Instructor Solution Manual For Advertising and Promotion An Integrated Marketing Communications Pers by QuentinAxel

INSTRUCTOR SOLUTION MNAUAL FOR ADVERTISING AND PROMOTION AN INTEGRATED MARKETING COMMUNICATIONS PERSPECTIVE 13E GEORGE BELCH AND MICHAEL BELCH Chapter 1-22

CHAPTER 1 AN INTRODUCTION TO INTEGRATED MARKETING COMMUNICATIONS Chapter Overview The purpose of this opening chapter is to provide the student with an overview of the field of advertising and promotion and its role in the marketing process. We introduce the concept of integrated marketing communications (IMC), its evolution, and examine how various marketing and promotional elements must be coordinated to communicate effectively. We also discuss the reasons for the increasing importance of the IMC perspective in planning and executing advertising and promotional programs. Marketers understand the value of strategically integrating the various communication functions rather than having them operate autonomously. The move to integrated marketing communications also reflects an adaptation by marketers to a changing environment, particularly with respect to consumers, technology, and media. The various elements of the promotional mix are introduced in this chapter along with a brief discussion of these basic tools of IMC. We discuss how many companies are taking an audience contact or touch point perspective in developing their IMC programs and consider four basic categories of touch points. This chapter also examines the various tasks and responsibilities involved in advertising and promotion management and a model of the integrated marketing communications planning process is presented. Lastly, we give an overview of the perspective and organization of the rest of the text.

Learning Objectives 1. Describe the role of advertising and other promotional elements in marketing. 2. Discuss the evolution of the integrated marketing communications (IMC) concept. 3. Explain the increasing value of the IMC perspective in advertising and promotional programs. 4. Identify the elements of the promotional mix. 5. Identify the contact points between marketers and their target audiences. 6. Describe the steps in the IMC planning process.

Chapter and Lecture Outline I.

INTRODUCTION TO ADVERTISING AND PROMOTION

The chapter begins with a brief discussion of the changing roles of advertising and promotional strategy in modern marketing. Specifically, it offers a case study about marketing approaches in the energy drink category. The case discusses first-mover Red Bull‘s alignment with extreme sports to position itself as the beverage for times of increased physical and mental stress. A new market entrant, Celsius, positioned itself as a healthier energy drink, relying heavily on influencer marketing. Its tactics attract new users to the energy drink category and convert consumers from other brands. Instructors should discuss how the roles of advertising and other forms of marketing communication are changing. Increases in audience fragmentation and a shift to digital media have spearheaded this change in brand/consumer communication. Consumers are no longer passive message recipients who wait to receive unfiltered advertising messages. They want more control of the content they receive, and actively seek out more information. Brands must be willing to adapt their strategies, moving away from solely an advertising focus to a holistic approach that attempts to engage consumers in a conversation: an IMC approach. Instructors should also stress the difference between IMC, advertising, and public relations.

II.

THE GROWTH OF ADVERTISING AND PROMOTION

Advertising and promotion are integral parts of our social and economic systems. Advertising has evolved into a vital communication system for both consumers and businesses. In market-based economies, consumers rely on advertising and other forms of promotion to provide them with information they can use in making purchase decisions. Corporations rely on advertising and promotion to help them market their products and services. Evidence of the increasing importance of advertising and promotion in the marketing process comes from the growth in expenditures in these areas over the past decade. In 1980, advertising expenditures in the U.S. were $53 billion and $49 billion was spent on sale promotion. In 2022, $330 billion was spent on advertising. Of that, $129 billion was spent on traditional advertising media such as TV, radio, magazines, newspaper, and OOH. Digital/online advertising accounted for the other $201 billion. Billions more are spent by both domestic and foreign companies in other promotional areas such as direct marketing, event sponsorship, interactive marketing, sponsorships, consumer and trade promotions, and public relations efforts. The tremendous growth in expenditures for advertising and promotion reflect the growth of the U.S. and global economies. Expansion-minded marketers are taking advantage of growth opportunities in various regions of the world and taking advantage of integrated marketing opportunities through methods such as event sponsorship and the use of the Internet. Particularly noteworthy is the increase in the amount of marketing communications dollars being spent online. For the first time ever, in 2019, digital ad dollars in the U.S. surpassed those dollars spent on traditional advertising media. Specifically, 54 percent of advertising dollars in the U.S. went to digital advertising efforts while 46 percent went to traditional advertising media. By 2022, digital advertising accounted for nearly two-thirds of all advertising spending. The increase in digital advertising comes from declines in spending in print versions of magazines and newspapers as well direct mail—with the largest digital ad category being paid search on search engines. These upward trends in ad spending, and particularly digital ad spending, are seen globally, although U.S. advertising spending accounts for nearly 40 percent of the world‘s advertising expenditures.

Professor Notes:

III.

THE ROLE OF MARKETING

Many students may already have had a marketing course; however, it is still helpful to define marketing and stress that it involves more than just selling or other promotion functions. For more than two decades, the American Marketing Association, the association that represents marketing professionals in the United States and Canada, defined marketing as: the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives. This definition of marketing focused on exchange as a central concept in the various activities involved in the marketing process. Many experts argue that exchange is the core phenomenon or domain for study in marketing. The discussion can focus on the nature of exchange and what is needed for this process to occur including: two or more parties with something of value to one another; a desire and ability to give up their something of value to the other party; and a way for the parties to communicate with one another. In 2007, the AMA adopted a revised definition of marketing: Marketing is the activity, set of institutions, and processes for creating, communicating, and delivering exchange offerings that have value for customers, clients, partners and society at large. This definition of marketing is more reflective of the role of nonmarketers to the marketing process. It also focuses on the important role marketing plays in developing and sustaining relationships with customers and delivering value to them. Value is the customer‘s perception of all of the benefits of a product or service weighed against all the costs of acquiring and using it. Benefits can be functional (focusing on the performance of the product), experiential (focusing on what it feels like to use the product), or psychological (feelings that result from owning a particular brand). Costs include the money paid for the product or service as well as other factors such as acquiring information, making the purchase, learning how to use a product/service, maintaining the product, and disposing of it. A.

The Marketing Mix—The four elements of the marketing mix (product, price, place, and promotion) can be introduced and the task of combining these elements into an effective marketing program for facilitating exchange with a target audience should be noted. The instructor should point out that while this course focuses on the promotion element of the marketing mix, the promotional program must be part of a viable marketing strategy and coordinated with other marketing mix variables. This leads into a discussion of the concept of integrated marketing communications.

Professor Notes:

IV.

INTEGRATED MARKETING COMMUNICATIONS

The Evolution of IMC—In the past, many marketers built strong barriers around the various marketing and promotional functions, planning and managing them separately with different budgets, different views of the market and different goals and objectives. In the 1980s, however, many companies began moving toward the concept of integrated marketing communications (IMC), and a more strategic integration of their promotional tools. As marketers embraced the concept of IMC, they began asking their ad agencies to coordinate the use of a variety of promotional tools rather than relying primarily upon media advertising. A number of companies began looking beyond traditional advertising agencies, using other types of promotional specialists to develop and implement various components of their promotional plans. As the advertising industry recognized that IMC was more than just a fad, terms such as new advertising, orchestration, and seamless communication were used to describe the concept of integration. In 1989, a task force from the American Association of Advertising Agencies (4As) developed one of the first definitions of integrated marketing communications (MC) defining it as: a concept of marketing communications planning that recognizes the added value of a comprehensive plan that evaluates the strategic roles of a variety of communication disciplines—for example, general advertising, direct response, sales promotion, and public relations—and combines these disciplines to provide clarity, consistency, and maximum communications impact. Integrated marketing communications calls for a ―big picture‖ approach to planning marketing and promotion programs and coordinating various communication functions. With an integrated approach, all of a company‘s marketing and promotional activities should project a consistent and unified image to the marketplace. However, advocates of IMC have argued for an even broader perspective that considers all sources of brand or company contact that a customer or prospect has with a company, product, or service. An example of this unified communication approach is provided of Montblanc, a luxury leather goods, tech, watch, and other accessory brand. The brand recognized that each interaction consumers have with their brand serves as an opportunity for the brand to deliver on their brand promise of quality products, to strengthen relationships with their customers, and deepen loyalty. For example, Montblanc‘s IMC approach in its global ―Mark Makers‖ campaign is designed to laud those who live their lives by intuition rather than rules. The campaign emphasizes the core belief that everyone can leave a mark by enjoying the journey along the way and pursuing inspiration. It features celebrities associated with artistry and creativity as brand ambassadors, and utilizes print, digital, and social media to communicate the brand‘s message. This example highlights the advertising industry‘s recognition that a broader perspective of the advertising discipline was needed to involve a more strategic perspective that would open up more opportunities for brands to engage with consumers.

A Contemporary Perspective of IMC—As IMC evolves and marketers develop a better understanding of the concept, they are recognizing that it involves more than just coordinating the various elements of the marketing and communications program to reflect ―one look, one voice.‖ 1-4 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

IMC is being recognized as a business process that helps companies identify the most appropriate and effective methods for communicating and building relationships with customers and other stakeholders. Don Schultz of Northwestern University, who has been one of the major proponents and thought leaders in the area, developed a new definition of IMC: Integrated marketing communications is a strategic business process used to plan, develop, execute and evaluate coordinated, measurable, brand communications programs over time with consumers, customers, prospects, employees, associates and other targeted relevant external and internal audiences. The goal is to generate both short-term financial returns and build long-term brand and shareholder value. This definition views IMC as an ongoing strategic business process rather than just tactical integration of various communication activities. It also recognizes that there are a number of relevant audiences that are an important part of this process beyond just customers such as prospects, suppliers, investors, interest groups, and the general public. This definition also shows the increasing emphasis being placed on accountability and measured outcomes of marketing communication programs. C.

Reasons for the Growing Importance of IMC—There are a number of reasons why marketers are adopting the concept of IMC. A fundamental reason is that they recognize the value of strategically integrating the various communication functions rather than having them operate autonomously, taking advantage of synergy among promotional tools. The move also reflects an adaptation by marketers to a changing environment, particularly with respect to consumers, technology, and media consumption behavior. One of the major developments that has led to the adoption of IMC is the fragmentation of media and the shift from mass to micromarketing. The IMC movement is also being driven by a ―marketing revolution‖ that is changing the ways companies market their products and services. Major changes in the media landscape driving this change include: 

Audiences are more fragmented than ever before, leaving media planners and buyers with much more difficult decisions to make when it comes to ad placement.

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Over the past decade, more households have been ―cutting the cord‖ from traditional cable services in favor of video streaming alternatives. Faster Internet connections and an abundance of video streaming devices are contributing to the decline of subscribers to cable and satellite services.

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The Internet has become the leading advertising medium, with online versions of nearly every magazine, newspaper, and television and radio station, as well as millions of websites that cater to very specific interests of consumers.

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Advertisers are able to use the Internet in a more targeted way than traditional media.

Challenges Impacting IMC—While IMC has become widely accepted as a strategic business process for brand communications, marketers face many challenges in implementing it. A major challenge is the proliferation of nontraditional media, coupled with the changing media consumption behavior of consumers. Today‘s consumers are no longer just recipients of messages or media content but can in fact control, create, influence, recreate, alter, and engage in shaping content across platforms and communication channels. In the digital age, the consumer is in control of the integration process. Marketers are also challenged by consumers being less responsive to and finding ways to avoid their advertising messages. Younger consumers are especially skeptical of advertising. In

addition, the advertising industry, as well as online publishers such as newspapers, magazines, blogs, and others, are concerned over the impact ad blockers are having on digital advertising. The IMC movement is being impacted by fundamental changes in the way companies market their products and services and an ongoing marketing revolution. Most agencies recognize that their future success depends on the ability to understand how to develop and place advertising messages for the rapidly evolving areas of digital marketing, including social media and mobile. E.

The Role of IMC in Branding—One of the major reasons for the growing importance of integrated marketing communications over the past decade is that it plays a major role in the process of developing and sustaining brand identity and equity. Brand identity is a combination of many factors including the name, logo, symbols, design, packaging, and performance of a product or service as well as the associations that come to mind when consumers think about a brand. It is the sum of all points of encounter or contact that consumers have with a brand, which includes the various forms of integrated marketing communication used by a company. Figure 1-1 shows the world‘s 10 best global brands from the 2022 Interbrand rankings. The relationship between brands and their customers has become much more complex. The value chain of companies has become increasingly visible, and consumers often select brands based on the social, economic, and environmental records and policies of the companies that make them. Sustainability, which refers to development that meets the needs of the current generation without compromising the ability of future generations to meet their needs, has become a very important issue for both consumers and corporations. Marketers are recognizing that many consumers evaluate them based not only on their support of the environment, but on their positions on social, political, and economic issues and often factor this into purchase decisions. This has led to an increase in brand activism, which involves a company or brand taking a stand and engaging in efforts to promote social, political, economic or environmental reform to help drive change in order to improve society. See Ethical Perspective 11 for a further discussion of brand activism.

THE PROMOTIONAL MIX: THE TOOLS FOR IMC

Promotion is defined as the coordination of all seller-initiated efforts to set up channels of information and persuasion to sell goods and services or promote an idea. It should be noted that promotion is best viewed as the communication function of marketing. The discussion of integrated marketing communications should point out how other marketing elements such as brand name, package design, price, or retail outlets implicitly communicate with consumers. However, most of an organization‘s communication with the marketplace takes place through a carefully planned and controlled promotional program which utilizes elements of the promotional mix. The promotional mix is defined as the basic tools or elements that are used to accomplish an organization‘s objectives. The role and function of each promotional mix element in the marketing program can be discussed along with its advantages and limitations. A.

Advertising—Any paid form of nonpersonal communication about an organization, product, service, or idea by an identified sponsor. Each element of this definition is described in the text and it would be beneficial for instructors to break down the definition for students. Advertising is a paid form of communication, meaning that it almost always purchased (except PSAs). The nonpersonal element indicates that advertising involves mass media that transmit a message to a large group of people at the same

time with little to no opportunity for immediate feedback. Advertising is done for organizations, produces, services, and ideas and is typically most beneficial for products and services targeted at a mass consumer audience. Finally, advertising comes from an identified sponsor. Advantages: 

Cost-effective way for communicating, particularly with large audiences.

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Ability to create images and symbolic appeals and for differentiating similar products and services.

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Valuable tool for creating and maintaining brand equity.

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Ability to strike responsive chord with audience through creative advertising.

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Opportunity to leverage popular advertising campaigns into successful IMC programs which can generate support from retailers and other trade members.

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Ability to control the message (what, when and how something is said and where it is delivered).

Disadvantages: 

Cost of producing and placing ads can be very high, particularly television commercials.

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Can be difficult to determine the effectiveness of advertising.

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Credibility and image problems associated with advertising.

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Vast number of ads has created clutter problems and consumers are not paying attention to much of the advertising they see and/or hear.

The nature and purpose of advertising differs from one industry to another and across various situations as does its role and function in the promotional program. The common classifications of advertising to the consumer market include national, retail/local and primary versus selective demand advertising. Classifications of advertising to the business and professional market include business-to-business, professional and trade advertising. These classifications are described in Figure 1-4. Professor Notes:

Direct Marketing—A system of marketing by which organizations communicate directly with target customers to generate a response and/or a transaction. Direct marketing has not traditionally been considered an element of the promotional mix. However, because it has become such an integral part of the integrated marketing communications program of many organizations, this text views it as a component of the promotional mix. Advantages:

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Changes in society (two-income households, greater use of credit) have made consumers more receptive to the convenience of direct-marketed products.

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Direct marketing allows a company to be very selective and target its marketing communications to specific customer segments.

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Messages can be customized to fit the needs of specific market segments.

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Effectiveness of direct-marketing efforts is easier to assess than other forms of promotion.

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Many companies now have extensive databases that can be used to target current and prospective customer, particularly through digital media.

Disadvantages: 

Consumers and businesses are being bombarded with unsolicited mail and phone calls which makes them less receptive to direct marketing.

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Direct marketing has image problems.

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There can be problems with clutter as there are too many direct-marketing messages competing for consumers‘ attention.

One of the major tools of direct marketing is direct-response advertising. This is when a product is promoted in an ad that urges consumers to purchase the product directly from the manufacturer. Direct mail, television, and Internet advertising are the primary platforms through which directresponse ads are placed. Some companies that distribute their products through traditional distribution channels or have their own sales force are also now engaging in omnichannel retailing where their products are sold through multiple distribution channels such as in retail stores, online, in catalogs, and in mobile apps. This type of strategy uses a combination of offline and online channels to influence customer‘s shopping experience and often involves the use of direct-marketing tools as part of the IMC mix. C.

Digital/Internet Marketing—Digital media, specifically interactive media, allow for a two-way flow of communication whereby users can participate in and modify the content of the information they receive in real time. The major interactive medium is the Internet, which is a global collection of computer networks linking both public and private computer systems. While the most prevalent perspective on the Internet is that it is an advertising medium, it is actually a medium that can be used to for other elements of the promotional mix as well including sales promotion, direct marketing, and public relations. The proliferation of the Internet has also given rise to the development and growth of social media. Social media are online means of communication and interactions among people that are used to create, share, and exchange content such as information, insights, experiences, perspectives, and even media themselves. Nearly three-quarters of Americans have a social media profile with usage of social media being highest among young adults (18–29). For many years, consumers accessed the Internet and even social media through their personal computers, but with the growth of smartphones and tablets, many consumers shifted to the use of mobile devices to access the Internet/social media. This has led to a rapid growth in mobile marketing, whereby marketing messages are designed for and sent directly to these devices. Mobile advertising saw spending of nearly $137 billion in 2022 and now accounts for more than two-thirds of digital advertising spending. Digital and Social Media Perspective 1-1 discusses the dependence of the media on revenue from advertising and how this business model is being challenged. Advantages:

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The Internet can be used for a variety of integrated marketing communication functions including advertising, direct marketing, sales promotion, public relations and selling. The Internet is also the foundation for social media sites such as Facebook and Twitter, which are becoming an integral part of many marketers IMC programs, as well as mobile marketing.

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Messages can be tailored to appeal to the specific interests and needs of the target audience.

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The interactive nature of the Internet leads to a higher degree of customer involvement when customers are visiting a website.

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The Internet makes it possible to provide customers with a great deal of information regarding product and service descriptions and specifications, purchase information and more. Information provided by marketers can be updated and changed continually.

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The Internet has tremendous creative potential as a well-designed website can attract a great deal of attention and interest among customers and be an effective way to generate interest in a company as well as its various products and services.

Disadvantages:

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The Internet is not yet a complete mass medium as some U.S. households do not have access to the Internet and many do not have broadband access. In some countries this percentage is much higher.

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There are problems with the Internet as an advertising medium as many Internet users do not pay attention to banner ads and the click-through rate on most is extremely low.

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There is a great deal of clutter on the Internet which makes it difficult for advertising messages to be noticed and/or given attention.

Sales Promotion—Marketing activities that provide extra value or incentive to the sales force, distributors, or the ultimate consumer and can stimulate immediate sales. Sales promotion is generally broken into two major categories: consumer-oriented and trade-oriented activities. Consumer-oriented sales promotions are targeted to the ultimate user of a product or service (i.e. coupons, sampling, premiums, rebates, contests, sweepstakes). Trade-oriented sales promotion is targeted toward marketing intermediaries (i.e. wholesalers, distributors, and retailers). Examples of this include price deals, merchandising allowances, and trade shows. Advantages: 

Provides extra incentive to consumer or middlemen to purchase or stock and promote a brand.

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Way of appealing to price sensitive consumer.

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Way of generating extra interest in product or ads.

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Effects can often be more directly measured than those of advertising.

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Can be used as a way of building or reinforcing brand equity.

Disadvantages: 

Many companies are becoming too reliant on sales promotion and focusing too much attention on short-run marketing planning and performance. 1-9

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Many forms of sales promotion do not help establish or reinforce brand image and short-term sales gains are often achieved at the expense of long-term brand equity.

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Problems with sales promotion clutter as consumers are bombarded with too many coupons, contests, sweepstakes and other promotional offers.

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Consumers may become over-reliant on sales promotion incentives which can undermine the development of favorable attitudes and brand loyalty.

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In some industries, promotion wars may develop whereby marketers sales promotion incentives extensively, which results in lower profit margins and makes it difficult to sell products at full price.

It is important to address the potential terminology problem concerning the use of the terms promotion and sales promotion. In this text, the term promotion represents an element of the marketing mix by which firms communicate with their customers and includes the various promotional mix elements. However, many marketing and advertising practitioners use the term promotion in reference to sales promotion activities. We use the term promotion in the broader sense. When discussing sales promotion activities, we are referring to this one specific element of the promotional mix. E.

Publicity/Public Relations 1. Publicity—nonpersonal communications about an organization, product, service, or idea that is not directly paid for nor run under identified sponsorship. Examples include news stories, editorials, or announcements about an organization or its products/services. 2. Public Relations—a strategic communication process that builds mutually beneficial relationships between organizations and their publics. The distinction should be made between publicity and public relations noting that public relations generally has a broader objective than publicity, as its purpose is to establish and maintain a positive image of the company among its various publics. Publicity is an important communications technique used in public relations; however other tools may also be used. Public relations has become an integral part of many companies‘ IMC strategy. Additionally, a distinction should be made between advertising and publicity. While publicity involves nonpersonal communication to a mass audience, it is not paid for directly by the company. Instead, the company attempts to get the media to run favorable stories about them. Advantages of publicity: 

Credibility of publicity is usually higher than other forms of marketing communication.

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Low cost way of communicating.

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Often has news value and generates word-of-mouth discussion among consumers.

Disadvantages of publicity:

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Lack of control over what is said, when, where and how it is said.

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Can be negative as well as positive.

Personal Selling—direct person-to-person communication whereby a seller attempts to assist and/or persuade prospective buyers to purchase a company‘s product or service or act on an idea. 1-10 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

Personal selling is the final element of an organization‘s promotional mix but is not a direct part of the IMC program of most companies and is often not in the control of the advertising or marketing communications manager. Advantages: 

Direct contact between buyer and seller allows for more communication flexibility.

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Can tailor and adapt message to specific needs or situation of the customer.

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Allows for more immediate and direct feedback.

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Promotional efforts can be targeted to specific markets and customers who are best prospects.

Disadvantages: 

High cost per contact.

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Expensive way to reach large audiences.

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Difficult to have consistent and uniform message delivered to all customers.

Professor Notes:

VI.

IMC INVOLVES AUDIENCE CONTACTS

The various promotional mix elements are the major tools that marketers use to communicate with current and/or prospective customers as well as other relevant audiences. Many companies are taking an audience contact or touch point perspective in developing their IMC programs whereby they consider all of the potential ways of reaching their target audience with their messages. A touch point is every opportunity the customer has to see or hear about the company and/or its brands or have an encounter or experience with it. The various ways that a customer can come into contact with a company or brand are shown in Figure 15. It is the responsibility of those involved in the marketing communications planning process to determine how each of these contact tools can be used to communicate with the target audience and how they can be combined to form an effective IMC program. Tom Duncan notes that there are four basic categories of contact or touch points which include: 

Company-created touch points are planned marketing communication messages such as advertisements, websites, news/press releases, packaging, sales promotion offers and point-ofpurchase display.

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Intrinsic touch points are interactions that occur with a company or brand during the process of buying or using a product or service such as discussion with retail sales personnel or customer service representatives. These are not always under the direct control of the marketing department or IMC program.

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Unexpected touch points are unanticipated references or information about a company or brand that a customer or prospect receives that is beyond the control of the organization. This includes word-of-mouth messages as well as information from various media sources.

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Customer-initiated touch points are interactions that occur whenever a customer or prospect contacts a company. These contacts often involve inquiries or complaints that must be handled properly by the company such as through customer service departments.

Paid, Owned, and Earned Media—Another categorization of the various types of customer touch points that has become very popular is that of paid, owned, and earned media as shown in Figure 1-7. Marketers making effective use of IMC today will use a combination of all three forms of media and must determine how valuable each of the various forms of media and contact tools are for communicating with their current and prospective customers and how these can best be combined for the creation of an effective IMC program.

VII.

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Paid media refers to channels a marketer pays to leverage and includes traditional advertising media such as television, radio, print, outdoor, and direct mail as well as various forms of digital advertising such as paid search and online display and video ads.

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Owned media refers to channels of marketing communication that a company controls, such as its websites, blogs, and mobile apps as well as social media channels such as Facebook, Twitter, Instagram, and YouTube.

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Earned media is exposure for a company or brand that it did not have to pay for and is generated by outside entities such as the media or the general public. Earned media has traditionally been viewed as exposure for a company or brand generated by its public relations/publicity efforts or through favorable word of mouth.

THE IMC PLANNING PROCESS

Integrated marketing communications management is defined as the process of planning, executing, evaluating, and controlling the use of the various promotional-mix elements to effectively communicate with target audiences. It involves coordinating the promotional mix elements to develop a controlled and integrated program of effective marketing communication. It involves various decision areas such as: 

Which promotional tools to use and how to combine them effectively.

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Determining the size of and distributing the advertising and promotional budget.

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Determining the influence of various factors on the promotional mix including the type of product, target market, decision process of the buyer, stage of the product life cycle, and channels of distribution.

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What percentage of the budget should be allocated to advertising, sales promotion, the Internet, sponsorships, and personal selling.

This process is guided by the development of the integrated marketing communications plan, which provides the framework for developing, implementing, and controlling an organization‘s IMC program and activities. At this point it is helpful to go through the Integrated Marketing Communications Planning Model presented in Figure 1-8 of the text. The steps in the Integrated Marketing Communications Planning Model include:

Review of the Marketing Plan—The first step in the IMC planning process is to review the marketing plan, which is a document that describes the overall marketing strategy and programs developed for an organization, a product/service line, or an individual brand. The marketing plan generally includes five basic elements: 1) a detailed situation analysis, 2) specific marketing objectives, 3) a marketing strategy that includes selection of target market(s), 4) a program for implementing the marketing strategy, and 5) a process for monitoring and evaluating performance.

