed, and the methods used for data tabulation and analysis. For a test to be "valid", results must reflect the true status of the market. And, for a test to be "reliable", it must produce the same result each time it is administered.

b. Sampling methods - when a company wants to know what consumers think, it can't ask everybody. But its research must reflect the universe (the entire target population) of prospective customers. Researchers select from that population a sample that they expect will represent the population's characteristics. Sample units - the individuals, families, or companies being surveyed - are very important. There are two types of samples:

1. Random probability samples - give every unit in the target population an equal and known probability of being selected for the research. This sampling method produces the greatest accuracy, but is expensive.

2. Nonprobability samples - less mathematically perfect than probability sampling, but less expensive, quicker and easier to conduct because the research does not give every unit in the universe an equal chance of being included.

c. Questions must be carefully developed to assure that answers will be accurate, easy to tabulate, and useful to the researcher. Effective survey questions have three important attributes: "focus, brevity", and "clarity". The four most common types of questions are "open-ended, dichotomous, multiple choice", and "semantic differential."

d. Collected data must be validated, edited, coded and tabulated. Answers must be checked to eliminate errors or inconsistencies.

International marketers face a number of challenges when they collect primary data. For one thing, research overseas is often more expensive than domestic research. But the advertiser must determine whether their message will work in foreign markets. There are many problems encountered with control and research in a foreign country because of cultural and language differences. Lead times are also longer. Computers, e-mail, faxes, etc. have improved international research capabilities, but shipping disks and complex files should be done with care. Two goals for international research are flexibility and standardization.

E. Step 5: Interpreting and Reporting the Findings - the final step in the research process involves interpreting and reporting the data. The final report must be comprehensible to the company's managers and relevant to their needs.

Marketing and Advertising Planning: Top-Down, Bottom-Up, and IMC

eLearning Session

I. The marketing plan

A. Since marketing is typically a company's only source of income, the marketing plan may be a company's most important document. The marketing plan assembles all the pertinent facts about the organization, the markets it serves, and its products, services, customers, competition, and so on.

It forces all of the departments - product development, production, selling, advertising, credit, transportation - to focus on the customer.

It sets goals and objectives for specified periods of time and lays out strategies and tactics to achieve them in a written form.

It is NOT a one-time event. Plans are continually reviewed and revised.

B. The marketing plan has a profound effect on a company's advertising plan. Successful organizations do not separate advertising plans from marketing. The market plan:

Helps managers analyze and improve all company operations, including marketing and advertising programs.

Dictates the role of advertising in the marketing mix.

Enables better implementation, control, and continuity of advertising programs, and it ensures the most efficient allocation of advertising dollars.

C. Top-Down Marketing Plan (27.0K)is the most common planning format. It is good for hierarchical organizations and new products. The top-down plan has four main elements:

Situation analysis - The section which is a "factual" statement of the organization's current situation and how it got there. It also:

a. Presents all relevant facts about the company's history, growth, products, sales volume, share of market, competitive status, markets served, distribution system, past advertising programs, results of marketing research studies, company capabilities, strengths and weaknesses, and any other pertinent information.

b. After gathering historical information, the focus changes to potential threats and opportunities based on key factors outside the company: economic, political, social, technological, or commercial environments the company operates in.

Marketing objectives - the next step is determining the company's specific marketing objectives and stating them in a hierarchy as follows:

a. Corporate objectives are usually stated in terms of profit or return on investment-or net worth, earnings ratio, growth, or corporate reputation.

b. Marketing objectives, which derive from corporate objectives, relate to the needs of target markets and to specific sales goals referred to as:

1. Need-satisfying objectives - which shift's management's view of the organization from a producer of products or services to a satisfier of target market needs.

2. Sales-target objectives - are specific, quantitative, realistic marketing goals to be achieved within a specified time period. May be expressed as total sales volume, sales volume by product, market segment, or customer type; and market share, growth rate of sales volume, or gross profit in total or by product line.

Marketing strategy - a statement of how the company is going to achieve its objectives. A company's marketing strategy has a dramatic impact on its advertising and it determines the following:

a. Selecting the target market - defining and selecting the target market using the processes of market segmentation and research.

b. Positioning the Product

- establishing what the product does and who it is for.

c. Determining the marketing mix - developing a cost-effective mix (product, price, distribution and communication) for each target market the company pursues

Marketing tactics (action programs) - The determination of the specific short-term actions to be taken, internally and externally, by whom and when.

D. Small companies use bottom-up marketing (22.0K)

Focus on a singular competitive mental angle which is the tactic and build a strategy around it.

Focus all the elements of the marketing mix (58.0K) on the tactic.

II. Relationship marketing is the new marketing mantra.

A. Today, advertisers are discovering the key to building brand equity is to develop interdependent, mutually satisfying relationships with customers. Greater acceptance of this concept is creating the following changes:

A belief that customers, not products, are the lifeblood of business.

