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  2. The Effects of Advertising • U.S. advertising was almost $300 billion in 2006 • In 2005, 32 companies spent over $1 billion each • The advertising industry is small—only 155,000 employed by the 12,000 advertising agencies • Ad budgets of some firms are almost $4 billion annually

  3. The Effects of Advertising Top Ten Leaders by U.S.Advertising Spending

  4. Advertising and Market Share New brands with a small market share spend proportionally more for advertising and sales promotion than those with a large market share. • Beyond a certain level of spending, diminishing returns set in. • New brands require higher spending to reach a minimum level of exposure needed to affect purchase habits.

  5. The Effects of Advertising on Consumers • The average U.S. citizen is exposed to hundreds of ads each day. • Advertising may change a consumer’s negative attitude toward a product, or reinforce a positive attitude. • Advertising can affect consumer ranking of a brand’s attributes.

  6. Effects of Advertising

  7. Corporate identity Institutional Advertising Advocacy advertising Pioneering Product Advertising Competitive Comparative Major Types of Advertising

  8. Stimulates primary demand for new product or category • Used in the PLC introductory stage Pioneering • Influences demand for brand in the growth phase of the PLC • Often uses emotional appeal Competitive • Compares two or more competing brands’ product attributes • Used if growth is sluggish, or if competition is strong Comparative Product Advertising Online

  9. The Major Types of Advertising

  10. Creative Decisions in Advertising AdvertisingCampaign A series of related advertisements focusing on a common theme, slogan, and set of advertising appeals.

  11. Determine the advertising objectives Make media decisions Make creative decisions Evaluate the campaign Creative Decisions in Advertising

  12. Define target audience Define desired percentage change Define the time frame for change Setting Objectives: The DAGMAR Approach

  13. Identify product benefits Develop and evaluate advertising appeals Execute the message Evaluate the campaign’s effectiveness Creative Decisions

  14. Identify Product Benefits • “Sell the Sizzle, not the Steak” • Sell product’s benefits, not its attributes • A benefit should answer “What’s in it for me?” • Ask “So?” to determine if it is a benefit

  15. Attribute “Powerade’s new line has been reformulated to combine the scientific benefits of sports drinks with B vitamins and to speed up energy metabolism.” Benefit “So, you’ll satisfy your thirst with a great-tasting drink that will power you throughout the day.” Product Attributes Vs Benefits - So?

  16. Profit Product saves, makes, or protects money Health Appeals to body-conscious or health seekers Used in selling cosmetics and perfumes Love or romance Fear Social embarrassment, old age, losing health Admiration Reason for use of celebrity spokespeople Used for fast foods and microwave foods Convenience Key to advertising vacations, beer, parks Fun and pleasure Vanity and egotism Used for expensive or conspicuous items Environmental Consciousness Centers around environmental protection Advertising Appeals

  17. Unique Selling Proposition Unique SellingProposition A desirable, exclusive, and believable advertising appeal selected as the theme for a campaign.

  18. Scientific Slice-of-Life Musical Lifestyle Demon- stration Spokes-person/ Testimonial Mood or Image Fantasy Real/ Animated Product Symbols Humorous Executing the Message

  19. Setadvertising objectives Identify benefits Develop appeal Execute message Evaluatingresults helpsmarketersadjust objectivesfor futurecampaigns Evaluate campaign results Creative Decisions for Ad Campaign

  20. Newspapers Magazines Radio Television Outdoor Media Yellow Pages Internet Major Advertising Media

  21. Newspapers – 2009 Demise of Majors!! Advantages Disadvantages • Geographic selectivity • Short-term advertiser commitments • News value and immediacy • Year-round readership • High individual market coverage • Co-op and local tie-in availability • Short lead time • Limited demographic selectivity • Limited color • Low pass-along rate • May be expensive

  22. An arrangement in which the manufacturer and the retailersplit the costs of advertising the manufacturer’s brand. Cooperative Advertising CooperativeAdvertising