Promotional Program Situation Analysis—After the development of the marketing plan, a situation analysis is conducted to assess the factors that influence or are relevant to the development of the promotional strategy. This includes both an internal and external analysis. 1. Internal analysis—Assesses relevant areas involving the product/service offering and the firm itself. This involves assessing the company‘s performance, the strengths and weaknesses of the company as well as its products, and reviewing their previous promotional efforts. 2. External analysis—Focuses on factors such as characteristics of the firm‘s customers, market segments, positioning strategies and competitors. Figure 1-9 outlines the important questions to address in both an internal and external analysis.

Analysis of the Communication Process—This involves determining how the company can effectively communicate with customers in the target market. An important part of this stage of the IMC planning process is developing communication objectives which refer to what the firm seeks to accomplish with its promotional program. It is also important during this stage to establish communication goals and objectives. Distinguish with students the difference between marketing objectives and communication objectives. Marketing objectives are what is to be accomplished by the overall marketing program. Often stated in terms of sales, market share, or profitability. Communication objectives are what the firm seeks to accomplish with its promotional program. Often stated in terms of the nature of the message to be communicated or what specific communication effects are to be achieved.

Budget Determination—Two basic issues must be addressed with regard to the IMC budget while keeping in mind what needs to be done to accomplish communication objectives: 

How much money will be spent on marketing communication.

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How the money will be allocated across different media, geographic markets, and time periods.

Developing the Integrated Marketing Communications Program—The most involved and detailed part of the promotional planning process occurs at this stage as decisions have to be made regarding the role and importance of each IMC tool and their coordination with one another. Each IMC tool has its own set of objectives, budget, messaging, and media strategy, as shown in Figure 1-8. These include: 

Advertising message and media strategy and tactics.

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Direct marketing message and media strategy and tactics.

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Digital/Internet Marketing message and media strategy and tactics.

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Sales promotion message and media strategy and tactics.

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Public relations/publicity strategy and tactics.

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Personal selling—sales strategy and tactics.

Monitoring, Evaluation, and Control—The final stage of the IMC planning process involves monitoring, evaluating, and controlling the promotional program. At this stage, the marketer should be gathering feedback concerning how well the IMC program is working and whether it is meeting its objectives. It is important to note that information regarding the results achieved by the IMC program is used in subsequent promotional planning and strategy development.

Professor Notes:

PERSPECTIVE AND ORGANIZATION OF THIS TEXT In the contemporary business world, professionals must understand and use a variety of marketing communication tools, not just the ones in which they specialize. This text views advertising and promotion from an integrated marketing communications perspective and examines the promotional-mix elements and their roles in an organization‘s integrated marketing communications efforts. The purpose of this book is to provide a thorough understanding of the field of advertising and other elements of a firm‘s promotional mix and show how they are combined to form an integrated marketing communications program. It also examines special topic areas and perspectives that have become increasingly important in contemporary marketing.

Teaching Suggestions This initial chapter is designed to provide the student with an overview of the field of advertising and promotion and a brief look at the role of IMC in the marketing process. The instructor should be careful not to go into an in-depth discussion of marketing since this is covered in detail in Chapter 2. You should introduce the concept of integrated marketing communications discuss its evolution, and note how this approach differs from more traditional perspectives of advertising and promotional planning. In this edition, we have provided an updated perspective of IMC which recognizes that it involves more than just coordinating the various elements into a ―one look, one voice‖ approach. It is important to define the six elements of the promotional mix, discuss their role as marketing communication tools, their advantages and limitations. Note that our view of the elements of the promotional mix goes beyond the traditional communication tools of advertising, sales promotion, publicity/public relations and personal selling, as we also include direct marketing and digital/Internet marketing as part of the mix. Direct marketing and digital/Internet have become major methods by which modern-day marketers communicate with their target audiences and we feel they are best viewed as distinct IMC tools. You should also emphasize that there are a variety of ways by which customers come into contact with a company and/or its brands. There is a discussion of IMC involving audience contacts and Figure 1-5 of the text is an excellent way of showing the various contact tools. A discussion of the categorization of the type of contact points into paid, owned and earned media is provided. When discussing these various types of contact points, you might use Figure 1-7 to explain what is included under each category such as what is in a company‘s ability to control or influence. It is important to review the various factors that 1-14 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

underlie the adoption of an IMC approach to advertising and promotion by many companies. You might also spend some time discussing the pros and cons of IMC. Although we advocate the IMC approach in this text, the discipline is still evolving. During an introductory lecture, there is latitude to discuss various issues and aspects concerning each promotional mix variable. For example, various perspectives regarding advertising such as its social and economic effect might be noted along with common complaints and criticisms of advertising. We do not suggest going into a detailed discussion of these charges at this early stage of the course. We feel that students are best able to evaluate and appraise various arguments for and against advertising and other promotional mix elements toward the end of the course. We feel that it is important in either the first or second lecture to cover the integrated marketing communications planning model shown in Figure 1-8 in some detail. This text is built around this model and it provides the student with the ―big picture‖ as to the decision sequence and various considerations involved in the development of an advertising and promotional program. It is also important to communicate to students that advertising and promotion management is a process. A great deal of internal and external analyses, as well as the coordination of the promotional mix elements, is required to develop an effective program of marketing communications that can be integrated into an organization‘s overall marketing strategy and tactics.

Answers to Discussion Questions 1. Discuss the role of integrated marketing communications in the marketing program for the energy drink Celsius and how the company uses various IMC tools to compete in the energy drink market. (LO 1-2, 1-5) Celsius has adapted its marketing strategy and the way it communicates with consumers to become the fastest growing brand of energy drinks. It uses traditional mass-media advertising through TV, radio, and magazines as well as out-of-home media such as billboards to build awareness along with its brand identity. The company drives consumers to its website where they can learn more about the brand and where they can purchase it. As part of its overall marketing strategy, Celsius also relies heavily on brand ambassadors and other influencers who promote the brand through various social media platforms. Consumers are encouraged to connect with Celsius on Facebook, Instagram, and Twitter while inspirational videos promoting the brand are available on YouTube, Instagram Reels, and TikTok. The social media content follows the same theme as its advertising, which is designed to show how Celsius is part of an active lifestyle and is a healthy alternative to traditional energy drinks. In addition, Celsius uses public relations and sales promotion to reinforce its brand positioning. For example, it sponsors running events and experiential marketing such as its ―Live Fit‖ tour which features pop-up fitness events hosted by popular instructors from fitness chains. In 2022, Advertising Age recognized Celsius as one of America‘s hottest brands, noting how smart marketing and positioning are making it a major competitor in the highly competitive energy drink market. 2. Evaluate the success of Celsius in competing in the energy drink market against major brands such as Red Bull and Monster. What factors account for the strong growth of the Celsius brand? Do you think the company can continue to increase its market share? Why or why not? (LO 1-1, 1-4, 1-5) Although it was not first-to-market, Celsius disrupted the energy drink market with its strategic marketing approach. Celsius, which grew its dollar sales by nearly 200 percent in 2022 to nearly $400 million, carved out a position as a healthier energy drink and passed Rockstar to become the fourth1-15 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

largest brand in the category. Its growth is driven by a gender-neutral marketing strategy targeting health-conscious consumers, in contrast to the hyper-sports male market targeted by the Red Bull and Monster brands. Some of Celsius‘ success lies in its branding as a healthier alternative, and in its broad reach to all health-conscious consumers. Celsius has also successfully relied on influencer marketing to spread its message. Another factor boosting the company‘s marketing success is the impact of the COVID-19 pandemic. During the pandemic, consumers increasingly sought healthrelated foods and drinks to strengthen their immunity. Celsius‘ advertising and packaging highlighted the product‘s natural ingredients, and reinforced this perception. Market studies show that Celsius not only attracted new users to the energy drink category but also converted consumers from Red Bull, Monster, and other competitors to its brand. In order to reinforce and continue its success, Celsius must continue seeking innovative ways to deliver its message to consumers. Other energy drinks have larger marketing budgets, but smart marketing and positioning can continue to make Celsius a major competitor in the competitive energy drink market. 3. Discuss the role integrated marketing communications plays in the marketing program of companies and organizations. Discuss how the use of the various promotional mix tools has changed over the past decade and what factors drive these changes. (LO 1-1, 1-4) Integrated marketing communications plays a critical role in the marketing program most companies and organizations as it provides them with a way to communicate with consumers and help them influence their purchase decisions or other types of behavior. IMC differs from traditional advertising and promotion in that it recognizes the value of using a variety of communication tools rather than just relying primarily on media advertising, which might be supplemented with tactical promotions. IMC involves coordinating all a company‘s promotional elements, as well as marketing activities, in a synergistic manner to send a consistent message to the target audience. While traditional advertising relies primarily upon the use of ads through the mass media to communicate with the target audience, IMC recognizes that consumers‘ perceptions of a company and/or its brands are a synthesis of the bundle of messages or contacts they have with the firm. These contacts include media advertisements, packaging, sales promotion, messages received through interactive media such as websites and other digital media, point-of-purchase displays, and other forms of communication. The IMC approach seeks to have all of a company‘s marketing and promotional activities project a consistent, unified message and/or image to the market and consider which particular element of the promotional mix is the most effective way to communicate with customers in the target audience. There are many reasons why the IMC approach is becoming so popular among marketers. Probably the most fundamental reason is that marketers are recognizing the value of strategically integrating the various communication functions rather than having them operate autonomously. By coordinating their marketing communication efforts, companies can avoid duplication, take advantage of synergy among various communication tools, and develop more efficient and effective marketing communication programs. The movement toward IMC is also being driven by changes in ways companies market their products and services. As discussed in the text, there is an ongoing revolution that is changing the rules of marketing and the role of traditional media advertising. Important aspects of this revolution include: a shifting of marketing dollars from media advertising to other forms of promotion, a movement away from relying on advertising-focused approaches (which rely on mass media such as television and magazines) to solve communication problems, a shift in marketplace power from manufacturers to retailers, the rapid growth of database marketing, demand for greater accountability from advertising agencies and the way they are compensated, and the rapid growth of the Internet.

The growth of the integrated marketing communications is very likely to continue as it is being driven by fundamental changes in the way companies market their products and services. Moreover, many marketers and advertising agencies recognize the importance of taking an IMC approach and are becoming advocates of integration. The move to integrated marketing communications also reflects an adaptation by marketers to a changing environment, particularly with respect to consumers, technology and media. Major changes are occurring among consumers, particularly with respect to media use and buying and shopping patterns. Many consumers are turned off by traditional advertising which is leading marketers to look for alternative ways to communicate with their target audiences. The continued fragmentation of media markets and rapid growth of interactive media and online services are also creating new ways for reach consumers. While IMC will continue to have its critics and may undergo some changes, it is very unlikely that we will see a return to the traditional system where advertising in mass media dominates and advertising and other forms of promotion function autonomously. 4. Spending by marketers on digital advertising has now surpassed spending on traditional media such as television, radio, magazines, and newspapers. Discuss the reasons marketers are spending more on digital than traditional media. Do you expect this trend to continue? (LO 1-2, 1-3, 1-4) Marketers have recognized that there has been a shift in consumer‘s media consumption. Consumers are increasingly leaving traditional forms of media consumption in favor of online or digital experiences. Now, because of the proliferation of digital media, instead of being passive viewers of media, consumers are extremely involved and content creators themselves. Therefore, advertisers have had to shift from using primarily push media (i.e. television, radio, newspapers) to pull media (websites, social media, and other sources where two-way dialogue can be initiated with consumers) in order to actually reach consumers in the digital age. Additionally, with increased Internet availability, consumers almost cannot function without their mobile phones or other mobile devices. There are more app options, websites, and social media platforms than ever before where advertisers can attempt to engage with consumers. With more and more consumers in these platforms, advertisers are constantly looking for ways to engage with them in these new ways. This trend will likely continue. Consumers who say they hate advertising likely just mean that they hate being yelled at by a brand and told what and how to think about things and what to buy. Advertisers will continue to look for ways to have authentic communication experiences with consumers and where those conversations are increasingly happening is in online platforms. 5. Ethical Perspective 1-1 discusses how many companies are becoming involved in brand activism. Discuss the pros and cons of companies becoming involved with and taking a position on controversial social, economic, and political issues. (LO 1-1, 1-2). For many companies and brands, neutrality is no longer an option. They must determine how to align their values with those of their customers, employees, and society at large. Remaining ambivalent on controversial issues can be very risky, particularly for brands targeting younger generations of consumers. Studies show that young people around the world are growing up with a deeper sense of purpose than previous generations and prefer companies and brands that directly support causes about which they care. Research shows that millennials and gen-Zers, which are very important age cohorts for marketers given their size and spending capacity, are looking for brands that support their values, stand for a cause, and are giving back to the community. This is the positive side of becoming involved with controversial social, economic, and political issues. The downside, however, is that some argue that it is often little more than a public relations stunt, noting that it is often inauthentic, opportunistic, imitative, or just ―woke washing‖ which devalue such activism overall.

6. Discuss some of the ways technology is making it possible for consumers to avoid advertising messages and the impact this is having on the advertising and media industries. (LO 1-2, 1-3) Since audiences are now empowered to control the kind of messages or content they want to receive—including where, when, and how they want them—the function of integrator has shifted from marketers to the consumers themselves and in the digital age, the consumer is in control of the integration process. Many consumers are turned off by advertising and other forms of marketing communication because they are tired of being bombarded with sales messages. Younger consumers in the millennial and gen Z age cohorts (which include most college students) are particularly skeptical of advertising. Nearly all of this cohort have smartphones and are spending less time with traditional media. However, like other age cohorts, they are also actively seeking ways to avoid advertising messages, not only on television but online as well. They are installing ad blockers on their computers, tablets, and smartphones and skipping out of online ads as quickly as possible. The use of ad blockers is highest for personal computers but their use on mobile devices has nearly doubled over the past five years. The primary reasons consumers use ad blockers is that they feel websites are more manageable without banner ads, they wish to avoid irrelevant or offensive images/messages, and they have privacy concerns such as not wanting their online behavior tracked. The advertising industry, as well as online publishers such as newspapers, magazines, blogs, and online sites, are highly concerned over the impact ad blockers are having on their digital advertisingbusiness. Companies that sell advertising space on their websites, apps, and social media sites are paid based on the number of people who see, watch, or click on the ads, so the use of ad blockers has the potential to undermine their basic business model. 7. Digital and Social Media Perspective 1-1 discusses how Netflix made a strategic decision to launch an advertising-supported tier to its streaming service. Discuss the reasons Netflix made this strategic decision. Do you think this ad-supported tier of service will be successful? (LO 1-4, 1-5) Netflix dominates the streaming market with 221 million subscribers worldwide including 75 million in the U.S. and Canada. Since the inception of its streaming service in 2007, Netflix had resisted offering an ad-supported tier as subscriber growth skyrocketed. But in 2022, Netflix announced that it would begin testing an ad-supported, lower-priced subscription tier. The announcement came after disclosing that it had lost 200,000 subscribers during the first three months of the year as a result of stiffer competition and rising inflation that was pressuring households to tighten their budgets. Netflix made this move because it is concerned about ignoring a large customer segment which wants streaming but at a lower-priced tier. The move could make sense for Netflix‘s bottom line as analysts estimate that the company could generate $1.2 billion in the U.S. alone by 2025. Time will tell if consumers stick with this level of ad-supported service, or prefer to pay a higher amount for ad-free streaming. 8. What is meant by the categorization of touch points into paid, owned, and earned media? Choose a specific company or brand and discuss how it is using these three categories of media. (LO 1-5) Paid media refers to channels a marketer pays to leverage and includes traditional advertising media such as television, radio, print, outdoor, and direct mail as well as various forms of digital advertising such as paid search and online display and video ads. Owned media refers to channels of marketing communication that a company controls, such as its websites, blogs, and mobile apps as well as social media channels such as Facebook, Twitter, Instagram, Snapchat, and YouTube. Earned media is exposure for a company or brand that it did not have to pay for and is generated by outside entities such as the media or the general public. Earned media has traditionally been viewed as exposure for a company or brand generated by its public relations/publicity efforts or through favorable word of

mouth. However, with the growth of digital media, earned media exposure is taking place online through social media and the viral marketing efforts of marketers. Students should be asked to choose a company or brand and analyze how it is using the three categories of touch points as part of its Integrated Marketing Communications program. 9. Why is it important for those who work in marketing to understand and appreciate all the various IMC tools and how they can be used effectively? (LO 1-5, 1-6) The roles of advertising and other forms of marketing communication are changing in the modern world of marketing. Today‘s marketers recognize that the rapidly changing media environment is making it increasingly difficult to reach their target audiences and communicate effectively with them. The fragmentation of markets, the decline of traditional media such as magazines and newspapers, the growth of the Internet and new forms of digital and social media, the emergence of global markets, economic uncertainties, and changing lifestyles and media usage patterns of consumers are all changing the ways companies market their products and services and communicate with current and prospective customers. Developing marketing communications programs that are responsive to these changes is critical to the success of nearly every company that competes in the marketplace. In the contemporary business world, individuals working in marketing, advertising, and other promotional areas are expected to understand and use a variety of marketing communication tools, not just the one in which they specialize. Although media advertising may be the most visible part of the communications program, understanding its role in contemporary marketing requires attention to other promotional areas such as the Internet and digital marketing, direct marketing, sales promotion, and public relations—not all the promotional-mix areas are under the direct control of the advertising or marketing communications manager. All departments must communicate with each other to coordinate all the organization‘s marketing communication tools. 10. Assume a company is developing an IMC plan for a new product that will compete in a specific category or segment of the beverage market. Discuss some of the factors that should be considered as part of the external analysis when developing the IMC plan. (LO 1-6) Information from the competitive analysis would be very beneficial for a new beverage brand. They would need to consider direct and indirect competitors, what their beverage offers that their competitors‘ does not, how their competitors are promoting themselves, how they can differentiate themselves in their marketing efforts, and how their marketing budget compares with competitors‘. Additionally, an analysis of any environmental factors that could impact the beverage‘s success in the market should be considered. For example, would health trends in society potentially hurt the brand? Are there any policies on promoting certain beverages in certain places or in certain ways that the brand should be aware of? Finally, the brand must consider who customers are for their competitors, how consumers consider beverages, and how they make decisions in the beverage market.

Additional Discussion Questions (not shown in text) 11. Compare the definition of integrated marketing communications developed by Don Schultz with the original definition developed by the American Association of Advertising Agencies. How do they differ? (LO 1-2) The new definition of IMC developed by Don Schultz of Northwestern University is as follows: ―Integrated marketing communications is a strategic business process used to plan, develop, execute and evaluate coordinated, measurable, brand communications programs over time with consumers, 1-19 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

customers, prospects, employees, associates and other targeted relevant external and internal audiences. The goal is to generate both short-term financial returns and build long-term brand and shareholder value.‖ This definition differs from the seminal definition of IMC developed by the 4As in several ways. It views IMC as an ongoing strategic business process rather than just tactical integration of various communication activities. It also recognizes that there are a number of relevant audiences that are an important part of the marketing communications process. These include customers, prospects suppliers, investors, interest groups, and the general public as well as internal audiences such as employees. The definition also reflects the increasing emphasis that is being placed on the demand for accountability and measurement of the outcomes of marketing communication programs. The original definition developed by the 4As has been criticized for focusing primarily on coordinating the various communication tools with the goal of making them look and feel alike. Both academicians as well as practitioners are recognizing that the broader perspective of IMC offered in the definition by Schultz is needed as it views the discipline from a more strategic perspective. 12. Choose a company and discuss how it communicates with its customers at the corporate, marketing, and marketing communications levels. (LO 1-1) Messages can originate at all three levels since all of a company‘s corporate activities, marketing mix activities, and marketing communications efforts have communication dimensions and play a role in attracting and maintaining their customers. Students should be encouraged to choose a company and analyze how it communicates with its customers at each of these levels. At the corporate level the analysis should focus on how a firm‘s business practices and philosophies, policies and procedures, hiring practices, corporate culture, and other factors communicate with customers and other relevant stakeholders. At the marketing level, the analysis should focus on how the company communicates through various elements of the marketing mix. The physical product communicates a great deal to consumers through elements such as shape, design or appearance of the actual product or the packaging. The price of a product may also send a message about quality. The brand name of a brand also is a form of communication. Companies also communicate with consumers through the choice of retail outlets where they choose to sell their products. Selling a product only through upscale specialty or department stores may communicate that it is a high-quality item. On the other hand, selling a product through discount stores or mass merchandise outlets may send a cue of lower quality. There are many examples of how consumers communicate with consumers through their marketing activities. You might talk about products such as expensive watches (Concord, Movado, or Rolex) and how they are priced high, sold only through jewelry store or high-end department stores, and designed to reflect an image of quality, prestige and style. On the other hand, brands such as Timex and Casio are designed more for function or sport, are priced lower, and sold in drug stores, sporting goods stores and mass merchandise outlets. At the marketing communications level, the analysis should focus on the various IMC tools the company uses such as advertising, direct marketing, its website, sales promotion messages, publicity/public relations activities such as event sponsorships, and personal selling efforts. The analysis of the company should consider whether all of these IMC tools communicate with one look, voice, and image and position and identify the company and/or brand in a consistent manner. 13. Why are marketers putting so much emphasis on developing strong brands? Choose one of the Best Global Brands listed in Figure 1-1 and discuss how the company has used integrated marketing communications to build a strong brand image. (LO 1-3) There are a number of reasons why marketers are putting so much emphasis on building strong brands. Consumers have a tremendous number of choices available in nearly every product or service category and are have less time available to make purchase decisions. Thus they are putting a great deal of emphasis on well-known and trusted brand names to help simplify their decision making

process. Also, consumers are often willing to pay a price premium for well-known brands which provides marketers with higher profit margins and helps them avoid price competition. Consumer product companies, as well as business-to-business marketers, recognize that brand equity is a very important asset and they are taking steps to build and maintain brand equity. Students should be encouraged to select one of the top 10 brands listed in Figure 1-1 and analyze how the company has used IMC to build a strong image. This analysis might include examination of the company‘s advertising, sales promotion programs, product and service quality, public relations efforts, sponsorships, website and other communication elements. 14. The various classifications of advertising to consumer and business-to-business markets are shown in Figure 1-4. Choose one category of advertising to consumer markets and one to the business-to-business market and find an ad that is an example of each. Explain the specific goals and objectives each company might have for the ad. (LO 1-4) Students should be encouraged to choose one of the various classifications of advertising to consumer and business-to-business and professional markets, find an ad that they feel is an example of each and explain the company, association or organization‘s goals and objectives for the ad. Basic descriptions of each classification of advertising are provided in Figure 1-4 along with insight as to what the goals or objectives might be for using this type of advertising. This assignment is helpful in getting students to recognize that the nature and purpose of advertising varies from one industry to another and/or across situations. For example, you might encourage them to find an example of advertising done either by a company or an industry trade association where the focus is on primary demand stimulation. Advertising campaigns by the Beef Board, National Pork Producers Council, or Potato Board are all very good examples of primary demand advertising. Students might also be encouraged to look in some industry or trade publications for examples of business-to-business or advertising targeted at retailers. Publications such as Progressive Grocer or Drug Store News are a good source of trade advertising. 15. What is meant by primary versus selective demand advertising? Provide examples of each. Discuss when a marketer might focus on primary demand stimulation versus selective demand stimulation. (LO 1-4) Primary demand advertising is designed to stimulate demand for the general product class or entire industry. Selective demand advertising focuses on creating demand for a specific company‘s brand or a product or service. Primary demand advertising is often done by industry trade associations to generate demand for the product category. This is often done for commodity products where it is difficult to differentiate an individual brand or association members recognize the value of promoting the product category. Examples include products such as milk, orange juice, pork, beef, potatoes, avocados and raisins. Primary demand advertising is sometimes done by a company whose brand(s) dominates the market and will benefit the most from demand generation. For example, Gatorade has over 70 percent of the sports drink market and its ads often promote the value of its products for hydration versus water. Most advertising focus on selective demand as the goal is to create demand for a specific brand. Thus the advertising will emphasize reasons for purchasing a particular brand and focus on differentiating a particular brand of a product or service from the competition. 16. Discuss some of the ways technology is making it possible for consumers to avoid advertising messages and the impact this is having on the advertising and media industries. (LO 1-2, 1-3) As discussed in Digital and Social Media Perspective 1-1, consumers have been avoiding advertising messages for years simply by using a remote control to change channels during the commercial break of a television show or switching radio stations in their cars during a commercial break. Digital video recorders (DVRs) have given consumers yet another way to avoid TV ads by allowing consumers to 1-21 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