A new trend away from simple "transactional marketing" to relationship marketing - creating, maintaining, and enhancing long-term relationships with customers and other stakeholders that result in exchanges of information and other things of mutual value.

Will be the key strategic resource for success in the 21st-century. Managing strategic partnerships will be the focus in the new market-driven concept of marketing.

B. The importance of relationships

To succeed today, companies must focus on managing loyalty among carefully chosen customers and other stakeholders (among them employees, centers of influence, stockholders, the financial community, and the press). There are a number of reasons for this:

a. The cost of lost customers - no amount of advertising is likely to win back a customer due to shoddy products or poor service. And the profit lost is the "lifetime customer value" to a firm.

b. Defensive marketing typically costs less than offensive marketing because it takes a great deal of effort to lure satisfied customers away from competition.

1. Fragmentation of media and resistance of sophisticated consumers to advertising messages increases the difficulty of winning new customers.

2. It now costs five to eight times as much in marketing, advertising, and promotion costs to acquire a new customer as it does to keep an existing one.

The value of loyal customers

a. 90 percent of a manufacturer's profit comes from repeat purchasers.

b. Only 10 percent comes from trial or sporadic purchasers.

c. Reducing customer defections by even five percent can improve profits 25 to 85 percent.

C. Levels of Relationships (38.0K)

Kotler and Armstrong distinguish five levels of relationship that can be formed between a company and its various stakeholders:

a. Basic transactional relationship - the company sells the product, but does not follow up (Kmart).

b. Reactive relationship - the company (or salesperson) sells the product and encourages customers to call with problems (Men's Wearhouse).

c. Accountable relationship - salesperson phones customers shortly after the sale to check on the product and asks about product improvements and any specific disappointments (Acura dealers).

d. Proactive relationship - company representatives contact the customer from time to time with suggestions about improving product use or helpful new products (Compuserve).

e. Partnership - the company works continuously with customers (and other stakeholders) to discover ways to deliver better value (Apple Computer).

Different stakeholders require different types of relationships

The more stakeholders involved, the more difficult it is to develop a relationship (and some customers may only want a transactional relationship).

High-profit product or service categories make deeper, personal relationship more desirable. .

III. IMC: The concept and the process

A. Technology has enabled marketers to adopt flexible manufacturing, customizing products for customized markets - indicating that "market-driven" means:

Bundling more services with products to create a "unique product experience."

Companies and customers working together.

B. IMC is both a concept and a process.

The concept of integration (64.0K) is "wholeness" and wholeness in communications creates synergy - the principle benefit of IMC - because each element of communication each element of the communications mix reinforces the others for greater effect.

IMC is also a process in which communication becomes the driving, integrating force in the marketing mix and throughout the organization.

IV. The evolution of the IMC concept

A. Technological changes led to specialized media and a subsequent fragmentation in the ways humans reach one another and work together. With the flood of mergers, rise in the global marketplace, escalation of competition, companies are faced with redundancies and inefficiencies. Company departments were at odds with each other, and the company's needs were out of step with customers needs.

B. Companies had to change their perspectives

Inside-out view of IMC - The company adapts by working from within, changing the way it coordinates and manages its marketing communications in order to deliver a consistent overall message to its customers.

Outside-in view of IMC - The company views customers as partners in an ongoing relationship, recognizes the references they use, acknowledges the importance of communication, and accepts the many ways they come in contact with the company and the brand. Customers are more important than their product or plants.

IMC defined broadly - the process of building and reinforcing mutually profitable relationships with employees, customers, other stakeholders, and the general public by developing and coordinating a strategic communications pro-gram that enables them to have a constructive encounter with the company/brand through a variety of media or other contacts.

Tom Duncan, director of the IMC graduate program at the University of Colorado at Boulder, has identified four distinct levels of integration that companies use: unified image, consistent voice, good listener, and at the most integrated, world-class citizen. These levels demonstrate how IMC programs range from narrowly focused corporate monologues to broad, interactive dialogs.

C. How the customer sees marketing communications

All communications or brand contacts, sponsored or not, create an "integrated product" in the consumer's mind - customers automatically integrate all the brand-related messages that emanate from the company or some other source. Companies can manage or influence these perceptions to create good relationships with stakeholders.

D. As everything we do (and don't do) sends a message, Duncan has categorized four types of company/brand-related messages stakeholders receive:

Planned messages - these are the traditional marketing communications messages:

a. Advertising, sales promotion, personal selling, merchandising material, publicity releases, event sponsorships. May also include help-wanted or financial offering ads, engineering articles in professional journals, and new contract articles.

b. Appearing self-serving, these messages usually have the least impact.