  23. Magazines – 2009 Circulation Decline Advantages Disadvantages • Good reproduction • Demographic selectivity • Regional/local selectivity • Long advertising life • High pass-along rate • Long-term advertiser commitments • Slow audience build-up • Limited demonstration capabilities • Lack of urgency • Long lead time

  24. Radio – Great for Local markets Advantages Disadvantages • No visual treatment • Short advertising life • High frequency to generate comprehension and retention • Background distractions • Commercial clutter • Low cost • Immediacy of message • Short notice scheduling • No seasonal audience change • Highly portable • Short-term advertiser commitments • Entertainment carryover

  25. Television – 2009 Viewership DownDiscuss New Mode of TV viewing – Online: Hula, Youtube, etc Advantages Disadvantages • Wide, diverse audience • Low cost per thousand • Creative opportunities for demonstration • Immediacy of messages • Entertainment carryover • Demographic selectivity with cable • Short life of message • Consumer skepticism • High campaign cost • Little demographic selectivity with stations • Long-term advertiser commitments • Long lead times for production • Commercial clutter

  26. Outdoor MediaNew Electronic Billboards Advantages Disadvantages • Repetition • Moderate cost • Flexibility • Geographic selectivity • Short message • Lack of demographic selectivity • High “noise” level

  27. InternetMost Effective Reaching Youth Advantages Disadvantages • Difficult to measure ad effectiveness and ROI • Ad exposure relies on “click through” from banner ads • Not all consumers have access to Internet • Fast growing • Ability to reach narrow target audience • Short lead time • Moderate cost

  28. Shopping Carts Floor Ads Computer Screen Savers Subway Tunnel Ads DVDs Video Game Ads Interactive Kiosks Cell Phone Ads Ads in Movies Advertainments Alternative Media

  29. Microsoft plans to acquire Massive inc., a start-up that places ads in video games. Ads are inserted into the game environment. Video games could become a large new medium for advertising. Videogame Advertising SOURCE: Robert A. Guth and Nick Wingfield, “Microsoft’s ‘Massive’ Move into Game Ads,” Wall Street Journal, April 26,2006, B1.

  30. Companies are offering free telephone directory assistance—but there’s an advertisement first. The audio ads are narrowly targeted, and are 10 to 12 seconds. The growth of such free services could represent another change in the telecom industry. Dial 1-800-FREE411 or 1-800-411-METRO Directory Assistance Advertising SOURCE: Rebecca Buckman, “Your Listing, and a Word From Our Sponsor,” Wall Street Journal, April 20,2006, B1.

  31. Competition for Web advertising spots is driving up prices. Some Web advertisers now run campaigns based on time of day. Examples: McDonald’s: breakfast meals during morning hours Xerox: copier ads during the workday Budweiser: beer ads on Friday afternoons Scheduling Web ads during prime times is a more efficient use of ad dollars and more targeted. Media Scheduling on the Web SOURCE: David Kesmodel, “More Marketers Place Web Ads by Time of Day,” Wall Street Journal, June 23, 2006, B1.

  32. Public Relations Public Relations The element in the promotional mix that: • evaluates public attitudes • identifies issues of public concern • executes programs to gain public acceptance • E.g. McDonald’s: Healthy Meals – In response to Fast Food Nation

  33. Press relations Product publicity Corporate communication Public affairs Lobbying Employee and investor relations Crisis management Types of Public Relations Activities

  34. New product publicity Product placement - movies Consumer education Event sponsorship Issue sponsorship Internet Web sites Public Relations Tools

  35. Corporations are teaching public school students about personal finance. People under age 25 are a fast-growing group for credit card debt increases and bankruptcy. Is it appropriate to use educational materials with corporate a corporate identity? How should financial literacy be taught? Example of Consumer Education SOURCE: Diya Gullapalli, “Your Kid’s Teacher: The Bank,” Wall Street Journal, April 8-9, 2006, B1.

  36. A coordinated effort to handle the effects of unfavorable publicity or of an unfavorable event. Managing Unfavorable PublicityThe Exxon Valdez Incident Crisis Management

  37. The Role of Public Relations