fast-forward through the ads during playback of a recorded show. As marketers shift more of their advertising spending online, they must deal with another weapon used by consumers to avoid advertising, which is ad-blocking software. Most consumers have installed ad blocking software on their desktops and laptops and many on now doing so on their mobile devices such as smartphones and tablets. Apple began adding ad-blocking software to the operating system for its Safari mobile browser in 2015 and a few months later ad-blocking capabilities became available for mobile devices using the popular Android operating system. The ability of consumers to avoid advertising messages is having a significant impact on the advertising and media industries. Radio stations rely almost entirely on advertising as a source of revenue while TV stations get the majority of their income from the monies marketers pay to air their commercials. Without advertising, television networks and local stations would have to rely almost entirely on viewers for revenue and the average household would have to pay much more for subscription TV service and get fewer channels. The television industry has already modified its measurement audience measurement system to account for delayed viewing that occurs when people play back recorded TV shows. In addition to the television industry, web publishers (including online magazines and newspapers) and social media sites would be devastated if they lost most of their advertising revenue. Most newspapers and magazines have been unsuccessful in getting people to pay for subscriptions to their digital editions and/or they find a way around their firewalls. Digital advertising is critical to the survival of companies such as Google, Facebook, and Snapchat, all of which generate nearly all of their revenue from advertising. Although consumers may not like being bombarded by advertising messages, it is important for them to realize that the revenue generated by these ads, which in turn depends on the size of the audience they can deliver, is what allows these companies to survive. 17. Discuss how the digital revolution is impacting the way marketers plan and implement their integrated marketing communications programs. Identify three specific technological developments and discuss how each is affecting the IMC program of companies. (LO 1-3, 1-4) There are many technological developments that are impacting IMC. Cable and digital satellite systems have vastly expanded the number of channels available to television viewers, which is contributing to the fragmentation of media markets. The average household in the U.S., as well as many other countries, now receives 180 television channels versus 60 at the beginning of the new millennium. The proliferation of channels as well the penetration of new technologies such as DVRs, video-on-demand, and streaming is also impacting television. The long-predicted convergence of television with computers has become a reality as consumer now have many other viewing options beyond the programming offered by the television networks. The rapid penetration of the Internet is another development as it has led to media fragmentation as hundreds of millions of consumers are now online and can visit a myriad of different websites. However, time spent online, particularly on social media, competes for time spent with traditional media such as television, radio, newspapers and magazines. One of the most significant changes is the penetration of smartphones as more than threefourths of U.S. adults now own one and are using them to access the Internet. The growth in tablets also bring yet another type of screen into the lives of many consumers. Magazines and newspapers have developed digital versions of their publications for consumers who want to read them online as well as on their mobile devices. Marketers are responding to these changes by increasing their spending on highly targeted media that reach specific market segments. Monies once spent in broadly targeted mass media are now being allocated to more websites and social media that reach specific market segments. Marketers are developing mobile marketing applications that can deliver messages and promotional offers directly to consumer‘s mobile devices and can be targeted to specific locations or consumption situations. They are also recognizing that it has become increasingly difficult to reach consumers through the mass media and are using a variety of other IMC tools such as sponsorships,

branded entertainment, publicity/public relations, digital and social media (such as Facebook and Twitter) and in-store media to reach consumers. The Internet is another technological development having a tremendous impact on the way companies design and implement their entire business and marketing strategies as well as their integrated marketing communications programs. Companies ranging from large multinational corporations to small local firms have developed websites to promote their products and services by providing current and potential customers with information, building images for their companies and brands and even selling their products or services directly over the Internet. While many view the Internet as an advertising or promotional medium, it really is a multimedia marketing communications tool that can be used to execute all elements of the promotional mix. Companies can advertise on the Internet by running banner ads or sponsorships on the websites of other companies or organizations. Marketers can offer sales promotion incentives such as coupons over the Internet and they can offer contests and sweepstakes online and encourage consumers to visit their websites to enter them. Many companies are using the Internet for direct marketing. Many companies have made the Internet a major part of their direct-marketing efforts and encourage consumers to visit their websites to view their merchandise and to place orders online. Companies are also using the Internet for publicity and public relations activities as most activities can now be done online. Many companies also maintain press releases on their websites, which can be accessed by the media and other relevant publics to learn more about these companies and their products and services. 18. Discuss the opportunities and challenges facing marketers with regard to the use of mobile marketing. What are some of the ways marketers can use mobile marketing as part of their IMC program? (LO 1-4, 1-5) The Mobile Marketing Association defines mobile marketing a set of practices that enables organizations to communicate and engage with their audience in an interactive and relevant manner through any mobile device or network. It includes promotional activity designed for deliver to cell phones, smartphones, tablets and other handheld devices and includes apps, messaging, commerce and customer relationship management. The growing popularity of smartphones, tablets, and other mobile devices along with the decision of the various wireless carriers to open their mobile phones services to these messages has opened up new marketing opportunities. Marketers are already sending interactive messages to consumers that contain promotional offers such as coupons that can be redeemed at the point-of-purchase. Many of these mobile messages are specific to a consumers‘ location or consumption context. One of the major factors driving the growth of mobile marketing is the development of shopping services and apps that consumers can use to make shopping more efficient, productive and fun. Marketers are also developing their own brand specific applications such as games, video, and promotional offers as part of their mobile marketing programs. One of the challenges marketers will face with mobile marketing is possible resistance from consumers. Many consumers do not want to be bombarded with messages to their smartphones or other mobile devices. Thus, marketers will be dependent upon consumers ―opting in‖ to receive these messages. However, it is likely that most marketers will tie-in their mobile marketing efforts to other components of their IMC programs such as sales promotions or incentives to visit a website. Thus, mobile marketing will become yet another way for marketers to deliver messages to consumers and get them to take some form of action that helps in the marketing process. Another challenge for mobile marketing is the small screen size of mobile devices which limits the type and design of messages that can be sent to mobile devices. Marketers must also develop responsive websites that can be adapted to smaller screens found on mobile devices.

19. Why is it important for those who work in marketing to understand and appreciate all the various integrated marketing communication tools and how they can be used effectively? (LO 1-6) In today‘s business world, marketers use a variety IMC tools to communicate with their customers. The various promotional mix elements have to be viewed as component parts of an integrated marketing communications program. An individual IMC activity such as advertising or sales promotion cannot be managed without considering its relationship to other promotional mix elements. Individuals working in various areas of advertising and promotion are expected to understand and use a variety of marketing communication tools, not just the one in which they specialize. For example, advertising agencies no longer confine their services to creating and placing ads. Many agencies are involved in sales promotion, public relations, Internet/interactive media, direct marketing, event sponsorship and other communication areas. Thus, it is important for those who work in advertising and promotion, either on the agency or client side, to understand and appreciate the value and limitations of all the promotional mix elements and how they can be combined to develop an effective program of integrated marketing communications.

CHAPTER 2 THE ROLE OF IMC IN THE MARKETING PROCESS Chapter Overview The purpose of this chapter is to examine the marketing process and the role of advertising and promotion in an organization‘s integrated marketing program. A basic model of the marketing and promotional process is presented, which can be used as a framework for analyzing how advertising and promotion fit into a company‘s marketing program. The chapter examines the various decision areas under each element of the marketing mix and how they influence and interact with advertising and promotional strategy. The chapter also introduces and/or refreshes the student on the concepts of target marketing, segmentation, and positioning. The target marketing process is introduced, and the specific elements of this process—identifying markets with unfulfilled needs, market segmentation, selection of a target market, and positioning—are described in detail.

Learning Objectives 7. Describe the role of advertising and promotion in an organization‘s integrated marketing program. 8. Define target marketing. 9. Discuss the role of market segmentation in an IMC program. 10. Describe positioning and repositioning strategies. 11. Identify the marketing-mix decisions that influence advertising and promotional strategy.

Chapter and Lecture Outline I.

INTRODUCTION

A model is presented at the beginning of the chapter (Figure 2-1) which is a useful framework for analyzing how promotion fits into an organization‘s marketing program. The model consists of four components: 2) The organization‘s marketing strategy and analysis. 3) The target marketing process. 4) Marketing planning program development (which includes promotional decisions). 5) The target market. The first part of the chapter is devoted to examining the four components of this model and the role advertising and promotion play in each. As noted in the text, it is important to note that a firm‘s promotional program is directed not only to the final buyer but also to channel or trade members who distribute its products/services to the ultimate customer. This point is stressed in Figure 2-1 where promotion to trade and resellers is positioned directly between promotional decisions and the target market. The role of promotion is discussed for building and maintaining demand not only in the consumer market, but among the trade as well. Professor Notes:

II.

MARKETING STRATEGY AND ANALYSIS

The marketing process actually begins with the development of a marketing strategy whereby the company determines the product or services area and particular markets in which it wants to compete. A strategic marketing plan usually evolves from an organization‘s overall corporate strategy and serves as a guide for specific marketing programs and policies. The development of a marketing strategy is based on a situation analysis (as discussed in Chapter 1) from which a firm develops an understanding of the market, the opportunities it offers, the competition, and various market segments or target markets the company may wish to pursue. Steps in the development of a marketing strategy include the following. G.

Opportunity Analysis—A careful analysis of the marketplace should lead to alternative market opportunities or areas where the company feels there are favorable demand trends, where customer needs and/or wants are not being satisfied, and where it could compete effectively. Market opportunities are usually identified by examining demand trends in various market segments. The discussion can focus on how market opportunities are identified and can work to determine recent examples of companies finding and exploiting them. The chapter lead-in discusses the strategies behind name changes for companies and brands. IMC Perspective 2-1, which appears later in the chapter, discusses online dating sites and audience segmentation while IMC Perspective 2-2 discusses the factors and changing market conditions that lead brands to reposition themselves. This can lead to a discussion on which factors may be beyond a company‘s control.

Competitive Analysis—In developing marketing strategies and programs, a company must analyze the competition its products or services face in the marketplace. Competition can range from direct brand competition to other products and services that satisfy consumers‘ needs and/or compete for their dollars. Competitors‘ marketing programs have a major impact on a firm‘s marketing strategy and must be carefully analyzed and monitored. Various aspects of advertising and promotion such as promotional spending, media and creative strategy, and sales promotion are often directly affected by competitors. An important aspect of marketing strategy development is the search for an advantage over the competition. A competitive advantage refers to something unique or special a firm does or possesses that gives it an edge over competitors. Competitive advantage can be achieved in a variety of ways, including having quality products that are differentiated from the competition and command premium prices, providing superior customer service, having the lowest production costs or dominating channels of distribution. Competitive advantage can also be achieved through having excellent advertising and promotion that creates and maintains product/service differentiation and brand equity. You might want to discuss how many companies have used advertising to achieve brand equity. Some examples of brands that have utilized advertising to achieve a competitive advantage and brand equity include Samsung, Nike, BMW, and McDonald‘s. It is also important to note the concerns of many advertisers and marketers that reductions in media advertising and increased spending in trade promotions may lead to losses in brand equity and competitive advantage. A final aspect of competition is the growing number of foreign companies penetrating the U.S. market and taking business from domestic firms.

Target Market Selection—After evaluating marketing opportunities for products/services in various market segments, a company selects one or more as a target market for which it will develop a marketing program(s). This target market becomes the focus of the company‘s marketing efforts. Selection of the target market is not only a very important part of a firm‘s marketing strategy, but also has implications for advertising and promotional strategy and tactics.

Professor Notes:

III.

THE TARGET MARKETING PROCESS

Almost no products satisfy the needs of all consumers. Thus, companies must develop marketing strategies to reach and satisfy different consumers. In this section, the concept of target marketing is introduced, noting that there are four distinct steps involved in this process—identifying target markets with unfulfilled needs, market segmentation, selecting a target market, and positioning through marketing strategies. From this point, the chapter will go on to discuss in detail the processes required in each step. Identifying Markets—Target marketing involves the identification of the needs and wants of specific groups of people (or segments), selection of one or more of these groups as targets, and the development of marketing strategies aimed at each. This approach has found increased applicability for a number of reasons. o

The diversity of consumers‘ needs.

Increasing use of segmentation by competitors.

More managers are trained in segmentation and realize its advantages.

The instructor should note that this process leads to a more homogeneous grouping of potential customers, which allows the marketer to develop more precise strategies designed to reach them. J.

Market Segmentation—Once the marketer has identified who it is that is to be targeted, these potential customers are grouped based on similar needs and/or behaviors that are likely to cause them to respond similarly to marketing actions. This division of the market into distinct groups is referred to as the market segmentation process. a. Bases for segmentation—A number of bases for segmentation are available to the marketer including the following: (Figure 2-4 will be helpful here.) 

Geographic segmentation—The market is divided into geographic units (i.e. nations, states, counties, or even neighborhoods) with alternative marketing strategies targeted to each.

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Demographic segmentation—Division involves demographic variables such as age, sex, family size, income, education, and social class, among others.

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Psychographic segmentation—Markets are divided based on the personalities and/or lifestyles of consumers. (The instructor should note that lifestyles have become a commonly employed segmentation strategy.) Programs such as VALS and PRIZM are commonly employed by marketers for this purpose.

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Behavioristic segmentation—This form of segmentation divides consumers into groups according to their usage, loyalty, or buying behaviors. These characteristics are then usually combined with demographic and/or psychographic criteria to develop profiles of market segments. When considering consumer usage and loyalty, marketers consider the 80-20 rule, which proposes that 20 percent of buyers account for 80 percent of their sales volume. Therefore, it is beneficial for marketers to attempt to reach that loyal 20 percent.

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Benefit segmentation—Specific benefits offered by a product or service may also constitute a basis for segmentation. In many instances a variety of benefits may be derived for the same product among different groups. (For example, the instructor might ask students to suggest benefits to be derived from the purchase of a watch, noting that at certain times of the year these benefits will change based on the recipient of the watch!)

b. The Process of Segmenting a Market—This section concludes by reminding the student that market segmentation is indeed a process that develops over time and is a critical part of the situation analysis. K.

Selecting a Target Market—Having conducted the segmentation analysis, the marketer will be faced with two subsequent decisions: Determining how many segments to enter—Three market coverage alternatives are available in this step: 

Undifferentiated marketing would involve the decision to ignore the segment differences and develop one product for the entire market. It should be noted that few firms pursue this strategy today.

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Differentiated marketing involves the decision to compete in a number of segments, developing different marketing strategies for each.

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Concentrated marketing takes place when a firm decides to concentrate its efforts on one specific segment in an attempt to capture a large share of that market. (The examples of Volkswagen and Rolls Royce provided in the book will illustrate this point well.)

c. Determining which segments offer the most potential—This involves determining which of the markets is most attractive by examining the sales potential of the segment, the opportunities for growth, the competition, and a brand’s own ability to compete. L.

Market Positioning Approaches to Positioning—This section discusses the approaches to positioning as well as a number of strategies for developing a position. Positioning has been defined as ―the art and science of fitting the product or service to one or more segments of the broad market in such a way as to set it meaningfully apart from the competition.‖

IV.

DEVELOPING A POSITIONING STRATEGY

This section outlines a number of positioning strategies that can be employed in developing a promotional program, including: Positioning by Product Attributes and Benefits—Setting a product apart by stressing a specific characteristic or benefit offered. Marketers attempt to identify salient attributes that are important to consumers and are the basis for making a purchase decision. M.

Positioning by Price/Quality—In this strategy, price/quality characteristics are stressed. For example, some products set themselves apart by assuming a very high price/quality association, while others become affordable products. While the price element is important, the quality element of price/quality positioning is just as important as the product quality must be comparable to, or even better than, competing brands in order for the positioning strategy to be effective.

Positioning by Use or Application—How a product is to be used may in itself lead to a positioning strategy. The Arm & Hammer and Intuit examples offered in the text have capitalized on this strategy.

Positioning by Product Class—The Amtrak example provided in the text reflects this strategy in which the product is positioned against others that, while not exactly the same, provide the same class of benefits. The California Avocado Commission is another example that might be cited, as well as the Dole campaign cited in the text.

Positioning by Product User—In this strategy the product is positioned at a particular group of users. The Vans shoes ad example in Exhibit 2-19 demonstrates this strategy in practice.

Positioning by Competitor—in many cases the competition may be used to define the positioning strategy. Companies can position their products to set themselves apart from the competition, show superiority, etc. The AT&T ad shown in Exhibit 2-5 is an example in the text that provides an example of positioning a brand against the competition.

Positioning by Cultural Symbols—The Jolly Green Giant, the Pillsbury Doughboy, the Keebler Elves, Ronald McDonald, and Mr. Peanut are all examples of cultural icons, as are the Wells Fargo stagecoach and Tony the Tiger.

Repositioning—Declining sales or changes in market conditions may lead a firm to engage in repositioning. Companies such as JCPenney, La-Z-Boy, and MTV are a few of the examples of companies that have attempted (both successfully and unsuccessfully) to assume a new position in the market. Repositioning occurs because of declining or stagnant sales or because of anticipated opportunities in the marketplace.

Professor Notes:

DEVELOPING THE MARKETING PLANNING PROGRAM

The next stage of the marketing process involves combining the various elements of the marketing mix into a cohesive and effective marketing program. This requires that all elements of the marketing mix be combined effectively and that they be consistent with one another. It is important to stress that each element of the marketing mix is multidimensional in nature and includes a number of decision areas. In discussing the various elements of the marketing mix attention should be given to how each influences and interacts with promotion. Product Decisions—An organization exists because it has some product, service, idea or cause to offer customers. Discussion can focus on benefits or values offered by the product and the fact that products and services satisfy not only functional but social and psychological needs as well. Product decision areas of branding and packaging are particularly important from a promotional perspective because of the role the brand name and package play in communicating attributes, information, and meaning to the consumer. Product symbolism is the term for what a product or brand means to a consumer and what they experience in purchasing and using it. Branding—Choosing a brand name for a product is important from a promotional perspective because brand names communicate attributes and meaning. The goals of branding are three-fold: 1) to build and maintain brand awareness and interest; 2) develop and enhance attitudes toward the company, product, or service; and 3) build and foster relationships between the consumer and the brand. The combination of a brand’s name, logo, symbols, design, packaging, and overall image comprise the brand identity. One important role of advertising in respect to branding strategies is creating and maintaining brand equity. Brand equity can be thought of as an intangible asset of added value or goodwill that results from the favorable image, impressions of differentiation, and/or the strength of consumer attachment to a company name, brand name, or trademark. d. Packaging—The role and function of packaging has changed because of the self-service emphasis of many stores and the fact that as many as two-thirds of all purchases made in the supermarket are unplanned. The WD-40 advertisement in Exhibit 2-22 is an excellent example of how packaging can create new opportunities—sometimes for existing products. T.

Price Decisions—The price variable of the marketing mix refers to what the consumer must give up in exchange for a product or service, Marketing managers must be concerned with establishing a price level, developing pricing policies and monitoring consumers‘ and competitors‘ reactions to price in the marketplace. Factors a firm must consider in determining price levels include:

Costs.

Demand factors.

Competition.

Perceived value. Relating price to advertising and promotion—Factors such as product quality, competition, and advertising all interact in determining what price a firm can and should charge. Studies have shown that pricing and advertising strategies go together.

Distribution Channel Decisions—Marketing channels or the place element of the marketing mix refers to the set of interdependent organizations involved in the process of making a product or service available to customers. Differences in direct versus indirect channel arrangements should be discussed. In discussing the latter, the importance of resellers in marketing and promotional strategy should be introduced. The Internet has become a new channel for most companies, and has had a demonstrable impact on the distribution system. Attention should be given to the need to develop promotional programs for the trade or resellers to encourage them to stock and promote a product.

Developing Promotional Strategies: Push or Pull?—When a promotional push strategy is used, the goal is to push the product through the channels of distribution by aggressively selling and promoting the item to the resellers, or trade. This can be done by having the company‘s sales representatives call on resellers and offering special programs such as promotional allowances and cooperative advertising. Trade advertising in publications that serve the industry such as Progressive Grocer or Drug Store News may also be used as part of a push strategy. When a promotional pull strategy is used, the goal is to create demand among end users which will in turn encourage retailers to carry a brand. Heavy spending on consumer advertising and sales promotion is an important part of a pull strategy.

Professor Notes:

Teaching Suggestions This chapter is designed to provide the student with an overview of the overall marketing process and the role advertising and promotion play in the marketing program. The chapter may be a review for some students, particularly those who have had a basic marketing course. However, we feel that this chapter is more than just a review of marketing principles or fundamentals. We have written the chapter to show the role advertising and promotion play in the marketing process as well as how promotional strategy is influenced by and interacts with marketing strategy and the various elements of the marketing program. Students will benefit from the discussion of the marketing mix from a promotional strategy perspective even if they have had an introductory marketing course. We have found that the model of the marketing and promotion process is a very good framework for analyzing how promotion fits into an organization‘s marketing program. The components of the model cover the basic areas of marketing and the model shows that promotional programs must be developed for the trade as well as for the ultimate customer in the target market. It is important to stress to students the important role resellers play and the need to develop promotional programs to motivate the trade to get them to stock, merchandise and promote a company‘s products. You might point out to students that the recent trends in the allocation of promotional budgets have seen a shift in monies away from media advertising and toward trade promotions. Another shift in budgets has been affected by the advent of the Internet. Students will see that the Internet has both benefited and negatively impacted traditional media. These issues are discussed is considerable detail in the sales promotion and Internet chapters.

Answers to Discussion Questions 2. The chapter opening discusses the fact that many companies have been changing their company names. Give a few examples (other than those in the text) of companies that have changed their names. Explain why you think they took this action, and whether you believe it was a positive or negative move on their part. (LO 2-4) You are probably familiar with the company/brand names Meta (formerly Facebook) and Alphabet (formerly Google) but never even knew that USX used to be called United States Steel (USS), Apple, Inc. used to be Apple Computers, or that Tinder was previously Matchbox. Did you know that KFC was Kentucky Fried Chicken, Dunkin’ was Dunkin’ Donuts, and AirTran was formerly ValuJet? These are just a few of the name changes that have taken place over time in an attempt to not only change the name but also the perceptions of the company or brand itself. Many of these names were quite established and well known, and even doing well as they were. While these name changes were strategic in nature and initiated by the companies themselves in response to new opportunities and/or to avoid potential threats, this is not necessarily the case for others. Some companies must change their names in response to social pressures: examples include Aunt Jemima, Uncle Ben’s, and Eskimo Pie. This is also common in the world of sports, as with recent name changes for the Washington Redskins (now the Washington Commanders) and the Cleveland Indians (now the Cleveland Guardians). Many other sports teams have faced similar challenges, but have yet to change their names as of this writing: the Kansas City Chiefs, the Atlanta Braves, and the Chicago Blackhawks, among others.

Changing names is not an easy decision. Not are not only are there significant financial costs, but also the cost of giving up years of brand identity and starting over. Student examples and opinions on this topic will vary. 3. Online dating sites have now become a common way for people to meet others that share similar characteristics as themselves. Explain why these sites have become so popular, citing some of the factors leading to their success. (LO 2-2) While having a somewhat negative image in the beginning, online dating has become so mainstream that it no longer appears to be anything other than just another way to meet someone who is similar to you—and an apparently effective way at that. An article in Wired magazine in 2002 predicted that, ―Twenty years from now, the idea that someone looking for love won’t look for it online will be silly, akin to skipping the card catalog to instead wander the stacks because the right books are found only by accident.‖ As long as people have different interests, lifestyles, and needs, it appears marketers will find them, and a new online site will be born. There are now thousands of sites and apps frequented by millions of people looking for their match—whether it be a hookup, date, relationship, or marriage. 4. For many marketers, demographics is the most prevalent form of segmentation employed. Explain why this may not necessarily be the most effective form of segmentation to use. Provide examples to support your position. (LO 2-3) Demographic segmentation is the segmenting of markets based on age, income, sex, race, etc. Clearly, there are products targeted to the sexes. Those marketed to men and women, including media as well as products themselves. We have shown in the text that the teenage market is much different than those in midlife and those in older age brackets. Higher income groups are marketed to much differently than lower income groups. Think of the strategies for Jaguar, Mercedes, and Bentley versus those for VW, Kia, and Hyundai. The pricing is different, the product quality is different, and certainly the IMC strategies are different. Remember that Lexus and Infinity are distributed in different dealerships. Benefit segmentation relates to the development of segments based on the specific benefits sought. Think about low-fat or gluten-free products, electric cars, or high gas mileage cars versus SUVs and sports cars—what benefits drive the sale? 5. Digital media have become the focus of many companies‘ media strategies and have experienced strong growth in recent years resulting in traditional media receiving less advertising dollars. Based on what you have learned in this chapter provide some advantages and disadvantages of focusing so much attention on digital media. (LO 2-5) As consumer behaviors have changed, so must a firm’s marketing efforts. More and more, consumers are relying on digital means for information and to purchase goods and services. An advantage of focusing so much more attention on digital media is that this is where consumers continue to become more active. For example, the COVID-19 pandemic had a major impact on where consumers shopped. While digital channels were already experiencing increases in sales, the trend was greatly accelerated as consumers were confined to their homes. The impact on on-site shopping was

devastating to retail establishments, many of which did not survive. Those that increased their digital presence were able to adapt. 6. The chapter identifies 5 different ways to segment a market. Provide an example of a product or service that employs each and explain how and why they employ this method. (LO 2-3) Market segmentation is dividing a market into distinct groups that (1) have common needs and (2) will respond similarly to a marketing action. Five different strategies for segmenting discussed are: 

Geographic Segmentation In the geographic segmentation approach, markets are divided into different geographic units. These units may include nations, states, counties, or even neighborhoods. Consumers often have different buying habits depending on where they reside. Regional differences may exist in regard to food, drinks, attitudes toward foreign products, and the like.

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Demographic Segmentation Dividing the market on the basis of demographic variables such as age, sex, family size, education, income, and social class is called demographic segmentation. Secret deodorant and the Lady Schick shaver are products that have met with a great deal of success by using the demographic variable of gender as a basis for segmentation.

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Psychographic Segmentation Dividing the market on the basis of personality, lifecycles, and/or lifestyles is referred to as psychographic segmentation. While there is some disagreement as to whether personality is a useful basis for segmentation, lifestyle factors have been used effectively. Many consider lifestyle the most effective criterion for segmentation.

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Behavioristic Segmentation Dividing consumers into groups according to their usage, loyalties, or buying responses to a product is behavioristic segmentation. For example, product or brand usage, degree of use (heavy vs. light), and/or brand loyalty are combined with demographic and/or psychographic criteria to develop profiles of market segments. In the case of usage, the marketer assumes that nonpurchasers of a brand or product who have the same characteristics as purchasers hold greater potential for adoption than do nonusers with different characteristics.