Product messages - messages reflecting the marketing mix:

a. Primarily the product, price, and distribution elements. Also called inferred messages.

b. Product messages have great impact - when a product performs well, the customer infers a positive message that reinforces the purchase decision.

Service messages - messages sent by service personnel, employees who interact with customers. Service messages, like product messages, have greater impact than planned messages.

Unplanned messages - messages companies have little or no control over. These include employee gossip, unsought news stories, comments, comments by trade or competitors, word-of-mouth rumors, major disasters. Etc.

a. Unplanned messages may affect customer's attitude dramatically.

b. Some unplanned messages can be anticipated and planned responses can be prepared, especially by managers experienced in public relations.

E. The Integration Triangle (27.0K)

Developed by Duncan and Moriarity, it illustrates how perceptions are created from various brand message sources.

There are three types of integration triangle messages:

a. Say messages - planned messages, what companies say about themselves.

b. Do messages - product and service messages that represent what a company does.

c. Confirm messages - unplanned messages that reinforce the say and do messages generated by a company.

Constructive integration occurs when a brand does what it maker says it will do and then others confirm that, in fact, it delivers on its promises.

V. The dimensions of IMC

A. To maximize the synergistic benefits of IMC, Duncan suggests three dimensions to an organization's integration process.

Ensure consistent positioning

Then, facilitate purposeful interactivity between the company and its customers or other stakeholders.

Finally, actively incorporate a socially responsible mission into the organization's relationships with its stakeholders.

B. Interest in IMC has gone global, moving form North America into Europe, Asia, and Latin America.

C. IMC offers accountability by maximizing resources and linking communications activities directly to organizational goals and the resulting bottom line.

VI. The IMC approach to marketing and advertising planning

A. IMC is a new approach

Mixes marketing and communications planning together, rather than separating them.

Begins with the customer and works back to the brand.

B. Computer technology can determine customer behavior for use in IMC programs by helping to:

Identify specific users of products and services.

Measure users' actual purchase behaviors and relating that to specific brand and product categories.

Measure the impact of various advertising and marketing communications activities and determining their value in influencing the actual purchase.

Capture and evaluate this information over time.

C. The ever-expanding database of customer behavior becomes the basis for planning all future marketing and communications activities.

D. Wang and Schultz (part 1 (58.0K) and part 2 (109.0K) ) have developed a seven-step IMC planning model.

Segment customers and prospect in a database.

Analyze customer data to determine the best time, place, and situation to communicate with customers.

Set the marketing objectives.

Identify brand contacts and attitude changes necessary to support the customer's continuance or change of purchase behavior.

Set communications objectives and strategies for making contact with consumers and influencing their attitudes, beliefs, and purchase behavior.

Decide what other elements of the marketing mix (product, place, and distribution) can be used to encourage the desired behavior.

Determine what communications tactics to use.

VII. The advertising plan is a natural outgrowth of the marketing plan and is prepared in much the same way. In IMC planning, the advertising plan is an integral part of the overall procedure.

A. Reviewing the Marketing Plan - first section of advertising plan is a situation analysis that is organized in four categories: internal strengths and weaknesses, and external opportunities, and threats (SWOT). This SWOT analysis briefly restates the company's current situation, reviews the target market segments, itemizes the long- and short-term marketing objectives, and cites decisions regarding market positioning and the marketing mix.

B. Setting Advertising Objectives - second section lists, realistic, specific and measurable advertising objectives.

Understanding what advertising can do. Marketing sells. Advertising tells.

The advertising pyramid (23.0K)is a model of the progression of effects advertising has on mass audiences especially for new products.

a. The first objective is to create "awareness" - to acquaint people with the company, product, service, or brand.

b. The second is to develop "comprehension" - to communicate enough information so some percentage of the aware group recognizes the product's purpose, image or position, and perhaps some of its features.

c. Next, advertising needs to communicate enough information to develop "conviction" - to persuade a certain number of people to believe in the product's value, such that ...

d. Of those who become convinced, some can be moved to "desire" the product.

e. Finally, some percentage of those who desire the product will take "action" - request additional in-formation, send in a coupon, visit a store, or buy it.

The old model versus the new

a. The advertising pyramid represents the learn-feel-do model of advertising effects. The theory is that advertising affects attitude, and attitude leads to behavior.

b. Some impulse purchases are do-feel-learn. The advertising pyramid also reflects the traditional mass marketing monologue. The advertiser talks, the customer listens.

c. The IMC model is based on the fact that many marketers have databases of information on their customers. When marketers can have a dialog and establish a relationship, the model is no longer a pyramid but a circle (29.0K) .

By starting with the customer and then integrating all aspects of their marketing communications, companies hope to accelerate the communications process, make it more efficient, and achieve lasting loyalty from good prospects.

