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- Overview of Advertising
CHAPTER 7
Management
© 2010 South-Western, a part of Cengage Learning PowerPoint Presentation by Charlie Cook
All rights reserved. The University of West Alabama
Eighth Edition
- Chapter Objectives
After reading this chapter you should be able to:
1. Understand the magnitude of advertising and the
percentage of sales revenue companies invest in this
marcom tool.
2. Appreciate that advertising can be extraordinarily
effective but that there is risk and uncertainty when
investing in this practice.
3. Recognize the various functions that advertising
performs.
4. Explore the advertising management process from
the perspective of clients and their agencies.
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 7–2
- Chapter Objectives (cont’d)
After reading this chapter you should be able to:
5. Understand the functions agencies perform and how
they are compensated.
6. Explore the issue of when investing in advertising is
warranted and when disinvesting is justified.
7. Examine advertising elasticity as a means for
understanding the contention that “strong advertising
is a deposit in the brand equity bank.”
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 7–3
- Is Advertising Rocket Science?
• “The truth is that
The
advertising is harder
than rocket science.
It’s news when a
rocket launch fails.
It’s news when an
ad campaign launch
succeeds.”
succeeds.”
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 7–4
- Introduction
• Advertising Defined
A paid, mediated form of communication from an
paid,
identifiable source, designed to persuade the receiver
to take some action, now or in the future
to
• Types of Advertising
Business to Consumer (B2C)
Business to Business (B2B)
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 7–5
- Example of the Use of Humor in B2B Advertising
Figure 7.1
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 7–6
- The Magnitude of Advertising
United States:
United
$294 billion
$294
($1,000 per person) Global:
$360 billion
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 7–7
- Top 20 Spenders in U.S Advertising, 2006 ($ million)
Table 7.1
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 7–8
- The Magnitude of Advertising (cont’d)
• Advertising-to-Sales Ratios
Advertising as a percentage of sales ranges from a
Advertising
low of 1.3 % to a high of 29.9 %
low
Ratios typically range from 2% to 10% with an
Ratios
average of 3.1% across most B2C and B2B
categories
categories
Competition from larger firms forces smaller
Competition
companies to have higher ratios
companies
Personal care products based on image have high
Personal
ratios
ratios
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 7–9
- Advertising-to-Sales Ratios for Select Product Categories
Table 7.2a
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 7–10
- Advertising-to-Sales Ratios for Select Product Categories
Table 7.2b
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 7–11
- Advertising-to-Sales Ratios for Select Product Categories
Table 7.2c
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 7–12
- The Magnitude of Advertising (cont’d)
• Advertising Effects Are Uncertain
Advertising is not just a current expense but rather is
Advertising
an investment
an
Advertising should not be managed as a discretionary
Advertising
variable cost
variable
Advertising should not be the first reduction when
Advertising
financial pressures call for cost-cutting measures.
financial
Consistent investment spending is the key factor
Consistent
underlying successful advertising
underlying
Stopping advertising can cause a brand to lose
Stopping
© 2010 arket momentum, reducing its equity and market
m South-Western, a part of
share
share
Cengage Learning. All rights
reserved. 7–13
- Advertising Functions
Informing
Reminding and
Influencing
Increasing Salience
Assisting Other
Adding Value
Company Efforts
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 7–14
- Advertising Functions
• Informing
Making consumers aware of new brands.
Making
Increasing TOMA (Top of Mind Awareness)
Increasing
Teaching new uses for existing brands (called usage
Teaching
expansion advertising)
expansion
• Influencing
Getting prospective customers to try advertised
Getting
products and services:
products
Creating primary demand
Building secondary demand
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 7–15
- Advertising Functions (cont’d)
• Reminding and Increasing Salience
Enriching the memory trace for a brand so that
Enriching
the brand comes to mind in relevant choice
situations
Increasing customers’ interest in mature
Increasing
brands and the likelihood of choosing brands
that might have otherwise not been chosen.
that
Influence brand switching by reminding
Influence
consumers that the brand is available and that
© 2010 possesses favorable attributes.
it South-Western, a part of
it
Cengage Learning. All rights
reserved. 7–16
- Advertising Functions: Adding Value
Advertising
Adding Value
Increases DCF
Improving Quality
Innovating Altering Perceptions
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 7–17
- Advertising Functions (cont’d)
• Using Advertising to Assist Other
Using
Company Efforts
Company
To deliver coupons and
To
sweepstakes
sweepstakes
To assist sales representatives
To pre-sell a firm’s products by
To
introducing the product and
legitimizing salespeople’s claims
legitimizing
To augment the effectiveness of
To
price deals
price
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 7–18
- The Advertising Management Process
Figure 7.2
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 7–19
- The Role of Advertising Agencies
Advertising Function
Alternatives
Purchase Services
In-house Advertising Use a a Full-Service
As Needed
Operation Advertising Agency
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 7–20
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