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Benefit Segmentation In purchasing products, consumers are generally trying to satisfy specific needs and/or wants. They are looking for products that provide specific benefits to satisfy these needs. The grouping of consumers on the basis of attributes sought in a product is known as benefit segmentation and is widely used. For example, the market for products that contain protein has led to numerous new entries like the Special K Protein cereal.

7. Discuss the difference between a push and a pull strategy. How do these strategies differ in advertising and promotional strategies? (LO 2-5) A push strategy tries to convince resellers they can make a profit on a manufacturer’s product and to encourage them to order the merchandise and push it through to their customers. An alternative strategy is a promotional pull strategy, spending money on advertising and sales promotion efforts directed toward the ultimate consumer. The goal of a pull strategy is to create demand among consumers and encourage them to request the product from the retailer. Seeing the consumer demand, retailers will order the product from wholesalers (if they are used), which in turn will request it from the

manufacturer. Thus, stimulating demand at the end-user level pulls the product through the channels of distribution. Whether to emphasize a push or a pull strategy depends on a number of factors, including the company’s relations with the trade, its promotional budget, and demand for the firm’s products. Companies that have favorable channel relationships may prefer to use a push strategy and work closely with channel members to encourage them to stock and promote their products. A firm with a limited promotional budget may not have the funds for advertising and sales promotion that a pull strategy requires and may find it more cost-effective to build distribution and demand by working closely with resellers. When the demand outlook for a product is favorable because it has unique benefits, is superior to competing brands, or is very popular among consumers, a pull strategy may be appropriate. Companies often use a combination of push and pull strategies, with the emphasis changing as the product moves through its life cycle. 8. What is the difference between product symbolism and functional product attributes? Give examples of brands that reflect each of these in their marketing strategies. (LO 2-5) Product symbolism is a description of what a product or brand means for consumers and what they experience in purchasing and using it. High-end designer handbag brands such as Kate Spade or Coach provide the symbolic image of status, wealth, and high fashion. A protein bar brand such as CLIF bars provides the symbolic image of someone who cares about their health but wants a convenient, on-the-go snack. Functional product attributes are those attributes of a product that appeal to the functionality of the product rather than focusing on the social or psychological benefits of the product such as status symbols. Tire brands such as Michelin promote the quality of their tires and their good value as well as their performance of durability. A brand such as Jiffy Lube, a car repair and oil change shop, stresses the time-saving aspects of their services while also stressing that they are fast and still high-quality. 9. IMC Perspective 2-1 discusses segmentation in the online dating market. Pick any three online sites and discuss the target market these sites are trying to appeal to. Provide examples to support your position. (LO 2-4) Like other industries, when the number of competitors increases, marketers often find that they can no longer compete with everyone or in every market. To market more effectively, they look for segments in the marketplace in which they can compete most effectively. By 2010, segmentation had hit the online dating industry with a bang! There are now thousands of sites and apps frequented by millions of people looking for their match—whether it be a hookup, date, relationship, or marriage. The variety is astounding! Examples discussed in the text include Match.com, eharmony and Zoosk, and Tinder. Other sites which target specific segments of the market include Asian dating sites such as Asian Honeys, and The LuckyDate Asia; sites targeting single farmers who live in rural areas (FarmersOnly.com) and sites for those over the age of 50 (SilverSingles). 10. Many companies compete in a number of market segments. Discuss an example of one such company and describe how it communicates with its customers in different market segments. (LO 2-4) Perhaps the best example might be an automobile company like Toyota. First of all, Toyota makes cars, trucks, SUVs, and vans, offering a vehicle for the needs and wants

of a variety of segments. The car segment offers a range from its low-priced entry the Yaris to the higher-end Avalon. In between are sports oriented vehicles, family vehicles, and the hybrid Prius. Toyota also offers several varieties of SUVs again, reaching various segments based on price as well as lifestyle, as the selection ranges from a small fuel-efficient RAV 4 to the large V8 Land Cruiser. Models at various prices offering specific benefits are offered in between. Lexus, made by Toyota, is targeted to the luxury car market. Another good example is the Marriott hotel chain. A visit to the Marriott website shows that the chain includes offerings from over 15 brands ranging from economy pricing to luxury suites, and appealing to pleasure travelers, business travelers, families, and longstay occupants. The Marriott products reach a variety of segments based on a number of segmentation criteria. 11. The chapter describes various age cohorts including Baby Boomers, Millennials, and Gen Z. Describe some of the similarities and differences between these groups and the implications for marketers. (LO 2-3) This chapter discusses the strategy of segmentation, whereby groups exhibiting common characteristics (demographic, psychographic, etc.) are targeted with similar marketing and IMC strategies. Simply put, the assumption is that the commonalities between the groups allow for efficiencies in implementation, cost savings, and more effective strategies overall. Some believe that this strategy may not be as effective—particularly if taken to the extreme. For example, all Generation Zers are not the same. While you may be very similar to your friends, for example, you no doubt know many others who are in your age range, in your college, etc., who are very different from you. Their lifestyles, values, interests, etc. make them seem almost alien, and you share nothing in common. When marketers segment, they are stereotyping to an extent. And while this strategy has been proven to be effective, it can also be dangerous if the marketer is to assume that by segmenting on any particular basis leads to one homogenous group that requires only one marketing strategy.

Additional Discussion Questions (not in text) 12. As noted, packages are now becoming communications tools, serving as advertising vehicles. At the same time, packages are changing the other marketing mix elements as well. Discuss how packages are being used to impact price and distribution strategies as well as promotional strategies. (LO 2-2) One such example is that of Coors Light’s cans, which change colors when the product is at the preferred drinking temperature. This is just one of many examples, of the use of packaging more effectively in the marketing mix. In the Coors case, the uniqueness of the package design is, in itself, a potential selling point. As the same time, it is a beneficial package element that helps insure that the product is consumed at the point at which it will have the most flavor. From a promotional standpoint, packages can be effective in attracting attention, differentiating the product, and creating a brand image. The role of the package is to communicate and establish a position for the product and/or brand. 1-36 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

Packages are also being used to make the product more convenient. Think about how lids have changed. Plastic is becoming more popular than cans, tuna can now be carried in an easy-open pouch instead of a can. Separate tops for consuming drinks while participating in sports, walking, etc. have now become more attractive. Package sizes are used to differentiate—family size bottles, to regular size cans, to half-cans, or minicans make consumption more convenient. Ultimately, the different packages impact the price variable. Sticking with the drink example, the sports packaged drinks cost more than the same amount of beverage in a non-sports package. Convenience packages of potato chips, cookies, etc. used for brown bag lunches cost more than larger bags, etc. Typically, larger size containers cost less (on a relative basis) than do these convenience packaged items. Many companies have changed their package designs to accommodate retailers. With the enormous battle for shelf space comes a marketing opportunity or necessity. Uniquely designed packages that do not fit or take up too much room on the shelves must give way to those that do. Packages that are more durable are also being required in an attempt to eliminate or reduce breaking or spilling. Finally, from an IMC perspective, the package communicates a lot about the brand. The Arm & Hammer baking soda packaging immediately communicates about what is inside of the package, its quality, and it’s longevity. Expensive brands rely on packaging as much as do the inexpensive ones in informing the consumer as to what to expect inside. 13. The text describes a number of different positioning strategies. Give examples of products and/or brands that utilize each of these different strategies. (LO 2-5) The text lists a number of ways that companies can position their products. These include: Positioning by product attribute and benefits—In this case, a company differentiates itself based on specific characteristics and/or benefits that it offers. Apple has positioned itself on its‘ innovative technology and exciting products and Emergen-C positions itself as a product that fortifies and refreshes, and increases your energy. Positioning by price/quality—Companies like Bose and Bang & Olefsen position themselves as very high-quality brands that are worth the extra expense associated with their purchase. While not irrelevant, the companies want to communicate that price should not be the major factor considered in their purchase. Kohl‘s takes the position of a family-oriented specialty store offering good value. Positioning by use or application—Another way to communicate a specific image or position for a brand is to associate it with a specific use or application. The Intuit ad shown in the text is specifically targeted to small business owners and/or entrepreneurs. Positioning by product class—A number of juice companies position themselves as a substitute for eating fruit, and V8 says to ―drink your vegetables.‖ The California Avocado Commission has more strongly positioned avocados as a fruit. Positioning by product user—Vans shoes ad emphasizes identification or association with a specific group—in this case, skateboarders.

Positioning by competitor—Perhaps the best-known example of this strategy was Avis, which positioned itself against the car-rental leader, Hertz, by stating, ―We‘re number two, so we try harder.‖ Positioning by cultural symbols—The Jolly Green Giant, the Keebler elves, and the Pillsbury Doughboy are all examples of companies that have cultural symbols. Tony the Tiger has been used by Kellogg‘s for over 60 years. 14. What is meant by repositioning? Discuss some companies that have successfully employed this strategy. (LO 2-4) Sometimes due to a downturn in sales, changing marketing conditions, or other reasons, companies may need to change their positioning strategy, also known as re-positioning. Perhaps the most often cited example of this is Rolling Stone magazine, which changed from a predominantly music-oriented medium to include articles that reach a broader audience. Another example is MTV, which started as a channel playing music to one that now contains much broader programming and only a small portion of music playing. It is not difficult to find companies that have repositioned themselves in recent years. A few of these include: 

Cadillac—the flagship of the GM line has tried to move away from the image of ―my grandfather‘s car" to attract a younger market. Using rock stars, young athletes, entertainment stars, and product placements are just a few strategies Cadillac has employed.

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IBM—once a computer company, IBM now has a completely different image as a solutions provider.

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Xerox—the copy machine company has almost no identity with copying services.

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Kia and Hyundai—these Korean manufactured automobiles have been forced to reposition from a low-price positioning to one of higher quality. Both are doing so quite successfully.

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Abercrombie—the difference between the Abercrombie of today and 20 years ago is worlds apart. While many companies successfully re-position, many others are less fortunate. To successfully reposition, brands must commit to the strategy in total. Failure to do so, will lead to failure in the marketplace.

15. Many companies have maintained their same brand identity for years by keeping the same logos, packaging, and so on, while others have made changes. Give examples of companies employing both of these strategies and discuss their results. (LO 2-5) What comes to mind when you see the package or logo of Coke, Jaguar, Budweiser, Target, or the Penn State football team? Each of these brands is clearly identifiable, with strong recognition and image identification. (In 2012, Penn State changed its uniform for the first time in over 50 years by putting names on the back of the players’ jerseys.) When a consumer sees a Target store logo, it is clear as to what it means and what is inside of that store. The BMW and Jaguar logos are clearly recognizable. UPS has extended its brown label to their packaging and shipping stores.

On the other hand, what comes to mind when you see the package or logo of less well known and identifiable brands? Can you describe what the Xerox logo looks like? What about Duracell batteries? Do you easily recognize a Postal Annex sign? While the first group sends a clear signal about what they stand for through their packages and or logos, the latter does not—either as a result of not building the brand image or changing it too often. To establish a strong brand image, brands must promote and establish their logos and packages to add an extra communications contact point. They must also stick with this position and identity and not change it too often. In 2022, M&Ms, Instagram, Pfizer, and Baskin Robbins all changed their logos—some drastically, others minimally. Time will tell how this works out.

IMC Exercise The text discusses a number of efforts by marketers to reach diverse market segments by targeting various ethnic groups and subcultures such as teenagers. Have students find ads targeted to specific market segments and have them bring these ads to class and discuss which market segment is being targeted, the type of appeal used in the ad, and whether they feel the targeting effort will be successful.

CHAPTER 3 ORGANIZING FOR ADVERTISING AND PROMOTION: THE ROLE OF AD AGENCIES AND OTHER MARKETING COMMUNICATION ORGANIZATIONS Chapter Overview The purpose of this chapter is to familiarize the student with the various ways that organizations might organize for purposes of developing and executing integrated marketing communications programs. Students often have little or no idea of the roles of various participants in the advertising and promotional program and how the IMC function is organized and coordinated. The chapter begins with a presentation of the various participants involved in the promotional planning process—advertisers, advertising agencies, media organizations, marketing communication specialist organizations, and collateral service organizations. This is followed by a discussion of the various organizational systems and the advantages and disadvantages of each. An in-depth discussion of the role and functions of advertising agencies is provided, as is an explanation of how agencies are compensated and evaluated. The chapter also discusses organizations that provide specialized integrated marketing communication services including directresponse, sales promotion, and interactive agencies as well as public relations firms. It is very important for students to understand that a variety of different organizations may play a role in the development of various aspects of a company‘s integrated marketing communications program.

Learning Objectives Describe how companies organize for advertising and integrated marketing communications functions. Compare the advantages and disadvantages of different ways to organize for advertising and promotion.

Identify the types of advertising agencies and the roles they play. Explain how to select, compensate, and evaluate advertising agencies. Identify the role and functions of specialized marketing communication organizations. Compare the pros and cons of using an integrated marketing services agency.

Chapter and Lecture Outline I. PARTICIPANTS IN THE INTEGRATED MARKETING COMMUNICATIONS PROCESS: AN OVERVIEW This chapter examines the various organizations that participate in the integrated marketing communications process, their roles and responsibilities, and their relationship to one another. Some companies choose to handle advertising, media buying and other parts of their IMC programs in-house. However, most major marketers use advertising agencies and other types of promotional specialist organizations to handle the various areas of their IMC programs as they do not have these capabilities internally. Marketers are always searching for creative ways to communicate with their customers and are looking for agencies that can offer a range of integrated marketing communication capabilities and help them compete in the rapidly changing world of advertising and promotion. The opening section provides an overview of the various participants in the integrated marketing communications process. The student should become familiar with the various players including clients, advertising agencies, media organizations, specialized marketing communications specialists, and those who provide collateral services. It is particularly important to note that with the movement toward IMC, marketing communication specialist organizations such as direct response agencies, sales promotion agencies, public relations firms, and digital/interactive agencies are playing an increasingly important role in the development and implementation of programs in their areas of expertise. However, decisions also have to be made regarding the coordination and control of the IMC program and whether this should be the responsibility of the client or turned over to the control of an outside agency.

II. ORGANIZING FOR ADVERTISING AND PROMOTION IN THE FIRM: THE CLIENT’S ROLE How a firm organizes for advertising and promotion is a function of a number of factors including (1) the size of the organization, (2) the number of products it markets, (3) the role that advertising and promotion assume in the product mix, (4) the advertising and promotions budget, and (5) the structure of the firm. Three organizational designs are discussed: The Centralized System—In a centralized system, marketing activities are organized along functional lines. A common form is to have an advertising manager (or marketing communications manager) responsible for all advertising and promotions activities including planning and budgeting, administration and execution, and coordination with other departments and outside agencies. The Decentralized System—In a decentralized system, individual products or brands are the responsibility of the brand manager (or product manager). All advertising and promotion for the brand or product will be this person‘s responsibility (including responsibilities for working with all external agencies) and s/he will be in charge of all planning, implementation and control for that product or brand. In-House Agencies—Some companies develop their own internal ad agencies. The design of these agencies may vary from small advertising departments to operations as large as an external agency. In the latter case, the in-house agency will operate as a separate entity and control advertising and promotional expenditures in millions of dollars. Large companies that use inhouse agencies include Hyundai/Kia, Avon, Revlon, Land Rover, and Spotify. The advantages and disadvantages associated with each of these organizational systems are shown in Figure 3-4. This exhibit can be used as an effective slide for class discussion purposes.

Professor Notes:

III.

ADVERTISING AGENCIES

Many large companies employ the services of an external advertising agency. More than 14,000 U.S. and international agencies are listed in the Advertising Red Books however, most are individually owned small businesses employing fewer than five people. The U.S. ad agency business is highly concentrated. Nearly two-thirds of the domestic billings are handled by the top 500 agencies. Agency Consolidation—There are five large agency holding companies including WPP, Omnicom Group, Interpublic Group, Publicis Groupe, and Accenture Rose. These holding companies own multiple advertising agencies, media specialist companies, public relations firms, digital agencies, and other types of marketing communication organizations. The top ten advertising agencies are shown in Figure 3-5 of the text. The Ad Agency‘s Role—External agencies provide a variety of services to their clients, including those discussed in the previous section. Though many clients have the capabilities of performing these roles themselves, they elect to use outside agencies for the following reasons: (1) the skills offered, (2) objectivity, and (3) experience. Types of Ad Agencies—All agencies are not the same of course. This section discusses the various types of agencies and their services. a. Full-Service Agencies—These agencies offer their clients a full range of services including account services, marketing planning and research, media planning and buying, sales promotion, creative services, and interactive media. The various departments of a full-service agency include: b. Account Services—The link between the advertising agency and its clients. Account executives serve as the liaison between the agency and client and are responsible for coordinating the agency's efforts in planning, creating and producing ads. c. Marketing Services—Many full-service agencies provide a variety of marketing services to their clients and maintain departments such as research, strategy and planning and media. In many agencies the marketing services department may include account planners who are individuals that gather information that is relevant to the client‘s product or service and can be used in the development of the creative strategy as well as other aspects of the IMC campaign. The research and media department provides important services that full-service agencies need to plan and execute their client‘s advertising programs. d. Creative Services—Agency personnel in this department include artists and copywriters who are responsible for the creation and execution of the clients advertising messages. Creative services may also include print and broadcast production departments, which are responsible for actually producing the advertising messages and putting them into final form. The traffic department coordinates all phases of production and sees that all ads are completed on time and deadlines for submitting the ads to the media are met.

e. Management and Finance—Like any other business, an advertising agency must be managed and must perform basic operating and administrative functions such as accounting, finance, and human resources. f.

Agency Organization and Structure—Attention should also be given to the two basic types or agency organization structures used by agencies. Under the departmental system, each of the agency functions is set up as a separate department and is called upon to perform its specialty for all of the agency‘s clients. Many agencies use the group system in which individuals from each department work together as teams to service a particular account. Many clients prefer the group system because agency employees become very familiar with their business, and it ensures continuity in servicing the account.

Other Types of Agencies and Services—Many small advertisers are interested in specific services other agencies offer. Several alternatives to full-service agencies have evolved, including the following: g. Creative Boutiques—These types of agencies specialize in and provide only advertising creative services. They have creative personnel such as writers or artists on staff but do not have media, research or account planning capabilities. Many creative boutiques are formed by members of the creative departments of full-service agencies who leave the firm and take with them clients who want to retain their creative talents. IMC Perspective 3-1 provides some interesting insights into client-agency relationships. h. Media Specialist Companies—These are independent companies that specialize in media planning and buying. Many companies use independent media buying services to plan and purchase media and an advertising agency to handle their creative work. A major development in the purchasing of advertising media in recent years has been the rapid growth of programmatic buying, which refers to wide range of technology. Many of the major agencies have formed independent media services companies that handle the media planning and buying for their clients. Media specialist companies have become very important since many clients are consolidating their media buying to save money and improve media efficiency. Digital and Social Media Perspective 3-1 discusses why more companies are bringing media buying in-house. Professor Notes:

IV.

AGENCY COMPENSATION

Agency agencies may be compensated in a variety of ways, including: A.

Commissions from Media—The agency is compensated based on the time or space it purchases for its client. The commission has traditionally been 15 percent (16 2/3 percent for outdoor), but now is often negotiated downward. The commission system has been the target of criticism for a number of years as critics argue that it ties agency compensation to media costs and encourages agencies to rely too much on expensive, commissionable media such as network television and avoid noncommissionable IMC tools. Many advertisers have moved to a negotiated commission system that takes the form of reduced percentage rates, variable commission rates, and minimum

and maximum compensation rates. The most recent survey commissioned by the Association of National Advertisers found that 12 percent of clients pay a commission to their agencies. Among those companies that do pay commissions, most do not pay the traditional 15 percent. An earlier ANA survey of global ad agency compensation found that reliance on commissions is a more common practice outside the United States. B.

Fee, Cost, and Incentive-Based Systems—In situations where billings are low, and/or the client does not wish to pay a direct commission, an agreement may be reached in which the agency is compensated in the way of a fee, cost-plus, or incentive-based compensation system. Fee Arrangement—There are two types: A fixed-fee method is when the agency charges a basic monthly fee for all of its services and credits to the client any media commissions earned. Under a fee-commission combination, the media commissions received by the agency are credited against the fee. If commissions are less than the agreed-on fee, the client must make up the difference. i.

Cost-Plus Agreement—Under a cost-plus system, the client agrees to pay the agency a fee based on costs of its work plus some agreed-on profit margin. This system requires the agency to keep detailed records of costs incurred in working on a client‘s account.

Incentive-Based Compensation—While there are many variations on this system, the basic idea is that the agency‘s compensation level will depend upon how well it meets predetermined performance goals for its clients such as sales or market share. Figure 3-8 shows some of the criteria used for incentive-based compensation systems. Incentive-based compensation systems are becoming more prevalent as marketers strive to make their agencies more accountable and reduce costs.

Professor Notes:

Percentage Charges—When agencies purchase services from other outside agencies, they typically add a percentage in the form of a markup charge as their compensation. These markups usually range from 17.65 to 20 percent.

The Future of Agency Compensation—Companies have continued to make significant changes in their agency compensation systems, including increased use of the commission system and valuebased compensation systems. More companies are changing their compensation systems as they move away from traditional mass media advertising and turn to a wider array of marketing communication tools. A new issue has emerged from the increased emphasis on procurementdriven cost cutting: the practice of media rebates, which are loosely defined as an agency‘s receipt of a volume discount or compensation from media buys that is not passed on to the client. Figure 3-9 provides criteria for developing and analyzing agency compensation methods.

Professor Notes:

EVALUATING AGENCIES

Given the substantial amounts of money being spent on advertising by many companies, demands for accountability are increasing. The agency evaluation process generally involves two types of assessments—financial audits and qualitative audits. The financial audit focuses on how the agency conducts its business including verification of costs and expenses, the number of personnel hours charged to an account and payments to media and outside suppliers. The qualitative audit involves the agency‘s efforts in planning, developing and implementing the client‘s advertising programs and the results achieved. An increasing trend among larger firms is to formalize this process. A.

Gaining and Losing Clients—Agencies are like their clients in the sense that they must solicit business, and they often gain and lose business. The text offers a variety of reasons as to why agencies gain and lose clients, as well as some of the activities they perform in seeking new business. Current issues of Advertising Age or Adweek will be useful in providing the instructor with examples of recent account changes and some of the reasons clients decided to change agencies. Why agencies lose clients: i)

Poor performance or service.

ii) Poor communication. iii) Unrealistic demands by the client. iv) Personality conflicts. v) Personnel changes. vi) Changes in size of the client or agency. vii) Conflicts of interest. viii)

Changes in the client‘s corporate and/or marketing strategy.

ix) Declining sales. x) Conflicting compensation philosophies. xi) Changes in policies. xii) Disagreements over marketing and/or creative strategy. xiii)

Lack of integrated marketing capabilities.

k. How agencies gain clients: xiv)Referrals. xv) Solicitations.

xvi)Presentations. xvii)

Public relations.

xviii)

Image and reputation.

Professor Notes:

VI.

SPECIALIZED SERVICES

In addition to advertising agencies, other outside organizations may provide marketers with specialized services that are important in developing and executing integrated marketing communication programs. A.

Direct-Marketing Agencies—One of the fastest growing areas in IMC is direct marketing, where companies communicate with their customers through telemarketing, direct mail, and other forms of direct-response advertising. Direct-marketing agencies provide their clients a variety of services, including database analytics and management, direct mail, research, media services, and creative and production capabilities.

Sales Promotion Agencies—There are many companies specializing in the provision of sales promotions such as contests, games, sweepstakes, and refund and rebate offers. Services provided by large sales promotion agencies include promotional planning, creative research, tie-in coordination, fulfillment, premium design and manufacturing, catalog production, and contest/sweepstakes management. Time might also be spent discussing how promotional agencies are becoming important participants in the development of integrated marketing communications strategies for various companies.

Public Relations Firms—Many large companies use both advertising agencies and public relations (PR) firms. Public relations firms develop and implement programs to manage an organization‘s publicity, image, and affairs with consumers and other relevant publics, including employers, suppliers, stockholders, government, labor groups, citizen action groups, and the general public. The role of PR firms is examined in more detail in Chapter 17.

Digital Agencies—With the rapid growth of the Internet and other forms of interactive media, a new type of specialized marketing communication organization has evolved—the digital agency. Many marketers are turning to digital agencies for their expertise in digital media, content marketing, e-mail marketing and lead generation, database and customer relationship management, measurement, and analytics. The growth of social media and the increase in the number of marketers using them is giving rise to companies that specialize in developing applications and campaigns for platforms such as Facebook, Twitter, Instagram, and Snapchat.

Professor Notes:

VII.

COLLATERAL SERVICES

The final group of participants in the promotional process is those organizations that provide collateral services, such as marketing research, package design, consulting, photography, graphic design, talent and influencer selection, video production, and event marketing services. One of the more widely used collateral service organizations is market research firms that conduct both qualitative research such as focus groups and quantitative studies such as market surveys.

VIII.

INTEGRATED MARKETING COMMUNICATION SERVICES

Companies must decide whether to use a different organization for each marketing communications function or consolidate them with a large advertising agency that offers all of these services under one roof. A.

Pros and Cons of Integrated Services—It has been argued that IMC is nothing new, particularly in smaller companies and communication agencies that have been coordinating a variety of promotion tools for years. However, in the past, the various services were run as separate profit centers. Proponents of integrated marketing services contend that:  Greater control of the promotional process allows for more synergy among each of the communication program elements.  It offers convenience for clients to coordinate all promotional efforts with one agency.  Agencies with IMC capabilities can more easily create a single, unified image for the client. Opponents argue that:



Controlling all aspects of the promotional program is only an attempt to hold on to business that might otherwise be lost to independent providers.