C. Advertising Strategy and the Creative Mix - the advertising (or communications) objective declares where the advertiser wants to be with respect to consumer awareness, attitude, and preference; the advertising strategy describes how to get there. Advertising strategy blends elements of the creative mix (target audience, product concept, communications media, and advertising message):

The target audience: Everyone who should know

a. The target audience - the specific people the advertising will address, is typically larger than the target market. Advertisers need to know who the end user is, who makes the purchase, and who influences the purchasing decision.

b. Brand popularity (which advertising is good at creating) cuts across all levels of purchasing frequency. Dominant brands are purchased by both heavy and light users.

The product concept: the "bundle of values" the product might represent to the consumer.

a. When writing the advertising plan, the advertising manager must develop a simple statement to describe the product concept - that is, how the advertising will present the product.

b. How the consumer perceives the product is based on the level (high/low) and kind (cognitive/affective) with the product.

c. There are several models of involvement, including:

1. the Elaboration Likelihood Model and the FCB Grid.

2. the Kim-Lord Grid (34.0K) that depicts the degree and kind of involvement a consumer brings to the purchase decision

The communications media: The message delivery system - are all the vehicles that might transmit the advertiser's message.

The advertising message: What the advertising communicates.

a. What the company wants to say, and how it plans to say it, verbally and nonverbally makes up the advertising message.

b. The combination of copy, art, and production elements in the ads forms the message, and there are infinite ways to combine these elements.

D. The secret to successful planning is information, but the genius of business is integrating what the information means.

VIII. Money drives every marketing and advertising plan. The marketing department has to convince management that advertising spending makes good business sense, even in an adverse economic climate.

A. Advertising is an investment in future sales. It is best to see it as a long-term capital investment, building consumer preference and promoting goodwill that enhances the reputation and value of the company name. To see advertising as an investment, we must understand:

The relationship of advertising to sales and profits - many variables (both internal and external) influence the effectiveness of a company's marketing and advertising efforts.

a. Increases in market share are related more to increases in the marketing budget than to price reductions. Market share is a prime indicator of profitability.

1. While additional advertising will increase sales, the rate of return will decline at some point.

2. Sales response to advertising is spread out over time, but the durability of advertising is brief, so a consistent investment is important.

3. There are minimum levels below which advertising expenditures will have no effect on sales.

4. There will be some sales even if there is no advertising.

5. There are saturation limits imposed by culture and competition above which no amount of advertising can increase sales.

b. Advertising isn't the only marketing activity that affects sales. A change in market share may be due to:

1. Quality perceptions

2. Word-of-mouth

3. New products on market

4. New outlets opened

5. Better personal selling

6. Seasonal changes in the business cycle.

c. Most companies have no way of determining the relationship between sales and profit.

The variable environments of business - the advertising manager must consider the company's external situation (economic, political, social, and legal), and the internal situation (institutional and competitive environments). Plus, the company's policies and procedures

B. Methods of allocating funds - companies use a number of methods to determine how much to spend on advertising, including the :

Percentage-of-sales method

a. Simplest and most popular method because it is related to revenue and considered safe.

b. It may be based on a percentage of last year's sales, next year's anticipated rules, or a combination of both. Usually based on an industry average or company experience.

c. The problem is knowing what percentage to use. Unfortunately, it is too often determined arbitrarily

d. The greatest shortcoming is that it violates a basic marketing principle. Marketing activities are supposed to "stimulate" demand and thus sales - marketing activities aren't supposed to occur as a "result" of sales.

Share-of-market/share-of-voice method - a high correlation usually exists between share of market and share of industry advertising, in markets with similar products. Best to keep the share of voice ahead of market share.

a. Commonly used for new products

b. For new products, the budget should be one and one half times the brand's expected share of market in two years, e.g. if the 2-year objective is a 10 percent share of market, it should spend 15 percent of industry's advertising during the two year period.

c. One hazard of this method is the tendency to become complacent. Companies must be aware of all their competitor's marketing activities, not just advertising.

The objective/task method (also known as the budget build-up method) - is used by the majority of U.S. major national advertisers. The task method forces companies to think in terms of accomplishing goals. Its effectiveness is most apparent when the results of particular ads or campaigns can be readily measured. This method is adaptable to changing market conditions.

a. The task method has three steps:

1. Defining objectives

2. Determining strategy

3. Estimating cost

b. The major drawback is that it is usually very difficult to determine in advance how much money is needed to reach a specific goal.

Additional methods - advertisers also use several other methods.

a. Empirical research method, a company runs a series of tests in different markets with different budgets to determine the best level of advertising expenditure.

b. Computers can generate quantitative mathematical models for budgeting and allocating ad dollars.

C. The Bottom Line - unfortunately, all these methods rely on one of two fallacies.

The first is that advertising is a "result" of sales.

The second is that advertising "creates" sales.