Synergy and economies of scale are often not achieved by a single agency handling all communication areas.



Competition and conflict among agency subsidiaries have been a major problem.

Responsibility for IMC: Agency versus Client—A final area covered in this section is a discussion of whether the client or advertising agency should have the primary responsibility for planning and coordinating the IMC process. Most marketers believe it is their responsibility to set strategy for and coordinate integrated campaigns, while agency executives see this as their domain. The major barrier is a lack of people in agencies with the broad perspective and skills needed to make IMC work effectively. Internal turf battles, agency egos, and fear of budget reductions are also cited as major barriers to successful integrated marketing campaigns. A study by the Corporate and Executive Board‘s Advertising and Marketing Roundtable found that for many companies, the traditional static model of a single ad agency or fixed roster of agencies working on a brand is being replaced by an open-source model whereby marketers hire multiple partners to leverage their talents and expertise in various areas. However, there is still the issue of who will coordinate the efforts of the various specialist organizations as lead agencies prefer to handle many of these services themselves rather than overseeing the work of others.

Preparing for the Future—Traditional advertising agencies are facing competition from a variety of specialist companies, particularly in the areas of digital marketing and information technology, as well as the clients themselves who are bringing more of their IMC functions in-house. Therefore, agencies must be able to prove their value to clients and show how they are providing not just services, but solutions to their marketing communication problems. Figure 3-11 lists important foundational elements for the modern agency.

Teaching Suggestions As noted earlier, the student is usually unfamiliar with how companies organize for advertising and promotion and the role that various organizations play in this process. While most students are somewhat familiar with advertising agencies, they are less likely to know anything about direct-response and sales promotion agencies, public relations firms, and digital agencies. You might note that there are some excellent career opportunities available in these areas, as students are often interested in working for an advertising agency. This chapter will help to familiarize them with other major participants in the IMC process and the important role they play. You might encourage students to visit the websites of a promotion agency such as Aspen Marketing Services or a digital agency such as Digitas (www.digitas.com). Because of the rapidly changing advertising environment, it is important for the instructor to keep up-todate with events that are taking place. Good sources of information on advertising are publications and their companion websites such as Advertising Age (www.adage.com) and Adweek (www.adweek.com). Another excellent source of information on promotion is the Brand Activation Association (BAA) (formerly the Promotion Marketing Association) which is the world‘s leading non-profit promotion marketing trade association. The BAA is now part of the Association of National Advertisers (https://www.ana.net/brand-activation). Your lecture can be supplemented by articles from the sources listed above. We have also found strong student interest in identifying current ad campaigns that have been created by various agencies. Most major agencies have excellent websites that contain client rosters, examples of their advertising, information about their advertising philosophy, approaches to branding, and content related to other areas IMC areas.

Answers to Discussion Questions 16. The chapter opener discusses the acquisition of Droga5 by the consultancy company Accenture Song. Discuss how an independent agency such as Droga5 can benefit from being acquired by a consultancy company. (LO 3-3, 3-5) In the past, the advertising industry was dominated by traditional advertising agencies. Today, old-guard agencies find themselves competing against a different type of agency whose parent companies are known more for their accounting or management consulting expertise than advertising or marketing. But a strong message was sent that they do indeed plan to move deeper into the advertising business when Accenture Interactive (AI) paid nearly $500 million in 2019 to acquire Droga5, a leading independent agency widely recognized as a creative powerhouse. Thus far, Accenture Interactive’s acquisition of Droga5 appears to be working quite well. In 2021 David Droga was named the new CEO and creative chairman of Accenture Interactive. According to Accenture, in his new role Droga will drive creative excellence, customer experience, and business innovation, all of which leverage the unique capabilities of AI. This move showed that Accenture Interactive has rapidly become the leading digital powerhouse at the intersection of data, creativity, and technology. A few months after taking over as CEO, Droga rebranded Accenture Interactive by changing the name of the company to Accenture Song and consolidating more than 40 marketing, communications, and consulting companies under one name. Digital work now accounts for nearly two-thirds of the revenue for these agencies from all disciplines. Moreover, consultancies are already doing digital work for their clients and can use the vast amounts of data and insights they have on consumers to move into the creative turf of advertising agencies. 1-49 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

The takeaway is that many agencies will have to transform themselves if they hope to survive in the new digital world of advertising. 17. Who are the various participants in the integrated marketing communications process? Discuss the roles and responsibilities of each and how they are changing, given developments occurring in the advertising industry. (LO 3-1) Advertisers or clients are the key participants. It is their product or service that is being offered and that must be marketed. The advertiser is responsible for all marketing aspects and will ultimately have the final say regarding approval of the proposed integrated marketing communications program. It is the advertiser/client who ultimately must provide the budget and pay the bills as well. The advertising agency is an external organization specializing in the planning, creation, and production of the marketing communication messages. They may also provide additional services designed to facilitate the integrated marketing effort such as media planning and buying, research, strategic marketing planning, directing marketing, and digital marketing. Media organizations provide the advertiser with a channel for their communications. Media may include traditional forms such as print, broadcast, and outdoor, as well as new digital media. Media organizations attempt to provide the advertiser with the proper environment for the message. Marketing communication specialist organizations provide services in specific areas of marketing communications. They include directresponse agencies, sales promotion agencies, public relations firms, and digital agencies. Collateral services participants are those who provide a wide range of support services including marketing research, package design firms, consultants, photographers, event sponsorship firms, and the like. Their functions will vary in accordance with the needs of the integrated marketing communications program. 18. Discuss the three systems companies generally use to organize for advertising and promotion. What types of companies are most likely to use each system? (LO 3-2) Centralized: In many organizations, marketing activities are divided along functional lines. The advertising manager is responsible for all promotions activities except sales (in some companies this individual has the title of marketing communications manager). In the most common example of a centralized system, the advertising or marcom manager controls the entire promotions operation, including budgeting, coordinating creation and production of ads, planning media schedules, and monitoring and administering the sales promotions programs for all the company’s products or services. A centralized organizational system is often used when companies do not have many different divisions, product or service lines, or brands to advertise. For example, airlines such as Southwest, American, and JetBlue have centralized advertising or marcom departments, as do major retailers such as Target, Walmart, and Best Buy. Decentralized: In large corporations with multiple divisions and many different products/services and brands, it is difficult to manage all the advertising, promotional, and other functions through a centralized department. These types of companies generally have a decentralized system, with separate sales and marketing departments for various divisions, product lines, or businesses. Many companies that use a decentralized system, such as Procter & Gamble, Unilever, PepsiCo, Google, and Nestlé, assign each product/service or brand to a brand manager who is responsible for the total management of the brand, including planning, budgeting, sales, and profit

performance. The brand manager, who may have one or more assistant brand managers, is also responsible for the planning, implementation, and control of the marketing program. Some companies may have an additional layer(s) of management above the brand managers to coordinate the efforts of all the brand managers handling a related group of products. This system—generally referred to as a category management system—includes category managers as well as brand and advertising managers. Category management is often used in large multiproduct or divisional companies such as Procter & Gamble, whose broad portfolio includes 10 product categories with 65 brands–21 of which generate more than a billion dollars in revenue each year. In-house agency: Some companies, in an effort to reduce costs and maintain greater control over agency activities, have set up their own advertising agencies internally. An in-house agency is an advertising agency that is set up, owned, and operated by the advertiser. Some in-house agencies are little more than advertising departments, but in other companies they are given a separate identity and are responsible for the expenditure of large sums of advertising dollars. Large advertisers that use in-house agencies include Hyundai/Kia, Avon, Revlon, Land Rover, and Spotify. Many companies use in-house agencies exclusively; others combine in-house efforts with those of outside agencies. A major reason for using an in-house agency is to reduce advertising and promotion costs. The use of in-house agencies has grown tremendously in recent years as studies by the Association of National Advertisers as well as the InHouse Agency Forum have found that nearly 80 percent of companies now have some type of in-house agency and that they are continuing to bring more IMC assignments inhouse. 19. Discuss the pros and cons of using an in-house advertising agency. Why are many companies moving their advertising in-house rather than using an outside agency? (LO 3-2) Some of the reasons why firms use in-house agencies include: (1) cost savings; (2) control; and (3) increased ability to coordinate marketing and promotional activities. Negative aspects include: (1) internal employees may have less experience and inferior skills than their external counterparts; (2) they may be less objective about the product and its capabilities; and, (3) they may be less flexible with respect to what they are willing and able to do with the product and/or brands programs. Companies often use an in-house agency when they have sufficient and capable staff to conduct the advertising and promotional activities themselves; they have a very large advertising and promotional budget and wish to save the costs of fees and commissions; and/or when they believe that the ability to coordinate and control the promotional activities is more feasible with this design. Companies change from using an in-house agency and hire an outside agency for various reasons. Many marketers feel that the use of an outside agency provides greater objectivity with respect to the advertising. When an in-house agency is used, management may get too close to the advertising process and product and will lose its objectivity when evaluating the ads. Outside agencies can provide a more objective perspective on the market and business that is not subject to internal biases and politics. Companies often move from in-house to outside agencies as they become larger and their advertising and other marketing communication needs become greater. Rather than continuing to expand the in-house agency, many companies will move to using an outside agency that has the various services and expertise needed by the company. It

should be noted that perhaps the major reason why outside agencies are used is that they provide the client with the services of highly skilled individuals who are specialists in the advertising area. Outside agencies also offer more flexibility to an advertiser as they can always switch agencies and hire a new one if they are dissatisfied with the work being done. It is much more difficult to terminate an in-house agency and hire new personnel to replace them. 20. Discuss the role of account planning in an advertising agency. What are some of the responsibilities of an account planner? (LO 3-3) Account planners are individuals who gather information that is relevant to the client’s product or service and can be used in the development of the creative strategy as well as other aspects of the IMC campaign. Account planners work with the client as well as other agency personnel including the account executives, creative team members, media specialists, and research department personnel to collect information that can be helpful in gaining a better understanding of the client’s target audience and the best ways to communicate with them. They gather and organize information about consumers as well as developments in the marketplace that can be used to prepare the creative brief, which is a document that the agency’s creative department uses to guide the development of advertising ideas and concepts. Account planners may also be involved in assessing consumers’ reactions to the advertising and other elements of the IMC program and providing the creative staff as well as other agency personnel with feedback regarding performance. 21. Why might an advertising agency choose to remain independent rather than being acquired by a larger agency or a holding company? (LO 3-1, 3-3) Not every agency is a large full-service agency. For example, creative boutiques are small ad agencies that provide only creative services. Many creative boutiques have been formed by members of the creative departments of full-service agencies who leave the firm and take with them clients who want to retain their creative talents. An advantage of these smaller agencies is their ability to turn out inventive creative work quickly and without the cumbersome bureaucracy and politics of larger agencies. There are a number of reasons why some agencies prefer to remain independent rather than being part of a larger agency network. They can often offer more personalized service for clients, maintain healthier work-life balances, and make nimble choices without have to sit through rounds of approval. Independent agencies can also maintain financial autonomy and be more selective about the clients with whom they choose to work. 22. Discuss the various ways agencies are compensated and how they are changing. Which type of agency compensation model is likely to become dominant, given the changes occurring in the industry? (LO 3-4) As more marketers adopt an integrated marketing communication perspective and move away from traditional mass media, changes in compensation systems are taking place. These changes are taking place to encourage agencies to look beyond expensive commissionable media such as television and magazines and to make use of other IMC tools such as events, the Internet, and direct marketing. advertising in developing IMC programs. Many companies are also demanding more accountability from their agencies and are moving away from the traditional commission system and using incentive-based systems where agency compensation is tied to performance. The performance measures may include objective measures such as sales and/or market 1-52 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

share as more subjective measures such as evaluations of the agency’s creative work. Companies feel that if agencies really want to be true partners, they will be willing to share in the sales performance of the product or service with them. Demands for accountability are also resulting in more scrutinizing of agency’s labor and other costs incurred in serving the account. Agencies are being viewed like other suppliers who are asked to continually lower their costs as clients are unwilling to compensate agencies for expenses that cannot be directly related to the performance of the advertising program. 23. Discuss the various criteria a company might use to evaluate the work of its advertising agency. (LO 3-4) The agency evaluation process usually involves two types of assessments—one financial and operational and the other more qualitative. The financial audit focuses on how the agency conducts its business. It is designed to verify costs and expenses, the number of personnel hours charged to an account, and payments to media and outside suppliers. The qualitative audit focuses on the agency’s efforts in planning, developing, and implementing the client’s advertising programs and considers the results achieved. The evaluation is often done on a subjective, informal basis, particularly in smaller companies where ad budgets are low, or advertising is not seen as the most critical factor in the firm’s marketing performance. However, some companies have developed formal, systematic evaluation systems, particularly when budgets are large and the advertising function receives much emphasis. One survey found that qualitative performance is weighted more heavily than quantitative factors. Among the leading qualitative performance criteria identified in the survey were innovation, ideas, teamwork, meeting deadlines, strategy, and implementation. Another important consideration in evaluating agencies is the value they provide to their client’s business. The top seven dimensions of agency activity that advertisers indicated add the most value to their business are: 20. Developing and producing creative ideas that are fresh and appropriate. 21. Ensuring that agency disciplines and functions are integrated and that agency teams and divisions collaborate well on behalf of the client. 22. Working in a collaborative way with the client by creating an environment of low egos and high mutual respect. 23. Developing ideas and programs that can be integrated into multiple communication channels. 24. Assigning its best people to the client’s business and making its top executives available when needed. 25. Evaluating brand drivers like awareness, consideration, and purchase intent. 26. Providing guidance and solutions in new media and technologies. 24. Many of the largest advertising agencies are now consultancies such as Accenture Song, Deloitte Digital, and IBM Corp. IBM iX. Discuss the reasons marketers are using consultancies to handle their advertising and other areas of marketing communication versus traditional advertising agencies. How might traditional agencies respond to the threats they are facing from consulting companies? (LO 3-3, 3-6) The growth of digital marketing, automation of media selling and buying, and the need for abilities in big data interpretation and processing have all led brands to question the need for traditional advertising agencies and instead turn to consulting firms who specialize in data analytics, digital media, or the use of ad technology in buying and selling ad space. Advertising agencies may respond to this shift by engaging in

convergence or purchasing smaller, more specialty consulting firms and offering and promoting more tailored or specialized services to their clients. They may also begin to seek out employees who can offer a more diverse skillset—those who are capable of offering skills in research and strategy development, who are also strong in managing client relationships and data analysis, and who also offer skills in creative for digital spaces. 25. Discuss the reasons why advertising agencies lose accounts. Find an example of a company that changed advertising agencies and identify the factors that led them to switch to another agency. (LO 3-4) The relationship between a client and an agency is influenced by a variety of factors. An advertiser may decide to switch agencies for a number of reasons. Some of the most common reasons why clients switch agencies are discussed in the Gaining and Losing Clients section of the text. These include perspectives on compensation policies, the demands clients place on agencies, the level of service the agency provides, the personalities of agency and client personnel, the performance of the client’s product or service, the perceived quality of the agency work in various areas (including account planning and management, creative, media, use of non-traditional media), and changes in the competitive situation. Changes in top management of a client may also affect the agency-client relationship. New management may prefer a particular agency or certain approach to advertising and promotion, which can affect the client’s relationship with the agency. These reasons can apply to long-term clients as well. When marketers are having problems such as stagnant or declining sales or losses in market share, they will often look to advertising. Often the problems are blamed on advertising agencies. In the competitive world of advertising, agencies are always looking for new business and major advertisers know they can attract a great deal of interest and attention when they put their accounts up for review. Students should be encouraged to find an example of a company that recently changed advertising agencies and identify the specific factors that led them to do so. Publications such as Advertising Age, Adweek, and Brandweek often have stories about companies that change agencies and can be used to find specific examples to analyze. 26. Discuss the pros and cons for a marketer having one agency handle all of its integrated marketing communication needs versus using specialized marketing communication firms to handle various components of it. (LO 3-6) Some marketers prefer to have all of their IMC activities performed by one agency rather than using multiple agencies that specialize in various areas such as direct marketing, sales promotion, digital marketing, and public relations. These companies feel that by having all of the IMC functions performed by one agency makes it easier to develop and implement a consistent and uniform program where everyone is working with the same information and toward the same goals and objectives. They also feel that giving one agency control of entire IMC program achieves greater synergy among each of the communication elements. It also makes it easier for the client when all of the promotional elements such as advertising, direct mail, event marketing, sales promotion, digital marketing, and public relations are handled by one large agency. However, some companies prefer to use companies that specialize in specific areas of integrated marketing communications such as sales promotion, public relations, direct marketing, and digital marketing. These agencies are important because they are specialists in planning, developing and implementing these various IMC functions and

can provide a great deal of expertise to these areas. For example, an interactive agency is an organization that specializes in the development and strategic use of various interactive marketing tools such as websites for the Internet, banner ads, social media sites, and other forms of digital media. Many marketers are using digital agencies because they are specialists in field of digital media and have capabilities beyond what might be found in a full-service advertising agency. Companies that are making the Internet and social media a major part of their IMC programs may use a digital agency that has strategy, creative, and technology capabilities and can help these companies integrate the Internet into various aspects of their business such as brand building, communications, transactions, and customer service. Companies may choose to use these specialized agencies rather than having one agency handle all of its IMC needs as they feel that they offer more expertise in a particular marketing communications area. These specialized agencies are often smaller and companies may feel that their account is getting more attention or is being handled by more talented individuals. The specialized agencies may also cost less since they may be smaller and thus have less overhead and other costs to cover.

Additional Discussion Questions (not in text) 27. Why might a company choose to use a creative boutique rather than a larger, full-service agency? Find an example of a company that uses a creative boutique and discuss why the decision to use a smaller agency may be appropriate for this firm. (LO 3-3) Creative boutiques are agencies that provide only creative services and have developed in response to some companies’ desires to use only the creative talent of agency. There are a number of reasons why marketers use creative boutiques. These smaller agencies often turn out excellent creative work and do not have the bureaucracy and politics of larger agencies. Many companies also feel that by working with a smaller creative boutique, they can get more attention and better access to creative talent than they would at a larger agency. Many creative boutiques are formed when creative people leave large agencies and form their own agencies. Often they take with them a client with whom they have worked closely and developed a strong relationship. Another reason why a company might use a creative boutique is that there are companies available to handle other parts of the advertising and promotional program. Independent media buying companies can be used to develop and implement the media strategy and plan, while other types of companies can provide specialized services in other areas such as direct response, sales promotion, and digital agencies, as well as PR firms. Students should be encouraged to identify a company that uses a creative boutique and evaluate why they do so rather than using an outside agency. Articles often appear in publications such as Advertising Age or Adweek that discuss agencies used by various companies. Alternatively, students might identify a creative boutique and look at the client list on the agency’s website. 28. Discuss the changing role of account representatives in advertising agencies. Discuss how the role of account representative is changing and the developments that underlie these changes. Do you think account representatives will become obsolete in the future? Why or why not? (LO 3-3) Account representatives or executives are individuals who work in an advertising agency and serve as the liaison between the agency and the client. They are responsible for understanding the client’s marketing strategy as well as its advertising and

promotion needs and interpreting and explaining them to agency personnel such as the creative department. Traditionally, their positions have involved working with the client to formulate the advertising plan, coordinating the agency’s services, and representing the client’s point-of-view to those in the agency. The role of account representatives is changing as they are now required to have a broader range of skills that they can use in interacting with the client. Agencies want account representatives who are good strategic thinkers and have a broad-based marketing and business perspective that extends beyond media advertising. As other integrated marketing communications tools such as direct, digital, and non-traditional media become more widely used, they are expected to have an understanding of their value and how they can be used as part of an IMC program. Many agencies are facing increasing pressure from their clients to keep costs under control and to justify the number of individuals assigned to work on their account. Thus, the number of account representatives assigned to work for a client is being reduced and those who handle the account are being asked to do more. It is unlikely that account representatives will become obsolete as they still play an important role in serving as the link between the agency and its clients. However, the skill set required to be an account representative is changing and the position is likely to become more demanding as marketers continue to move away from traditional media advertising and utilize a variety of IMC tools. Thus, agencies are developing training programs for their account executives to better educate them in a variety of areas and provide them with the skills needed to interact with clients who are becoming increasingly demanding of them. 29. Discuss the responsibilities and duties of an advertising or marketing communications manager in a company that uses a centralized organizational system versus a company that uses a decentralized system. (LO 3-2) The specific duties of the advertising or marketing communications manager will vary depending upon the size, organization, and makeup of the firm. In a centralized system, the manager may have responsibilities for all promotional functions except sales. These responsibilities may include planning and budgeting, administration and execution of the promotional program, coordination with other departments and outside agencies, and program evaluation. An advertising or marketing communication manager is usually needed even if an outside agency is used, as the agency may not perform all of the marketing tasks required. There is also still a need for someone to plan and coordinate the IMC program internally as well as to serve as the liaison between the agency and the firm. In addition, the ad manager will be responsible for evaluating the external agency’s performance. Under a decentralized system, a product or brand manager has responsibility for total management of the brand, which includes planning, budgeting, sales, and profit performance. The brand manager’s responsibilities will be similar to those of the advertising or marketing manager in a centralized system as s/he will work closely with the outside advertising agency and other marketing communication specialists such as promotion or digital agencies to develop budgets, define strategies, and oversee the implementation of the marketing program. 30. Discuss how technology and the emerging role of digital and social media are impacting the role of brand managers. What types of skills are needed to be a successful brand manager today? What can companies do to train brand managers so they can keep up with the changes occurring in digital and social media? (LO 3-2) Experienced brand managers who are not digital natives may be particularly challenged to understand the role of social media and the important role they play in 1-56 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

the lives of younger consumers. The increasing use of social media such as Twitter, Facebook, YouTube, Pinterest, and a myriad of blogs is changing the way brands communicate with their customers. Many brand managers spend much of their time on internal issues such as planning and budgeting and do not have ample time to devote to managing the social identity of their brands. Companies can address these problems by developing training programs for brand managers to help them better understand the role of various social media and how they can be used as part of the IMC program for the brands they manage. Many digital media companies such as Facebook, Twitter, and Google also provide online courses and tutorials that managers can take to enhance their knowledge and understanding of digital and social media. 31. Discuss the role of specialized marketing communication organizations such as sales promotion, public relations, and digital agencies in the IMC process. Why are marketers likely to use these specialists rather than a full-service agency? (LO 3-3, 3-5) These organizations provide services in their areas of expertise. A direct-response agency develops and implements direct-marketing programs, while sales promotion agencies develop promotional programs such as contests and sweepstakes, premium offers, or sampling programs. Digital agencies are being retained to develop websites and help marketers as they navigate the realm of digital media. Public relations firms are used to generate and manage publicity for a company and its products and services as well as to focus on its relationships and communications with its relevant publics. Probably the main reason outside agencies are used is that they provide the client with the services of highly skilled individuals who are specialists in their chosen fields. An advertising agency staff may include artists, writers, media analysts, researchers, and others with specific skills, knowledge, and experience who can help market the client’s products or services. Many agencies specialize in a particular type of business and use their knowledge of the industry to assist their clients with strategic marketing as well as branding. An outside agency can also provide an objective viewpoint of the market and its business that is not subject to internal company policies, biases, or other limitations. The agency can draw on the broad range of experience it has gained while working on a diverse set of marketing problems for various clients.

CHAPTER 4 PERSPECTIVES ON CONSUMER BEHAVIOR Chapter Overview The purpose of this chapter is to examine the field of consumer behavior and to demonstrate how knowledge and understanding of the consumer can be used in developing promotional strategies and programs. This chapter utilizes the basic consumer decision-making process model as a framework for examining consumer behavior. The chapter takes the student through the various stages of this model and discusses what occurs at each and how advertising and other forms of promotion can be used to influence consumer decision making. The influence of various psychological concepts or influences such as motivation, perception, attitudes, and integration processes are examined at the appropriate stages of the decision process model. Attention is also given to the three major variations in the consumer decisionmaking process: routine response behavior, limited problem solving, and extended problem solving. Consideration is given to how advertising and promotional strategies may differ depending on the type of decision-making process consumers are likely to be using.

Learning Objectives Discuss why an understanding of consumer behavior is valuable in developing advertising and promotional programs. Describe the steps in the consumer decision-making process. Explain the influence on consumer behavior of psychological processes like perception and motivation. Discuss behavioral learning theory and cognitive learning theory. Explain the influence of external factors like culture and subculture. Identify new ways to study consumer behavior.

Chapter and Lecture Outline I.

AN OVERVIEW OF CONSUMER BEHAVIOR

A brief introduction to the field of consumer behavior and an indication of the increased importance that this domain of study has assumed in marketing would be a good starting point. The instructor should discuss the fact that to operationalize the marketing concept and effectively design advertising and promotions programs, it is critical that the marketer have an understanding of consumer decision-making processes. It is important to point out that the development of successful marketing communication programs begins with understanding why consumers behave as they do. Those who develop advertising and other promotional strategies begin by identifying relevant markets and then analyzing the relationship between target consumers and the product/service or brand. Consumer behavior can be defined as the process and activities that people engage in when searching for, selecting, purchasing, using, evaluating, and disposing of products and services to satisfy their needs and desires. The decision process model should be introduced and a brief description given of the five stages: 

Problem Recognition



Information Search



Alternative Evaluation



Purchase Decision



Postpurchase Evaluation

You should let the students know that this model will be used as a framework for analyzing the consumer decision-making process. You will be going through the various stages of the model, discussing what occurs at each stage and how advertising and promotion can be used to influence consumer decisionmaking. Professor Notes:

II.

THE CONSUMER DECISION-MAKING PROCESS

The consumer purchase decision-making process is generally viewed as consisting of sequential steps or stages through which the buyer passes in purchasing a product or service. Figure 4-1 of the text shows the various steps in this process as well as the relevant internal psychological processes that occur at each stage such as motivation, perception, attitude formation, integration, and learning. W.

Problem Recognition—The first step in the consumer decision-making process is that of problem recognition, which is caused by a difference between the consumer‘s ideal state and actual state. There are various sources of problem recognition which include: l.

Out of stock—Consumers must replenish stock, typically selecting a familiar brand or one to which they feel loyal.

m. Dissatisfaction—Dissatisfied with current state of affairs or product being used. Advertising can help consumers recognize when they have a problem or need and need to make a purchase. n. New needs/wants—Lifestyle changes can trigger problem recognition and elicit new consumer wants and needs. A want is a desire for something one does not have. Many products advertised and sold satisfy consumer wants but not basic needs. o. Related products/purchases—The purchase of one product (an iPhone) may trigger the want or need for related products (earphones, charger, apps, etc.). p. Marketer-induced problem recognition—Advertisements can make consumers discontent with their current state and spurn a desire to change their current state. q. New products—When innovative and new products are introduced, consumers can also recognize new problems that this product can fix. However, marketers‘ attempts to create problem recognition among consumers are not always successful. Consumers may not see a problem or need for the product the marketer is selling. X.

Examining Consumer Motivations—The way a consumer perceives a need and becomes motivated to solve a consumption problem will influence the remainder of the decision-making process. To better understand the reasons underlying consumer purchases, marketers pay considerable attention to examining motives or factors that compel or drive a consumer to take a particular action. r.

Hierarchy of needs—One of the most basic and popular approaches to understanding consumer motivation is the classic theory of human motivation popularized by psychologist Abraham Maslow. His hierarchy of needs (represented in Figure 4-2) postulates five basic levels of human needs: xix)Physiological—Things required to sustain life. xx) Safety—Need for security and safety from physical harm. xxi)Social/love and belonging—Satisfying relationships with others; feeling loved, accepted, affection, and a sense of belonging. xxii) Esteem—Feeling a sense of accomplishment and recognition; raising status and gaining respect from others. xxiii)

Self-actualization—Realizing one‘s potential; self-fulfillment.

The implications of Maslow‘s hierarchy for developing advertisements that appeal to different types of needs should be discussed. s. Psychoanalytic theory—One of the initial approaches to the study of consumer behaviors in marketing used Freud‘s psychoanalytic theory as its basis. This approach viewed consumers as having complex, subconscious motivations for purchasing and is a somewhat more controversial approach to studying consumer motives. t.

Motivation research in marketing—While very popular in the late 1950s, this area of study— known as motivation research—received much less attention through the 1960s and 1970s. The text brings up several associations related to products and brands.

u. Problems and Contributions of Psychoanalytic Theory and Motivation Research—Because of problems with reliability and validity, and the fact that consumers were often considered as unaware and unable to control their motivations, this area has received substantial criticism. But the qualitative nature of the research is considered important in assessing how and why consumers buy. Y.

Information Search—The second step in the consumer decision making process is information search. Once a problem is recognized that can be solved by a product or service, consumers then search for information needed to make a purchase decision. Internal search involves a scan of information stored in memory to recall past experiences or knowledge regarding purchase alternatives. External search involves going to outside sources to acquire information and include personal sources, marketer controlled sources, public sources, or personal experiences such as examining or handling a product.

Perception—Perception is the process by which an individual receives selects, organizes, and interprets information to create a meaningful picture of the world. Perception depends on internal factors such as a person‘s beliefs, experiences, needs, moods, and expectations. There are a number of processes involved in perception that determine how marketing information will be received: 

Sensation—the immediate and direct response of the senses (taste, smell, sight, touch, and hearing) to a stimulus such as an advertisement.



Selecting information—determining whether incoming information will be attended to and how much attention it will be given.



Interpreting the information—the process by which incoming information is interpreted and assigned meaning.



Selective perception—a filtering or screening of messages may occur at various stages of the perceptual process such as exposure, attention, comprehension, and retention. xxiv) Selective exposure—occurs as consumers choose whether or not to make themselves available to information. xxv) Selective attention—occurs when consumers choose to focus attention on certain stimuli while ignoring or excluding others. xxvi) Selective comprehension—occurs when consumers interpret information based on their own attitudes, beliefs, motives, and experiences, often interpreting information in a way that supports their own position. xxvii) Selective retention—occurs when consumers do not remember all of the information they see, hear, or read even after attending to it and comprehending it. xxviii) Advertisers want to ensure that consumers remember the information they see, hear, or read so mnemonics are often utilized by advertisers. These are symbols, rhymes, association, and images that assist in the learning and memory process.



Subliminal perception—refers to the ability of an individual to perceive a stimulus that is below the level of conscious awareness. The possibility that marketers could use subliminal advertising to influence consumers at a subconscious level has very strong ethical implications.

AA.

Alternative Evaluation—After acquiring information during the information search stage, the consumer moves to alternative evaluation. At this stage, the consumer compares the various brands and services they have identified as being capable of solving the consumption problem and satisfying the needs or motives that initiated the decision process. v. The evoked set—The evoked set is a subset of all the brands of which the consumer is aware and actively considering in the decision process. A goal of marketers is to ensure that their brands are included in the evoked set of consumers. w. Evaluative criteria and consequences—Evaluative criteria are the dimensions or attributes of a product or service that are used to compare different alternatives. Consumers tend to think about products in terms of their consequences or outcomes. They tend to distinguish between two broad types of consequences. Functional consequences are tangible and can be experienced directly by consumers. Psychosocial consequences are more intangible, subjective, and personal. During the alternative evaluation stage, two subprocesses are very important: 1) the process by which consumer attitudes are created, reinforced, and changed, and 2) the decision rules or integration strategies consumers use to compare brands and make purchase decisions.

BB.

Attitudes—Attitudes refer to a summary construct that represents an individual‘s overall feelings or evaluation of an object such as a brand, a company, another person, a retail store, or even an advertisement. Attitudes are one of the most heavily studied concepts in consumer behavior. Marketer‘s keen interest in attitudes is based on the assumption that they are related to purchase behavior. Advertising and promotion are used to create favorable attitudes toward new products/services, reinforce or maintain existing favorable attitudes, and/or change negative attitudes. x. Multiattribute attitude models—Multiattribute attitude models have been used by marketers to study consumer attitudes for the past two decades. These models view an object such as a product as possessing a number of attributes that provide the basis on which consumers form their attitudes. According to this model, consumers have beliefs about specific brand attributes and attach different levels of importance to these attributes. Beliefs concerning specific attributes or consequences that are activated and form the basis of an attitude are referred to as salient beliefs. y. Attitude change strategies—The multiattribute model focuses on the underlying structure or basis of an attitude and provides insight into ways marketers can influence or change consumers‘ attitudes such as: xxix) Increasing or changing the strength or belief rating of a brand on an important attribute (frequently used by advertisers).

CC.

xxx)

Changing consumers‘ perceptions of the importance or value of an attribute.

xxxi)

Adding a new attribute to the attitude formation process.

xxxii)

Changing perceptions of belief ratings for a competing brand.

Integration Processes and Decision Rules—An important aspect of the alternative evaluation stage is the way consumers integrate or combine information to evaluate alternatives and arrive at a purchase decision. Integration processes are the way product knowledge, meanings, and beliefs are combined to evaluate two or more alternatives. Consumers may use formal integration 1-62 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

rules which require examination and comparison of alternatives on specific attributes. These include both compensatory and non-compensatory integration strategies. Consumers may also use informal integration rules which are often referred to as heuristics. One type of heuristic is the affect referral decision rule, where consumers make a selection based on an overall impression or summary evaluation of the various alternatives under consideration. Promotional planners need to understand consumers‘ integration processes and the types of decision rules they might use in a situation. Advertising messages can be constructed to be consistent with these decision rules or to suggest how consumers might go about making a decision. It is also important for marketers to recognize that some purchase decisions are the result of a constructive process that occurs at the time of purchase. DD.

Purchase Decision—As an outcome of the alternative evaluation stage the consumer may develop a purchase intention or predisposition to buy a certain brand. Once a purchase intention has been made and an intention formed, the consumer must still implement it and make the actual purchase. Many purchase decisions are made on the basis of brand loyalty, which is a preference for a particular brand that results in its repeated purchase. Many purchase decisions for nondurable, low-involvement items take place in the store and decision and purchase occur almost simultaneously. For these types of decisions, top-of-mind awareness of a brand is important as is the influence of packaging, shelf displays, point-of-purchase materials, and various sales promotion tools.

EE.

Postpurchase Evaluation—The consumer decision process does not end once the product or service has been purchased. After using a product or service the consumer compares the level of performance with expectations. Satisfaction occurs when the consumer‘s expectations are either met or exceeded, while dissatisfaction results when performance is below expectations. Another possible outcome of purchase is cognitive dissonance, which refers to a feeling of psychological tension or postpurchase doubt a consumer may experience after making a difficult purchase choice. Consumers often look to advertising for supportive information regarding the choice they have made. Marketers have come to realize that postpurchase communication is important.

FF.

Variations in Consumer Decision Making—Consumers do not always engage in all five steps of the purchase decision-making process nor proceed in the sequence presented. There are three major variations of the consumer decision-making process: 

Routine response behavior—Many purchase decisions for low-priced, frequently purchased products are based on a habitual or routine choice process consisting of little more than recognizing the problem, engaging in brief internal search, and making the purchase. Marketers of products characterized by routine response behavior must get and/or maintain their brands in the consumers‘ evoked set and encourage brand loyalty. Those not in the evoked set must encourage trial and brand switching.



Limited problem solving—Often a consumer has a limited amount of experience in purchasing a product or service but is somewhat aware or knowledgeable of the brands available and/or the criteria to use in making a purchase decision. When consumers purchase a product through limited problem solving, marketers should make information available to consumers that will help them make their decision.



Extended problem solving—The most complex and detailed form of decision making occurs when consumers have little, if any, knowledge regarding the criteria to use in making a purchase decision or the various brands available. As with limited problem solving, marketers of products characterized by extensive problem-solving must provide consumers with detailed information that helps them in making their purchase decision.

Professor Notes:

III.

THE CONSUMER LEARNING PROCESS

Up to this point of the chapter, the focus on consumer behavior has been from a cognitive orientation. The decision process model looks at the consumer as a problem solver and information processor who engages in a variety of mental activities in evaluating and choosing among alternatives. There are, however, alternative perspectives regarding how consumers acquire the knowledge and experience they use in making purchase decisions. To examine some of these perspectives, we look at various approaches to the consumer learning process and their implications for advertising and promotion. Consumer learning is the process by which individuals acquire the purchase and consumption knowledge and experience they apply to future related behavior. Behavioral Approach—Behavioral learning theories emphasizes the role of external or environmental stimuli in causing behavior while minimizing the significance of internal psychological processes. Traditionally, there are two behavioral learning theory approaches: z. Classical conditioning—This approach assumes that learning is essentially an associative process whereby the relationship between an unconditioned stimulus and conditioned stimulus develops through repetition and contiguity. Classical conditioning has many applications in advertising as products and services become associated with perceptions, images, and emotions that evoke favorable reactions from consumers. Pavlov‘s dog experiment is the example of classical conditioning provided in the text. Classical conditioning can easily be applied to the practice of marketing. Consumers can be conditioned to form favorable impressions and images of various brands through associative processes and advertisers constantly strive to associate their products with images, emotions, and perceptions that are known to evoke positive consumer reactions. Figure 4-7 provides a diagram of the classical conditioning process. aa. Operant conditioning—This approach, which is sometimes called instrumental conditioning, requires the individual to operate or act on some aspect of the environment for learning to occur. Learning occurs as a result of the outcomes or consequences associated with a particular response. Reinforcement refers to a reward or favorable consequence associated with a behavior and is an important element of instrumental conditioning. Many advertisements emphasize the benefits or rewards a consumer will receive from using a product or service or encourage a consumer to use a brand to avoid unpleasant consequences. There are a number of operant conditioning concepts that are particularly relevant to marketers such as schedules of reinforcement and shaping. Schedules of reinforcement result in varying patterns of learning and behavior. Learning occurs more quickly when every response is rewarded (continuous reinforcement schedule), but the behavior is likely to stop when the reinforcement stops. Learning occurs more slowly but lasts longer under a partial/intermittent reinforcement schedule where only some of the individual‘s responses are rewarded. Shaping is particularly relevant to the introduction of new products through the use

of sales promotion tools and techniques. Figure 4-8 demonstrates how the principles of operant conditioning can be applied to marketing. Cognitive Learning Theory—Figure 4-10 outlines the cognitive learning process. In contrast to behavioral learning theory perspectives, cognitive orientations emphasize internal processing or thinking. Many consumer researchers disagree with the simplified explanations of behavior offered by behavioral learning theories and are more interested in examining the complex mental processes that might underlie consumer decision-making. Thus the cognitive approach to studying learning and consumer decision-making has dominated the field of consumer behavior. The various processes examined during the discussion of the consumer decision-making process are all relevant to a cognitive learning approach to consumer behavior. Professor Notes:

IV.

ENVIRONMENTAL INFLUENCES ON CONSUMER BEHAVIOR

Consumers do not make purchase decisions in isolation as there are various external factors that may influence their purchase decisions. These include: Culture—Culture refers to the complex learned meanings, values, norms, and customs shared by members of a society. The importance of understanding the impact of culture on consumer behavior has become increasingly important both in the U.S. and as marketers expand their international marketing efforts. Subcultures—Subcultures refer to smaller groups or segments in a society that possess similar beliefs, values, norms, and patterns of behavior that set them apart from the larger cultural mainstream. Subcultures may be based on age, geography, race, religion, racial, lifestyles, and ethnicity. Subcultures are important to marketers because of their size, growth, purchasing power, and distinct purchasing patterns. Social Class—Social class refers to relatively homogenous divisions in a society into which people sharing similar lifestyles, values, norms, interests, and behaviors can be grouped. Social class structures in the United States are generally based on occupational status, educational attainment, and source of income. Social class is important to marketers because consumers within various social strata often exhibit similar values, lifestyles, and buying behaviors, thus providing a natural basis for market segmentation. Reference Groups—A reference group is a group whose perspective or values are being used by an individual as the basis for his/her judgments, opinions, and actions. Marketers utilize reference group influences in developing advertisements by associating, or sometimes disassociating, products, services, or certain behaviors with certain types of groups. bb. Family decision making—Many purchase decisions are made by families rather than by individuals. Marketers must understand the various roles in the family decision-making process such as initiator, information provider, influencer, decision maker, purchaser, and user or consumer. They must also determine who in the family is responsible for the various 1-65 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

roles in the decision-making process so messages can be targeted to them. Messages must also be designed so as to appeal to the appropriate family member(s). Situational Determinants—Another type of external factor that promotional planners must consider is that of situational determinants on consumer behavior. Three types of situational determinants may have an effect—the specific usage situation (the circumstance in which the product will be used), the purchase situation (the environment operating at the time of purchase), and the communications situation (the conditions in which an advertising exposure occurs). Professor Notes:

ALTERNATIVE APPROACHES TO CONSUMER BEHAVIOR

In addition to the perspectives discussed, consumer researchers complement these psychological approaches with perspectives driven from other scientific disciplines, such as economics, sociology, anthropology, philosophy, semiotics, neuroscience, and history. These cross-disciplinary perspectives have broadened the realm of methodologies used to study consumers and have provided additional insights into consumer decision processes. New technologies have also provided new means for exploring consumers‘ behaviors. New Methodologies—Sociologists and anthropologists study behavior in context, often using qualitative methods such as individual interviews, participant observation studies, and/or ethnographies.. These new methodologies have led to new insights into consumer‘s decision-making processes. Research methods from the humanities such as semiotic and structural analyses examine the symbolic meanings of advertising and various factors of consumption. New Insights—Marketers now have a better understanding of how advertising campaigns become popular and help shape our culture. Some consumer researchers believe that cross-disciplinary research is better suited for the study of consumers because it takes into account their complexity and multidimensionality. When considered along with psychological research, these alternative approaches help us better understand the impact of communications. Professor Notes:

Teaching Suggestions Because of the consumer emphasis dictated by the marketing concept, consumer behavior has increased in importance and has found its way into virtually every aspect of marketing. Of course, advertising and promotion are no exception. As a result, it is very important for the student to understand that advertising and promotion strategies are designed for the purpose of influencing customer behavior. Thus, it is important for promotional planners to have some understanding of consumer behavior including the way consumers relate to products and services, the goals and motives they seek to achieve and satisfy, and the process by which they make purchase decisions. You should emphasize that the success marketers have in influencing the purchase behavior of their target customers depends in large part on how well they understand their purchase patterns and behavior. This is one of the longer chapters in the text as it covers an extensive amount of material. Some students may have covered some of this material in a basic marketing or consumer behavior class. However, this chapter will still be valuable to them since it discusses how this material is used in the development of advertising and promotional programs. You may wish to divide the topics into two lectures to reduce the possibility of information overload.

Answers to Discussion Questions 32. In the lead-in to the chapter, Jagdish Sheth noted some factors that have led to major changes in consumer behaviors. Cite examples of how each of the five factors he listed have changed buying behavior. (LO 4-5) Changing environmental factors have an impact on shopping and buying behaviors. Sometimes the impact is temporary, and consumers later return to their previous behaviors, while at other times it changes consumer behaviors forever. An article by consumer behavior expert Jagdish Sheth titled ―Impact of COVID-19 on consumer behavior: Will the old habits return or die?‖ identified some of the immediate effects of the pandemic including (1) hoarding—stockpiling products; (2) improvisation— discarding existing habits and finding new ways to consume; (3) pent-up demand— postponing purchase and consumption of products that results in shifting demand to the future; (4) embracing digital technologies—adopting new technologies (like Zoom) and increasing the use of social media; (5) store comes home—the places we used to go to now come to us, including stores, jobs, education, and health care offerings. Student examples related to these five factors will vary. 33. Psychoanalytic theory was once considered a good theoretical basis for describing consumer behaviors, then seemingly went out of favor, only to return to prominence in the 1990‘s. Describe the current state of marketers‘ use of psychoanalytic theory to explain consumer behaviors. (LO 4-3) Psychoanalytic theory had a strong influence on the development of modern psychology and on explanations of motivation and personality. It has also been applied to the study of consumer behavior by marketers interested in probing deeply rooted motives that may underlie purchase decisions. Among the first to conduct this type of research in marketing, Ernest Dichter and James Vicary were employed by a number of major corporations to use psychoanalytic techniques to determine consumers’ purchase motivations. The work of these researchers and others who continue to use this approach assumed the title of motivation research. Motivation researchers use a variety

of methodologies to gain insight into the underlying causes of consumer behavior. Methods employed include in-depth interviews, projective techniques, association tests, and focus groups in which consumers are encouraged to bring out associations related to products and brands. Such associations often lead to interesting insights as to why people purchase. Psychoanalytic theory has been criticized as being too vague, unresponsive to the external environment, and too reliant on the early development of the individual. It also uses a small sample for drawing conclusions. Results are difficult if not impossible to verify, leading motivation research to be criticized for both the conclusions drawn and its lack of experimental validation. Since motivation research studies typically use so few participants, there is also concern that it really discovers the idiosyncrasies of a few individuals and its findings are not generalizable to the whole population. However, its insights can often be used as a basis for advertising messages aimed at buyers’ deeply rooted feelings, hopes, aspirations, and fears. Such strategies are often more effective than rationally based appeals. While often criticized, motivation research has also contributed to the marketing discipline. The qualitative nature of the research is considered important in assessing how and why consumers buy. Focus groups and indepth interviews are valuable methods for gaining insights into consumers’ feelings, and projective techniques are often the only way to get around stereotypical or socially desirable responses.

34. The chapter discusses various roles in the family decision making process. Describe each of these roles. Give examples of purchase decisions which may lead to changes in who assumes responsibilities for these roles. (LO 4-5)      

Roles in the family decision making process include: The initiator. The person responsible for initiating the purchase decision process—for example, the parent who determines they need a new car. The information provider. The individual responsible for gathering information to be used in making the decision—for example, the teenage car buff who knows where to find product information in specific magazines or collects it from dealers. The influencer. The person who exerts influence as to what criteria will be used in the selection process. All members of the family may be involved. The parent may have their criteria, whereas others may each have their own input. The decision maker(s). The person (or persons) who actually makes (make) the decision. In our example, it may be the one parent alone or in combination with another family member. The purchasing agent. The individual who performs the physical act of making the purchase. In the case of a car, spouses may decide to choose it together and sign the purchase agreement. The consumer. The actual user of the product. In the case of a family car, all family members are consumers. For a private car, only one parent might be the consumer.

35. Explain what a reference group is. Why is this concept important to marketers? Give examples of ads or other marketing activities that employ this concept. (LO 4-5) A reference group is ―a group whose presumed perspectives or values are being used by an individual as the basis for their judgments, opinions, and actions.‖ Consumers use three types of reference groups (associative, aspirational, and disassociative) as a guide to specific behaviors, even when the groups are not present. Marketers use reference group influences in developing advertisements and promotional strategies. Examples of aspirational reference groups (to which we might like to belong) and disassociative groups (to which we do not wish 1-68 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

to belong), are shown in the text. The U.S. Air Force ad is aspirational, while the anti-drinking ad shown is disassociative, much like similar anti-smoking and anti-drug campaigns. 36. What is meant by multiattribute attitude model? Why is this important to marketers? Give examples of how this model has been used in practice. (LO 4-2)

A multiattribute attitude model views an attitude toward an object, such as a product or brand, as possessing a number of attributes that provide the basis on which consumers form their attitudes. According to this model, consumers have beliefs about specific brand attributes and attach different levels of importance to these attributes. n

AB   Bi  Ei i 1

where AB = attitude toward a brand

Bi = beliefs about the brand‘s performance on attribute i Ei = importance attached to attribute i n = number of attributes considered For example, a consumer may have beliefs ( Bi ) about various brands of toothpaste on certain attributes. One brand may be perceived as having fluoride and thus preventing cavities, tasting good, and helping control tartar buildup. Another brand may not be perceived as having these attributes, but consumers may believe it performs well on other attributes such as freshening breath and whitening teeth. To predict attitudes, one must know how much importance consumers attach to each of these attributes ( Ei ) . For example, parents purchasing toothpaste for their children may prefer a brand that performs well on cavity prevention, a preference that leads to a more favorable attitude toward the first brand. Teenagers and young adults may prefer a brand that freshens breath. Marketers can change attitudes by focusing on the beliefs and/or the importance of these beliefs. 37. The chapter discusses the use of storytelling in advertising to better understand consumer behaviors. Describe what storytelling entails. What are some of the advantages of storytelling? (LO 4-6) Market researchers aim to determine what makes a consumer more or less apt to listen and respond to a branded message. One effective method for exploring this is storytelling. The use of storytelling by brands stems from the recognition that stories have always been effective in getting people to attend to a message, even as children listening to their parents’ bedtime stories. While brands have long focused on communicating the most important information in a quick, 30-second commercial, brands now recognize that they can instead tell a story or series of stories in their messaging, providing them with much more branded content while also keeping them engaged with the message. This ability to communicate a branded story over time allows marketers to develop a deeper connection with the audience rather than focusing solely on one attribute or key takeaway.

Other advantages of branded storytelling include that the encourage consumers to engage with and remember a message by engaging different parts of the brain as consumers continue to engage with the story and place themselves in the story. Additionally, it facilitates a deeper connection between the consumer and brand as brands communicate continuously over time rather than once. Finally, storytelling allows brands to communicate a more involved explanation of the brand’s attributes and benefits rather than having to focus solely on one attribute. 38. What is marketer-induced problem recognition? Give examples of how marketers have created demand for a product or service. (LO 4-2) As noted in the text, problem recognition occurs when the consumers’ actual and ideal states are different. There are a variety of reasons this may occur: 

Out of stock—perhaps the simplest form of problem recognition occurs when one is out of a needed product—for example, being out of salt or sugar.



Dissatisfaction—the product or service no longer meets consumer‘s expectations. For example, the product or service provider doesn‘t perform to the degree wanted, prices increase, leading to lesser satisfaction, etc.



New needs/wants—sometimes changes in one‘s lifestyle—finding a new job, having a baby, etc. may lead to the creation of new needs or wants (buying a new suit, diapers, etc.)



Related products/purchases—purchasing a new computer will require purchasing additional items. For example, software, a laptop carrying bag, etc. Companies have become quite adept at cross-selling additional add-on purchases.



Marketer-induced problem recognition—by changing styles or models, adding upgrades, etc., marketers can make one feel like they need to make a purchase. Apple is quite good at doing this as they keep modifying their products to make one want the ―latest and greatest.‖



New products—the introduction of a new product—for example, a new technology—will often lead to problem recognition. Products that do things better, faster, or less expensively can often lead to demand by consumers.

39. Explain the difference between a culture and a subculture. Provide examples of how both cultures and subcultures can affect consumer behaviors. (LO 4-5) A culture is a much broader group than a subculture. Culture signifies the complexity of learned meanings, values, norms, and customs shared by members of a society. A subculture is a smaller group found within a culture which exhibits beliefs, values, norms, and patterns of behavior that distinguish them from the broader cultural group. Subcultures can be based on age, other demographics, religious affiliations, or racial or ethnic differences. Both culture and subculture impact consumer behavior. Cultural norms and values can impact consumption behaviors. For example, in the United States, our culture is built around convenience and speed thus making fast-food restaurants, particularly those with a drive-thru option, a popular dining choice for Americans. However, there are certain subcultures within the United States such as younger, more health-conscious cohorts who are extremely health-conscious and refrain from frequenting fast-food restaurants, despite their relevance in the overarching culture. This contrast between

culture and subculture is certainly something that advertisers need to acknowledge and confront in order to adapt their messaging strategies appropriately. 40. Marketers have studied family decision-making processes for decades. Why is it important to understand family decision making? How does family decision making impact purchase decisions? (LO 4-5) Reference groups are people whose presumed perspectives or values are used by an individual as the basis for their judgments, opinions, and actions. Marketers often use reference group influences when developing advertising and promotional messages. Family members can serve as an extremely relevant reference group. Families are important to acknowledge and understand in terms of purchase decisions because they can serve as a reference group for individuals, but also because families often act as an individual buying unit. There are several roles that family members may take on in a product decision-making scenario including the initiator, information provider, influencer, decision maker, purchasing agent, and consumer. Advertisers must determine which family members assume each role so their messages can be targeted to those specific individuals. Understanding these roles is also important because these various target audiences will impact advertisers’ media choices and strategies as well as the design of messages to reach these audiences. 41. What are schedules of reinforcement? Why are they important for advertisers to understand? Give an example of the use of schedules of reinforcement in advertising. (LO 4-4) Reinforcement is the reward or favorable consequence associated with a participant/consumer giving a certain response. A behavior that is reinforced strengthens the bond between a stimulus and response. This can be easily seen in the context of advertising. If a consumer buys a product in response to an advertisement and has a positive outcome from the purchase, this reinforces the purchase behavior and makes it more likely that the consumer will buy the product again. The opposite is true if the outcome of buying the product is a negative experience. Schedules of reinforcement is a method for advertisers to implement this concept of reinforcement in their advertising and promotional messaging. In a continuous reinforcement schedule, every response is rewarded. While learning the desired behavior happens quickly in this type of reinforcement schedule, the behavior is likely to cease when the reinforcement is taken away. One example of this in advertising would be the use of a promotional deal or coupon to introduce a new product. When new products are introduced, marketers often provide coupons which tempt consumers to try the product at a reduced cost rather than the norm. If advertisers gave out the coupon to consumers each time they bought the new product so they would continuously receive their next purchase of the product at a reduced cost, consumers would get used to receiving the product at the discounted price. If advertisers suddenly took the coupons away when the new product has been on the market for a while, the consumer may cease to buy the new product at the higher price without the coupon discount. Advertisers also engage in partial or intermittent reinforcement schedules. This involves only rewarding some of consumer’s responses, but not all. An example of this might be the use of a promotional buy one get one free initiative. While marketers certainly don’t offer these promotional deals all of the time, offering them intermittently rewards those who purchase the products regularly and encourages purchase by those consumers who do not purchase as frequently. Another example of this would be reward or loyalty programs that offer consumers a free or discounted item after a certain number of purchases. Consumers do not receive the

reward each time but receive it intermittently which encourages them to keep coming back in the hopes of receiving the next reward.

Additional Discussion Questions (not in text) 42. Describe the steps in the consumer decision-making process and provide an example as to what marketers might do at each step to influence the consumer. (LO 4-2) The first step in the consumer decision-making process is problem recognition. Problem recognition occurs when a consumer recognizes a need and becomes motivated to solve the problem and meet the need. Ultimately, a discrepancy exists between what the consumer wants a situation to be like and what the situation is actually like. An example of this would be if a consumer’s cellphone bill kept unexpectedly increasing each month. The consumer would be unhappy with the higher bill and either seek reparations with their current cell phone provider or, more than likely, seek other providers who could provide the service at a lower cost. Messaging in this instance could come from a competing phone company and could focus on how they realize other phone companies charge consumers too much or tack on unexpected fees that continuously leave consumers unsure of their monthly charges and show how their brand has a flat rate where no added fees are ever added on without prior communication. The second stage is the information search. After recognizing a problem, consumers begin a search for information needed to make their purchase decision. In the cell phone service example, consumers might turn to friends and family to discuss their current providers, search on the Internet for the best providers in their area, go to a local store to look at phones and discuss plan options, or they might encounter messaging from competitors in any number of outlets (i.e. television, radio, social media, online, etc.). Marketers attempting to reach people at this stage would want to ensure that their messaging is everywhere that someone might go to look for new phone plan information. They could promote themselves on family and friend’s social media accounts, when they search online, or on their TVs; they could ensure that their stores came up first in online searchers for phone providers; and they could promote themselves on TV/radio ensuring that wherever this consumer goes to look for information on phone options, that their name comes up first and most often. The third stage is alternative evaluation during which consumers evaluate and compare all of the options that they have identified would be capable of solving their problem. During this stage, marketers should seek to stand out among the alternatives the consumer is considering. This might involve offering a promotion for a certain phone or plan or having point-of-purchase materials in stores that encourage consumers to select their brand over others. In the purchase decision stage, consumers stop looking for information and evaluating options and select a product/brand. At this stage, advertisers want to ensure that they actually get consumers to follow through and purchase their brand. Advertising for their brand might increase and the brand might encourage one of the salespeople at their local store to reach out to the consumer and ask if they can answer any questions about the phone/plans available from this provider. The final stage is the postpurchase evaluation. This stage involves consumers evaluating their purchase decision against their expectations for the product’s performance. In the 1-72 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

case of the cell phone service provider, the consumer might wait to get their first bill to ensure that no added or unexpected charges were seen and that the phone and plan itself were performing as well as, or outperforming, their old phone/provider. Advertisers could again encourage salesperson contact through phone or email at this point to ensure the customer is happy. They could also send the consumer a survey to gauge their happiness with the plan/product as well as with the buying process. 43. Explain what is meant by cognitive dissonance. Why is this concept important to marketers? (LO 4-3) Cognitive dissonance is a feeling of psychological tension or post-purchase doubt that a consumer experiences after making a difficult purchase choice. Dissonance is more likely to occur in important decisions where the consumer must choose among close alternatives (especially if the unchosen alternative has unique or desirable features that the selected alternative does not have). Consumers experiencing cognitive dissonance may use a number of strategies to attempt to reduce it. They may seek out reassurance and opinions from others to confirm the wisdom of their purchase decision, lower their attitudes or opinions of the unchosen alternative, deny or distort any information that does not support the choice they made, or look for information that does support their choice. An important source of supportive information is advertising as consumers tend to be more attentive to advertising for the brand they have chosen. Thus, it may be important for companies to advertise to reinforce consumer decisions to purchase their brands. 44. In attempting to segment the market, marketers often will segment on the basis of subcultures. Citing the chapter, explain the advantages and potential pitfalls of this strategy. (LO 4-5) Subcultures may be based on age, geographic, religious, racial, and/or ethnic differences. A number of subcultures exist within the United States. The three largest racial/ethnic subcultures are African Americans, Hispanics, and various Asian groups. These racial/ethnic subcultures are important to marketers because of their size, growth, purchasing power, and distinct purchasing patterns. But American culture (and subculture) continually goes through many changes that have direct implications for advertising. Marketing researchers monitor these changes and their impact on the ways companies market their products and services. While marketers recognize that culture exerts a demonstrable influence on consumers, they often find it difficult to respond to cultural differences in different markets. The subtleties are often difficult to understand and appreciate. 45. Neuroscience has been attacked by many as an invasion of privacy. Describe how marketers are using neuroscience research and discuss the pros and cons of this ethical argument. (LO 4-4) Using technologies originally developed for the medical sciences, marketers are now studying physiological responses to advertising. By scanning the brain and observing chemical activity or changes in the magnetic fields of the brain, these researchers are observing how consumers respond to ads or even make purchase decisions. These methodologies have been used to view consumers’ responses to brand names, advertisements, and even spokespersons. In addition, the studies show promise for determining store layouts and assessing consumers’ opinions of innovations. Given that these responses are involuntary responses, it is argued that the responses are more credible as they are uncontrollable. Thus, while one might respond to a survey with a socially desirable response or one that reflects a testing effect, involuntary responses are not subject to these biases. 1-73 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

The use of neuroscience—a brain scan imaging technique that maps physiological reactions within the mind—has had the majority of its applications in the medical field. Now, marketers have discovered that there are research applications in consumer behavior as well. By mapping viewers’ physiological reactions to commercials and brands, scientists can help marketers better understand consumers’ behaviors and assist them in the development of more effective marketing strategies. For marketers, the use of neuroscience allows them to more effectively design ads, recognize the impact that brands have on consumers. Advertisers claim that this will allow them to create more effective advertising, break through the clutter of bland commercials, and ultimately have a positive effect on users’ businesses as well as benefiting consumers by giving them what they want—not what advertisers think they want. Boring and tedious advertising, for example, will be reduced or eliminated, based on more effective research than the traditional methods previously employed. Traditional methods, neuroscience using marketers argue, are obsolete and do not directly benefit the advertiser or the consumer. Just like everything else, they say, ―you can’t stop progress.‖ Opponents of the use of neurosciences have a different perspective. Calling the technique ―Orwellian,‖ they contend that probing our minds is an unfair invasion of privacy. While some argue that the technique does not work and that the results are being blown out of proportion, others are concerned that they work too well. If so, there is a potential that advertising could become too effective, and that consumers could be manipulated—a similar argument to those provided by opponents of subliminal advertising usage. At particular risk, they say, are unsuspecting children, though increased consumption of alcohol, cigarettes, and gambling may also result. They see the research as contributing to the social ills of societies, through the manipulation of effective marketing strategies. 46. Why is understanding consumer behavior of such importance to marketers? Give examples of how marketers apply their understanding of consumer behavior to their marketing strategies. (LO 4-1) When marketers moved from a sales orientation to a marketing orientation, it became necessary to have a more in-depth understanding of the consumer. Rather that developing products and then trying to push them onto consumers, marketers shifted their focus more to understanding consumers’ needs and wants and developing products and services to satisfy them. As the field of consumer behavior has expanded, marketers have increased their efforts by including different forms of psychology (social, physiological, etc.) into their studies as well as sociology, cultural anthropology and geography, among others. Simply put, the more we can understand consumers, the better we can successfully develop products and services to better meet their needs and wants. An excellent example of this lies in the fact that many of today’s consumers are ―money rich and time poor.‖ That means that they have disposable income, but less time as a result of their busy lifestyles, changing family structures, etc. By understanding this, marketers have been able to better develop products and services that meet the new needs of consumers, and a profit to them. 47. The text discusses the use of cultural anthropology to understand consumer behaviors. Why is it necessary for marketers to use alternative approaches to consumer behavior? (LO 4-6)

Once marketers recognized the necessity of understanding consumers’ behaviors and the fact that not all decisions are based on rational economic bases, they turned to psychology to gain insights. The early days of research in consumer behavior, therefore, was dominated by psychological research. As consumer behavior matured, those in the discipline recognized the fact that external factors such as social class, family, cultural, and subcultural factors also influenced the purchase decision process. Research from different areas of study such as sociology and anthropology provided valuable insights. The groundbreaking research of a French medical anthropologist, G. Clotaire Rapaille, who employed a research methodology known as archetype research to assist Chrysler (in the design of the PT Cruiser) and other clients demonstrated the contribution value and applicability of these other areas of research. Cultural anthropology, which involves the observation of people in their natural environments, has also been proven to be useful for understanding consumer behaviors. While much of the research conducted in psychology requires a controlled environment for conducting experiments and/or observing consumer behaviors, ethnography—a methodology employed by cultural anthropologists—watches the behaviors of individuals and groups as they ―act normal‖ in their day to day environments. As a result, some of the testing effects and criticisms of artificial environments are eliminated. Further, researchers know that situational and environmental factors may play an important role in consumer decision making, and this area of research attempts to account for these factors. As consumer behavior studies continue to advance, new disciplines, theories and methodologies will offer valuable insights into the reasons why consumers purchase, how they do so, and the impact of their purchases. Cultural anthropology is just one more contributor to this process.

IMC Exercise Have the class go to YouTube and find commercials that reflect various concepts of consumer behavior discussed in the text such as psychological theories, and/or those that depict stages of consumer decision making. They should explain how the ads/commercials they have selected relate to a specific consumer behavior concept or theory and/or how the ad is designed to appeal to the consumer.

CHAPTER 5 THE COMMUNICATION PROCESS Chapter Overview The purpose of this chapter is to examine the communication process by introducing the student to the fundamentals of communication and examining various models and perspectives of how consumers respond to advertising messages. A basic model of communication is presented which introduces the controllable elements of the communications process—source, message, channel, and receiver. Source, message, and channel factors are discussed in Chapter 6 and the remainder of this chapter is devoted to examining the target audience or receiver and the process by which consumers respond to advertising and other promotional messages. The growing importance of word-of-mouth influence as well as how it has led to the increased use of viral marketing and influencer marketing techniques are covered in the chapter. The response process is analyzed in terms of traditional response hierarchy models as well as alternative 1-75 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

response models. Attention is given to comparing alternative response models such as the standard learning versus low-involvement models. The Social Consumer Decision Journey is used as a framework to discuss how the environment in which consumers evaluate brands and make purchase decisions has changed as digital and social media become more pervasive. The chapter also examines the cognitive response approach and elaboration likelihood model to show how more detailed analyses can be made of receivers‘ cognitive processing of marketing communications.

Learning Objectives 12.

Describe the communication process and its role in IMC.

13.

Describe the basic model of the communication process.

14.

Discuss the role of word-of-mouth influence, viral marketing, and influencer marketing.

15.

Analyze receivers' responses to marketing communications and their implications for promotional planning and strategy.

16.

Describe the influence of social media on the consumer decision process.

17.

Discuss consumers' cognitive processing of marketing communications.

Chapter and Lecture Outline I.

INTRODUCTION

A commonality shared by all elements of the promotional mix is that their function is to communicate. Thus, it is important that advertising and promotional planners have an understanding of the communication process. This chapter reviews the fundamentals of communication and examines various perspectives regarding how consumers respond to promotional messages.

II.

THE NATURE OF COMMUNICATIONS

Communication has been variously defined as the ―passing of information,‖ the ―exchange of ideas,‖ or the ―process of establishing a commonness or oneness of thought between a sender and a receiver.‖ For communication to occur, there must be some common thinking or ground between the two parties and a passing of information. The communications process is often very complex with success depends on many factors such as the nature of the message, audience interpretation, and the environment in which it is received along with the receiver‘s perception of the source and medium. The challenge of developing effective marketing communications becomes particularly evident when companies are developing advertising and promotional messages for foreign markets or for certain ethnic markets. Examples of communication problems that have been encountered by marketers who are promoting their products and services in international markets are discussed in-depth in Chapter 19. Professor Notes:

III.

BASIC MODEL OF COMMUNICATION

Over the years, a basic model of communications has evolved that represents the various elements of the communication process. This model is shown as Figure 5-1 in the text. The elements of the model include: Source Encoding—The sender or source of a communication is the person or organization that has information to share with another person or group. It should be noted that the source could be an individual (e.g., salesperson or hired spokesperson) or a nonpersonal entity such as the corporation or organization itself. The receivers‘ perception of the source influences the manner in which the communication is received, interpreted, and responded to. Encoding is the process of putting together thoughts, ideas, and information into a symbolic form to communicate a message. The sender‘s goal is to encode the message in such a manner so as to ensure that it will be understood by the receiver. This involves using words, signs, or symbols familiar to the target. Marketers should pay special attention to symbols associated with their company/brand as these become a shorthand way for consumers to identify brands. Message—The encoding process leads to the development of a message that contains the information or meaning the source or sender hopes to convey. Messages can take a variety of forms such as verbal or nonverbal, oral or written, and may include symbolic forms or signs. The message must be put into a transmittable form that is appropriate for the channel of communication being used. Marketers are the ones that must make decisions about the content, structure, and design of these 1-77 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

messages. Advertising messages range from simply written words or copy that will be read or heard as a radio message to the expensive production of elaborate television commercials with a great deal of visual impact and imagery. Channel—The channel is the method or medium by which the communication travels from source or sender to receiver. At the broadest level, channels of communication exist as two types: 

Nonpersonal channels are those that carry a message without involving interpersonal contact between sender and receiver. These channels are often referred to as the mass media or mass communications, as messages transmitted through them are sent to many individuals at one time. The two major categories of nonpersonal channels are print and broadcast media.



Personal channels involve direct communication between two or more persons and can occur through interpersonal contact (face-to-face) or via other methods such as e-mail or through social media. For example, a salesperson serves as a personal channel of communication when delivering a sales presentation. Members of one‘s social networks (friends, family, neighbors, coworkers, etc.) also serve as personal channels of communication. These groups are often an important source of word-of-mouth (WOM) influence, which can be a very powerful form of communication and has been used by marketers for many years. There are different forms of word-of-mouth in marketing including WOM conversation, electronic word-of-mouth (eWOM), online reviews, and engineered WOM. Marketers have become much more sophisticated, organized, and systematic in the ways they go about encouraging speak favorably about their company, brand, organization, or issue and to recommend it to their social network. Today, many marketers are using engineered WOM through digital and social channels to bring attention to or generate discussion about their company or brands. Buzz marketing is the term used to describe WOM communication about a company, its products/services, and/or brands as well as its advertising messages that is often encouraged by a marketer.

Viral marketing—In the digital age, more traditional and buzz marketing techniques have been replaced by more systematic and organized efforts to encourage consumers to speak favorably about a company or brand and recommend it to others. Viral marketing refers to the act of propagating marketing-relevant messages through the help and cooperation of individual consumers. Many marketers, along with their advertising, PR, and/or digital agencies use a variety of tools and techniques to generate viral buzz about their brands, many of which involve the use of online communities and social media such as Facebook, Twitter, Instagram, and YouTube. The structure of networks through which a message spreads and the consumers‘ position in the social network can influence diffusion of a viral message. Seeding is another important aspect of viral marketing and involves identifying and choosing an initial group of consumers who will be used to start the diffusion or spreading of a message. Most viral marketing is done today through influencer marketing, which uses social media to leverage the influence of individuals with a dedicated social media following. These social media influencers are often popular social media personalities who constantly create and disseminate useful and organic content within a knowledge domain, project authentic personae, curate intimate relations with a large following, and thus wield influence over followers‘ purchases and decision making. Social media influencers have become a major part of the marketing strategy for many companies. Digital and Social Media Perspective 5-2 discusses the explosion in influencer marketing that has occurred in recent years. 18.

Integrating word-of-mouth with IMC—Viral marketing techniques should be integrated with the IMC program as research by the Keller Fay Group has shown that nearly 90 percent of conversations about products, services, and brands take place off-line—and face-to-face

interactions account for the vast majority of word-of-mouth communications. The role of advertising in WOM is very important, as Keller Fay has found that a quarter of all consumer conversations about a brand involve discussions about advertising. Additionally, Keller Fay found that word-of-mouth conversations influenced by advertising are significantly more likely to involve recommendations to buy or try a brand when compared to other WOMinduced discussions about brands. Consumers also ascribe high credibility to information they receive from others. Most importantly, a quarter of all consumers conversations about brands are said to involve discussions about advertising. Concern has been expressed over the use of buzz and viral marketing techniques as they become more prevalent. The Word of Mouth Marketing Association (WOMMA) was formed in 2004 to promote and improve the use of word-of-mouth marketing and protect consumers and the industry by providing ethical guidelines for its use. There is also concern over endorsements being made on social media by influencers. The Federal Trade Commission now requires anyone endorsing a product or service through social media to disclose whether they have a relationship (material connection) with the company or brand. A material connection includes a personal, family, or employment relationship or a financial relationship–such as the brand paying or giving the endorser free or discounted products or services. With the growth of social media and consumers‘ disinterest in more traditional forms of media advertising, marketers will likely attempt to seek new ways to develop branded messages that consumers will share with one another. Receiver/Decoding—The receiver is the person(s) with whom the sender shares thoughts or information. Receivers are generally viewed as the consumers in the target audience for the firm‘s marketing and promotional program. Decoding is the process of transforming and interpreting the sender‘s message back into thought and is heavily influenced by the receiver‘s frame of reference or field of experience, which refers to the experiences, perceptions, attitudes, and values he or she brings to the communication situation. Effective communication is more likely when common ground or shared meaning or understanding exists or has been established between the sender and receiver. Exhibit 5-6 shows an advertisement that utilizes the concept of common ground to communicate an important environmental message. Instructors should discuss the difficulty often found in establishing common ground in advertisements as those who serve as advertising practitioners are often very different than those in the mass market they are attempting to reach. Noise—Throughout the communications process the message is subject to noise, which refers to factors that can distort or interfere with adequate reception or comprehension. Noise can occur during the encoding, transmission, or decoding of a message. Noise can also occur because of a lack of common ground or understanding between the sender and receiver. Over the past decade, a new type of noise has become prevalent in the television-viewing environment as many viewers now multitask on their laptops, tablets, and smartphones while watching TV. Recent research revealed that nearly half of marketing executives surveyed felt that consumers being distracted by a second screen was one of the top factors limiting the effectiveness of their TV advertising, noting that it has become extremely difficult to capture consumers‘ attention solely through television advertising. This is why more and more, marketers are devoting more of their budgets to digital and social media. Response/Feedback—Response refers to the reaction the receiver has after seeing, hearing and/or reading the message. These responses can range from nonobservable actions such as storing information in memory to taking immediate actions such as ordering a product seen in a direct response ad. Feedback is the part of the receiver‘s response that is communicated back to the sender and takes

a variety of form and is of particular interest to marketers. Feedback provides the sender with a way of monitoring how the message is being decoded and received by the target audience. Professor Notes: IV.

ANALYZING THE RECEIVER

To communicate effectively, marketers must have an understanding of who their target audience is and how they need to be communicated with to influence their decision-making process. The relevant audience as well as the process consumers go through in responding to a promotional message must be identified and understood. Understanding the target audience and their response process serves as an important foundation for evaluating decisions regarding the controllable communication variables (source, message, and channel) that are covered in Chapter 6. A.

Identifying the Target Audience—The marketing communications process begins with the identification of the audience that will be the focus of the firm‘s advertising and promotional efforts. The target audience can be viewed as consisting of: 

Individuals—The target audience for some products and services can be viewed as consisting of individuals for whom communications must be specifically tailored. Life insurance, financial services, and real estate are often promoted through individualized sales presentations.



Groups—A second level of audience aggregation is the group. Organizational purchasing often involves buying centers or committees and requires communication with multiple parties. Decision making in the consumer market can include a group when various family members become involved in the purchase process.



Niche—Marketers look for customers who have similar needs and wants and thus represent some type of market segment that can be reached with the same basic communication strategy. Very small, well-defined groups of customers are often referred to as market niches. They can usually be reached through personal-selling efforts or highly targeted media such as direct mail.



Market segments—The next level of audience aggregation is market segments, broader classes of buyers who have similar needs and can be reached with similar messages.



Mass markets—The situation facing most marketers is that of communicating with large numbers of consumers or mass audiences through one-way communication via the mass media.

Professor Notes:

THE RESPONSE PROCESS

An important aspect of developing effective communication involves having an understanding of the response process the receiver may go through and how the promotional efforts of the marketer might influence this process. This section begins by covering three traditional response hierarchy models and then discussing alternative models of the response process.

Traditional Response Hierarchy Models—Three of the best-known response hierarchy models are discussed in this section, giving attention to their origin and implications. The models are: 

AIDA model—Attention, interest, desire, and action.



Innovation adoption model—Awareness, interest, evaluation, trial, and adoption.



Hierarchy-of-Effects Model—Awareness, knowledge, liking, preference, conviction, and purchase. The various stages of this model are shown in Figure 5-5.

Alternative Response Hierarchies—The more traditional responses models assume a cognitive → affective → behavioral sequence. In recent years, this sequence had been called into question and several other configurations of the response hierarchy have been theorized. The two discussed in this text include the standard learning model and low-involvement models. 1. The standard learning hierarchy—In many purchase situations, consumers go through the response process depicted by traditional communication models, referred to as the standard learning model, which consists of a learn, feel, do sequence. In this sequence, consumers acquire information and knowledge or learn about various brands. This information and knowledge forms the basis for developing affect or feelings that guide what a consumer will do. The consumer is thus viewed as an active participant in the communication process, gathering information through active learning. This type of process is likely when the consumer is highly involved in the purchase process and when there is much differentiation between competing brands. 2. The low-involvement hierarchy—In the low-involvement hierarchy, the receiver is viewed as passing from cognition, to behavior, to attitude change. This type of process is likely when the consumer‘s involvement in the purchase decision is low, there are few differences among brand alternatives, and mass media advertising is important. In this low-involvement hierarchy, consumers engage in passive learning and random information catching rather than active information-seeking. The chapter provides examples of advertisements utilizing a more standard learning model approach as well as a low-involvement hierarchy approach.

Implications of the Response Process Models—The hierarchy models are useful to promotional planners from several perspectives. They delineate the series of steps or stages potential purchasers often must be taken through to move them from a state of no or little awareness to the point where they are ready to purchase. The hierarchy models can also be useful as ―intermediate‖ measures of communication effectiveness. Knowing where potential buyers are with respect to the various stages of the hierarchy helps the marketers know the specific communication task that must be performed. The text discusses how marketers of high-tech products are developing profiles of digital adopters who are among the first to use various digital products and services. All four of these models view the response process as consisting of movement through a sequence of stages and assume a similar ordering whereby cognitive development precedes affective reaction, which in turn precedes behavior. While this is a logical progression that may be accurate in many situations, the response sequence may not always operate this way. Thus, attention needs to be given to alternative orderings of the response hierarchy.

The Social Consumer Decision Journey—The model shown in Figure 5-6 has five basic stages: consider, evaluate, buy, experience, and enjoy-advocate-bond. This framework recognizes that 1-81 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

consumers connect with large numbers of brands through digital and social media channels, which are a unique component of the consumer decision journey as they are the only form of marketing that can touch and influence consumers at each and every stage. Marketers often allocate much of their IMC budget to influencing consumers at the consider and buy stages. However, consideration should also be given to influencing them during the evaluate, experience, and enjoy-advocate-bond stages, as the most important incentive to buy or repurchase may be another person‘s advocacy or recommendation or the brand‘s follow-up with the consumer after purchase. It is important for marketers to focus on the portion of their IMC budget allocated to paid or “working” media as well as owned media that a brand controls (websites, and social media pages) and earned media generated through customer-created content (blogs, forums, and social media). A major study by the Advertising Research Foundation (ARF) examined how digital and social media are used in the purchase decision process and how consumers turn to them to help manage this process. One of the conclusions of this study was that consumers are ―always on‖ as they are constantly considering and evaluating the various providers of products and services. Another important conclusion from this study, as well as research conducted by McKinsey & Company‘s Global Digital Marketing Strategy practice group, is that consumers do not make purchase decisions in the linear manner depicted by the various traditional hierarchy of effects and purchase funnel models. Researchers at McKinsey have proposed a ―consumer decision journey‖ as a framework for understanding how consumers interact with companies and brands during the purchase decision process. Professor Notes:

VI.

COGNITIVE PROCESSING OF COMMUNICATIONS

For many years, the hierarchical response models were primary focus of approaches to studying receivers‘ responses to marketing communications. However, the inability of these approaches to explain what might be causing or determining these reactions to the message has led to an interest in understanding the nature of cognitive processing of advertising and other persuasive communications. Cognitive processing concerns how external information (such as an advertising message) is transformed into meanings or patterns of thought and how these meanings are combined to form judgments. Several approaches and models have been developed to examine the nature of consumers‘ cognitive processing of advertising messages. A.

The Cognitive Response Approach—A commonly used method for examining consumers cognitive processing of advertising messages is through the assessment of their cognitive responses or thoughts that occur to them while reading, viewing, and/or hearing the communication. The focus of this approach, which is commonly used by academic researchers as well as practitioners, is to determine the types of thought evoked by an advertising message and how these responses relate to traditional ―outcome‖ measures such as attitude toward the ad, brand attitudes, and purchase intention. The model shown in Figure 5-7 depicts the three basic categories of cognitive responses identified by researchers and their relationship to attitude and intention constructs. These include:

1. Product/message thoughts—These are thoughts directed at the product or service and/or the claims being made in the communication. Attention has focused on two types of responses: counterarguments and support arguments. Counterarguments are thoughts recipients have that are opposed to the position taken in the message. Support arguments are thoughts that affirm the claim(s) made in the message. 2. Source-oriented thoughts—These are thoughts directed at the source of the communication. Source derogations are one of the most important types of responses in this category and refer to negative thoughts about the spokesperson or organization making the claims. Conversely, receivers who react favorably to the source generate favorable thoughts, or source bolsters. 3. Ad execution thoughts—These are thoughts individuals have toward the ad itself. These thoughts can be either positive or negative. Ad execution-related thoughts may include reactions to ad execution factors such as the creativity of the ad, the quality of the visual effects, colors, and voice tones and are important because they are related to attitude toward the ad, which represents the receivers‘ feelings of favorability or unfavorability toward the ad. A→ ad is an important construct as the consumers‘ affective reactions to a message are an important determinant of advertising effectiveness. B.

The Elaboration Likelihood Model—The elaboration likelihood model (ELM), developed by Cacioppo and Petty, has become a very popular way of analyzing differences in the way consumers process and respond to persuasive messages. The ELM is presented in Figure 5-8 of the text. According to the ELM, there are two basic processes or routes to persuasion, which are based on motivation and ability to process the message. Under the central route to persuasion, the receiver is viewed as a very active and involved participant in the communications process whose ability and motivation to attend, comprehend and evaluate a message are very high. Under the peripheral route to persuasion, the receiver is viewed as lacking motivation or ability to process information and is not likely to engage in detailed cognitive processing. The receiver may use ―peripheral cues‖ such as focusing on the message source or executional elements of the ad rather than message content. The Pantene shampoo ad in Exhibit 5-13 featuring singer Selena Gomez contains several peripheral cues such as an attractive and relevant celebrity endorsement as well as imagery that is consistent with the brand positioning. Implications of the ELM—The ELM has important implications for marketing, particularly with respect to involvement. Messages should vary based upon the involvement level of consumers. While the ELM is one of the most frequently cited theories of how advertising impacts consumers, the model has been subject to criticism including that the replication of its use has been mixed in prior research and some have said that the development and proliferation of digital and social media call the theory‘s validity to today‘s advertising climate into question. Professor Notes:

VII.

SUMMARIZING THE RESPONSE PROCESS AND THE EFFECTS OF ADVERTISING

Professors Demetrios Vakratsas and Tim Ambler reviewed more than 250 journal articles and books to better understand how advertising works and affects consumers. They concluded that there is little support for the concept of a hierarchy of effects in the sense of a temporal sequence. They note that in trying to understand the response process and the way it works there are three critical intermediate effects between advertising and purchase including cognition, affect, and experience. They also conclude that individual responses to advertising are mediated or filtered by factors such as motivation and ability to process information, which can radically alter or change the individual‘s response to advertising. They suggest that the effects of advertising should be evaluated using these three dimensions with some intermediate variables being more important than others. This suggests that marketers should focus on knowledge, liking and trial or usage as critical variables that advertising may affect. Attention should be given to how advertising and other forms of promotion may affect these variables in various product market situations. While a number of issues regarding hierarchy of effects models have been noted, they are still of value to advertising practice and research as they provide insight into whether advertising strategies need to focus on impacting cognition, affect and/or behavior. It has also been noted that consideration should be given to how all of the various IMC tools, not just advertising, influence the response hierarchy. The chapter concludes with a discussion over the debate over the value of hierarchical response models of advertising effects. While a number of issues and concerns over the use of hierarchy of effects models have been noted, many feel that they are still of value to advertising practice and research. They provide insight into whether advertising strategies need to focus on influencing cognition, affect, and/or behavior. It is important to note that marketing communications programs include more than just media advertising and consideration needs to be given to how other components of the IMC program such as sales promotion activities, publicity, online, and direct marketing activities, and event sponsorships can move consumer through the response hierarchy. Professor Notes:

Teaching Suggestions This chapter is designed to introduce the student to the fundamentals of communication and is the first of two chapters devoted to this topic. The opening vignette to the chapter discusses the innovative use of word-of-mouth advertising by Tesla, which presents a good opportunity for instructors to discuss the potential new ways that consumers can respond to marketing communications. This is the most theoretical chapter in the text. However, we feel this material is very important as it presents the basic elements of communication and provides a detailed examination of the process by which consumers respond to marketing communications. The material also provides the student with a foundation that is important for subsequent chapters of the text. For example, the discussion of controllable elements of the communications process in Chapter 6 (source, message, and channel factors) builds on this chapter. We feel it is very important to stress to students that communication is the common goal of all promotional mix elements. They must have a solid foundation in this area if they are to evaluate other areas of advertising and promotion such as creative strategy, media strategy and alternatives and effectiveness measurement. We have found that it is helpful to emphasize to students that decisions regarding the controllable elements of the communication program, such as selecting a source, developing a message strategy and appeal, and selecting advertising media, cannot be made unless the promotional planner has some insight into how members of the target audience will respond to these factors. Students need to have some understanding of the traditional hierarchical models including their implications and limitations. It is also important to point out the limitations of the traditional cognitive → affective → behavioral sequence assumed by these models and to cover the alternative response hierarchies. After reviewing the alternative models of the response process, it should be apparent to the student that the traditional standard learning hierarchy may not be appropriate in many communication situations. From a promotional planning perspective, it is important that the marketer be able to examine the communications situation and determine what type of response hierarchy is most likely to occur. Of particular importance is the low-involvement hierarchy as a great deal of attention has been given to the involvement issue. It is important to show how the concept of alternative response hierarchies, involvement and rational versus emotional processing can be combined for advertising strategy purposes. Note that the discussion of the Social Consumer Decision Journey in this edition can be used to discuss how social media influences the consumer decision process. Instructors may find it helpful to read the article by Todd Powers et. al that summarizes the results from the ARF study (―Digital and Social Media in the Purchase Decision Process,‖ Journal of Advertising Research, December 2012, pp. 470–489) as well as the article by David Court and his associates (―The Consumer Decision Journey‖ McKinsey Quarterly, June 2009).

Answers to Discussion Questions Discuss why Tesla has been able to dominate the electric vehicle segment of the automotive market despite spending almost no money on media advertising. Do you think Tesla will be able to compete without advertising as more competitors enter the EV market? (LO 5-1, 5-3) Tesla spends virtually no money on media advertising and does not even have a marketing department or a chief marketing officer (CMO). According to Advertising Age, Tesla spends just 11 cents on measured media per vehicle sold, in stark contrast to its competitors in the luxury segment of the automotive market. Despite this, Tesla has become the most valuable car company in the U.S. and one of the most sought-after brands of automobiles with an extremely loyal fan base. Tesla dominates the EV market in the U.S. with a 60 percent market share and set records for sales and profit in 2021. Many factors account for Tesla‘s success such as its first-mover advantage in the EV market and having a revolutionary product. Tesla has also created a product so differentiated that in many ways it sells itself. A major reason for Tesla‘s success is that it uses one of the most effective methods of marketing: word-of-mouth. Since its beginning, Tesla has had a strong referral program that rewards those who share their experiences with the company and its cars with others. Tesla has the highest customer loyalty of all car brands with an overall satisfaction rating of over 90 percent. The company controls all steps of the customer journey and creates a very positive brand experience for its customers. Another reason for Tesla‘s success is what has been termed the ―Elon Musk‖ factor in reference to the company‘s mercurial CEO whose frequent tweeting brings a great deal of attention to the company on social media as well as in the mainstream media. The amount of free publicity Musk creates for Tesla is difficult to replicate and does not require the company to spend money to generate media attention. Some automotive analysts note that Tesla has been able to avoid having to spend money on advertising thus far as demand for its vehicles outstrips supply. They argue competition in the electric market is rapidly increasing, particularly in the luxury segment which Tesla dominates, as larger companies such as BMW, Mercedes, Volvo, Jaguar, and Lexus have added EVs to their product lines. As competition in the EV market intensifies, the true test for Tesla‘s ability to compete without spending money on media advertising may come over the next several years. 27. Discuss the importance of logos and why a company might make a decision to change its logo. Evaluate the logo changes made by General Motors, Pfizer, or Kia Motors Corp. Do you think these new logos are good or bad? (LO 5-1, 5-2) The communication process begins when the source (a company/organization/brand) selects words, symbols, and pictures to represent the message that is to be delivered to the receiver. This encoding process involves putting thoughts, ideas, or information into symbolic form. The sender‘s goal is to encode the message in an understandable way for the receiver. This involves using words, signs, and symbols (such as logos) that are familiar to the target audience. Marketers have to pay particularly close attention to the symbols that are associated with their company and brand, including their logos. Logos have become a shorthand way for consumers to identify brands. Logos can be used by brands to communicate certain things about the brand and marketers sometimes choose to change logos in order to send a different message to consumers about the brand or organization. For example, Starbucks changed its logo and dropped the green ring with the text ―Starbucks Coffee‖ to display its iconic siren more prominently. The change was made to help consumers ―think beyond coffee‖ when they see the Starbucks logo because the company is broadening its strategic focus to include other product categories. The change was also made so the logo would work in countries that do not use Western letters. In some cases consumers may become very attached to a company‘s logo and react negatively when they 1-86 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

change it. The Gap experienced this a few years ago when the retail chain introduced a redesigned logo that it felt was more contemporary. Student discussions regarding specific logo changes will vary. 28. Discuss the role of logos for digital technology companies such as Uber, Amazon, Airbnb, and others. Why is the design of a logo for these companies so important? (LO 5-1, 5-2) Marketers, particularly those working for digital technology companies, have to think about logos in different ways today. Services such as Facebook, Snapchat, Uber, or Amazon are primarily accessed through apps on consumer‘s smartphones. Thus, these companies have become interaction-design-centric in developing their logos and other visual symbols that represent the brand. The logo on a digital device must be designed for, and easy to recognize, on a digital device. The use of a logo in the context of advertising messages is what makes it recognizable and meaningful to consumers. Digital and Social Media Perspective 5-1 provides examples from Uber and Mastercard on the importance of the design and redesign of logos for digital spaces. 29. Discuss the four types of word-of-mouth communication and how they are used by marketers. (LO 5-3) There are four different forms of word-of-mouth communication in marketing that are discussed in this chapter: WOM conversations, electronic word-of-mouth, online reviews, and engineered WOM. WOM conversations involved an interactive dialogue between two or more consumers about a marketing-relevant topic without an apparent motive for either party. Marketers engage in WOM conversations in social media platforms such as when they address consumer questions or comments about their product or brand. Electronic word-of-mouth is the transmission of marketing-relevant information using a digital device like a computer or smartphone. An example of this would be marketers utilizing mobile specific advertisements to reach consumers. Online reviews include consumers‘ evaluations of a marketplace offering that is submitted in an online platform that is purposefully designed to aggregate these consumer evaluations. Marketers use online reviews to gauge consumer satisfaction with the product/brand and to address consumer concerns and questions. Engineered WOM happens when there is a commercial motive to engage in a word-of-mouth conversation such as a consumer receiving products in exchange for positive reviews. Influencers are an example of the use of engineered WOM. 30. Discuss the reasons why companies are using social media influencers as part of their integrated marketing communication programs. Why might a marketer choose to use a nano- or microinfluencer rather than a popular macro-influencer such as a celebrity? (LO 5-3) Most viral marketing is done today through influencer marketing. These are often popular social media personalities who constantly create and disseminate useful and organic content within a knowledge domain, project authentic personae, curate intimate relations with a large following, and thus wield influence over followers‘ purchases and decision making. Influencers are conceptualized as similar to everyday consumers and hence, more authentic than models and celebrities who are traditionally featured in advertising. Since followers often trust influencers and perceive them as experts and/or tastemakers in their areas or domain, marketers can collaborate with them to promote their brands through recommendations or featured content on various social media platforms. Marketers are making influencer campaigns an integral part of their IMC programs. Not only is it difficult to reach consumers through traditional media advertising, but it‘s also becoming very challenging to reach them online as well. Nearly half of consumers are now using ad blockers, which means that marketers cannot rely on digital advertising through search, display, and social media to target them. However, it is possible to reach them through the Instagram, TikTok, or

Facebook sites of influencers, because that is where many people now spend time when they go online. Marketers view influencers as providing targeted exposure to the right kind of consumer: one who is already interested and likely to pay attention. They are also turning to influencers to leverage the authenticity embedded in the connections they have with their friends and followers on social media. These followers don‘t feel they are being ―influenced‖ or manipulated when they scroll through their Facebook, TikTok, or Instagram feeds and look at pictures or videos from their favorite influencer or blogger. Many of the influencers have become very savvy about how to collaborate with marketers and share their experiences with or opinions about a brand in a subtle but effective way. There are several reasons many marketers are allocating more of their budgets to nano- and micro-influencers rather than to the macro-influencers with large fan bases. Many experts argue that while these bloggers have a smaller following, they often have higher engagement rates, and their content performs better than the posts of those with large numbers of followers. Research has shown that influencers with 1,000 to 10,000 followers have ―like‖ rates of about 4 percent. This drops to 2.4 percent for those with 10,000 to 100,000 followers, and to just under 2 percent for those with more than a million followers. Many of the macro-influencers with large numbers of followers also have a very diverse fan base, which means marketers may be paying to reach people who are not viable prospects for their brands. Nano- and micro-influencers usually cater to specific, niche audiences that are very interested in the products, services, or topics and are looking for information to help them make purchase decisions. The micro-bloggers often connect better with their followers, which makes them more trustworthy, authentic, and relatable. Another reason marketers, particularly those with smaller budgets, are collaborating with nano- and microinfluencers is cost, as they charge less per post than do influencers with large followings, which makes them more affordable. Although, brands will need to partner with a number of microinfluencers to reach a large audience, the total costs will often still be lower than the fees required to use a macro-blogger. Experts say that viral marketing techniques are very resistant to manipulation and marketers must be careful about how they use them. The effective use of viral marketing requires that marketers take a strategic approach in the development and implementation of campaigns that are designed to have strong WOM and viral components. For example, Keller and Fay note that marketers should think in terms of social consumers rather than just social media and focus on the stories that consumers share with one another about a brand or a product or service category to ensure that there is a good fit between the consumer story and the brand story. They also suggest that it is the job of brand strategists to identify the people who are most likely to talk about their brand or category and seek to understand when, where, and why people talk. 31. It is recognized that an age bias exists in the advertising industry and digital agencies against older people who may not be as digitally savvy as younger generations. Do you think it is acceptable for agencies to favor younger people in the hiring process? (LO 5-1, 5-3) There are a number of reasons why agencies are focusing their hiring on younger workers. One reason is that they are cheaper to hire as the weak economy has made it difficult for young people to find jobs, and they are often willing to work for less, particularly, in advertising and digital agencies as they view these jobs as a way to break into the industry. However, digital agencies often prefer young people because they are digital natives who have grown up with the Internet and social media and have thoroughly immersed themselves in the digital world. They are much more in touch with the various digital platforms that have become very important to marketers as they strive to engage consumers and require less time and effort to train. Older employees may

argue that they understand digital media as they have taken it upon themselves to learn about social media and other digital platforms. However, they often do not have the innate understanding of digital and social media as the young people who use them on a regular basis. The ageism problem in advertising has come about for other reasons. Marketers are very interested in younger consumers as this age group spends more on a variety of products including automobiles, electronics, appliances, and other items and are more willing to switch brands and try new products and services. The 18 to 49 demographic market is highly coveted for this reason. Also, by targeting younger people with their advertising messages and media buys, marketers can also reach older consumers who aspire to be young. However, the opposite is rarely the case, as younger consumers do not want to be old before their time. Students should be asked to take a position as to whether young professionals can create advertisements that connect with older consumers. Since most students taking this course will be in their late teens or early 20s, it should be interesting to hear their perspective as to whether their generation understands the over 50 crowd. It is often said that older people do not understand or relate to Generations X or Y. This question turns the tables and asks whether the younger generation has the empathy and understanding needed to develop effective advertising for older consumers. The young creative staff in an agency is likely to want to create ads that are reflective of their own life phase. They will want to create ads that are hip, cools, impressive to their peers, and award-winning. This is more fulfilling than creating ads for older consumers with whom they have little in common. However, the reality is that the digital and advertising agencies are likely to favor young people and this is unlikely to change until the new generation of workers becomes older themselves. 32. Discuss how marketers of a low-involvement product such as soft drinks or paper towels would use various IMC tools differently than a marketer of a high-involvement product such as a laptop computer or an automobile. (LO 5-4) The standard learning hierarchy is likely when the consumer is highly involved in the purchase process and there is much differentiation among competing brands. High-involvement purchase decisions (industrial products and services, consumer durables like personal computers, smartphones, printers, cameras, appliances, and automobiles) are areas where a standard learning hierarchy response process is likely. Ads for products and services in these areas are often detailed and provide customers with information that can be used to evaluate brands and help them make a purchase decision. They also may focus on a specific product attribute or feature that is important to consumers in the market segment they are targeting. In the low-involvement hierarchy, the receiver is viewed as passing from cognition to behavior to attitude change. Ray suggests this learn→ do→ feel sequence may occur when involvement in the purchase decision is low, there are minimal differences among brand alternatives, and massmedia (especially television) advertising is important. In the low-involvement hierarchy, the consumer engages in passive learning and random information catching rather than active information seeking. The advertiser must recognize that a passive, uninterested consumer may focus more on nonmessage elements such as music, characters, symbols, and slogans or jingles than actual message content. Low-involvement advertising appeals prevail in much of the advertising we see for frequently purchased products such as consumer packaged goods: Advertising for Coca-Cola invites consumers to ―Taste the feeling‖ or ―Share a Coke.‖ Bounty paper towels claim to be the ―quicker picker-upper.‖ Dunkin‘ uses the slogan ―America Runs on Dunkin‘‖ to encourage consumers to purchase coffee and donuts. Each of these slogans is designed to help consumers maintain top-of-mind awareness that can influence their purchase decisions when they are in the market for one of these low-involvement products. Another popular creative strategy used by 1-89 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

advertisers of low-involvement products is use of visual image personality: for example, using symbols like the Pillsbury Doughboy, Morris the Cat, and Mr. Clean to develop visual images that will lead consumers to identify and retain ads. In the past, most marketers of low-involvement products such as consumer-packaged goods (CPG) have spent a large portion of their IMC budgets on traditional media such as television and print to build and maintain brand awareness as well as on consumer promotions such as coupons and promotional offers. However, the age of digital marketing has definitely arrived for CPG marketers, as many of them are recognizing that they can connect with consumers through social media as well. 33. Choose one of the four quadrants of the FCB planning grid and the FCB digital channel grid shown in Digital and Social Media Perspective 5-3. Discuss the type of advertising strategy a marketer of a product in this quadrant might use/ How might digital and social media platforms be used for products in this quadrant? (LO 5-4) In the informative (thinker) quadrant, paid advertising on websites, search engines such as Google, and social media platforms such as LinkedIn would be ideal as these are places where consumers typically go to find information once a purchase journey has begun. For the affective (feeler) quadrant, they propose that platforms such as Pinterest, YouTube, and Facebook are appropriate as they capitalize on affect or feelings and a preexisting interest in the product or service. In the habit formation (doer) quadrant, which the FCB grid views as being for lower involvement and primarily thinking products, Twitter is proposed as the best platform as it ranks high on topicality or staying up to date with emerging trends. Haley and Pittman argue that Twitter is a platform where users look for new and different ideas and topics and may be willing to try a new low-involvement product, particularly one where they might learn something from its use afterward. For the low-involvement, feeling-based self-satisfaction reactor quadrant, social media platforms such as Instagram, TikTok, and Snapchat are relevant as all three are based on photo- and video sharing. They argue that these platforms are used for entertainment and to share social knowledge, and are also used by influencers, which makes them good options for purchase decisions motivated by feelings. Their casual nature offering exposure to novelty and entertainment make them good candidates for low-involvement decisions. Student examples discussing a particular quadrant will vary. 34. Discuss how marketers can use the cognitive response approach to analyze consumers’ reactions to and processing of their advertising messages. Choose a print ad or TV commercial and discuss the types of cognitive responses that it might generate using the model shown in Figure 5-7. (LO 5-6) In the cognitive response approach, consumer thoughts are generally measured by having consumers write down or verbally report their reactions to a message. The assumption is that these thoughts reflect the recipient‘s cognitive processes or reactions and help shape ultimate acceptance or rejection of the message. Advertising practitioners use it to determine the types of responses evoked by an advertising message and how these responses relate to attitudes toward the ad, brand attitudes, and purchase intentions. The three basic categories of cognitive responses researchers have identified are product/message, source-oriented, and ad execution thoughts. Student discussions regarding a specific print ad or TV commercial will vary.

Explain the differences between the central versus peripheral route to persuasion and the factors that determine when each might be used by consumers in response to an advertisement or other form of marketing communication. (LO 5-6) Under the central route to persuasion, the message recipient is viewed as a very active and involved participant in the communications process whose ability and motivation to process a message are very high. The recipient will pay close attention to message content and will carefully scrutinize the communication for the cogency or quality of the message claims. Under the peripheral route to persuasion, the message recipient is viewed as lacking the motivation or ability to process the message and is not likely to engage in any detailed level of cognitive processing. Rather than thinking about or evaluating the information content of the message, the receiver will rely on ―peripheral cues‖ such as an attractive source or other executional factors. There are a number of factors that determine when each might be used by consumer in response to an advertisement. These include the involvement level of the consumer, which will be a function of the nature of the product being purchased, the importance of the product/service being purchased to the individual, the needs of the individual, and the motivation and ability of the consumer to process the message.

Additional Discussion Questions (not in text) Discuss the various elements of the communications process. Find an example of an advertising campaign being used by a company and analyze this campaign in terms of these elements of the communications process. (LO 5-1) The various elements of the communications process include the sender or source, the message, the channel, the receiver, noise, and feedback. The sender or source of a communication is the person or organization that has information to share with another person or group. The source may be an individual such as a salesperson or spokesperson who appears in a company‘s advertisements or a nonpersonal entity such as a company or organization itself. The message is the information or meaning the source hopes to convey and may be verbal or nonverbal, oral, written, or symbolic. The channel is the method by which the communication travels from the source or sender to the receiver. At the broadest level, there are two types of channels, personal and nonpersonal. Personal channels generally involve direct interpersonal contact with the receiver while nonpersonal channels carry a message without interpersonal contact between the sender and receiver. Nonpersonal channels are generally referred to as the mass media. The receiver is the person(s) with whom the sender shares thoughts or information. Generally, receivers are the customers in the target market or audience who read, hear, and/or see the marketer‘s message. Noise refers to extraneous factors in the communications process that can distort or interfere with the communication of a message. Errors or problems in that occur in the encoding of the message, distortions in the transmission of the message, and distractions at the point of reception are possible sources of noise. Feedback refers to the part of the receiver‘s response that is communicated back to the sender and may take a variety of forms such as response hierarchy measures including awareness, knowledge, attitudes, purchase intentions, preferences, and behavior. The form of feedback of ultimate interest to marketers is, of course, sales. Students should be encouraged to find an example of a current advertising campaign and to analyze it with respect to various elements of the communications process. They might evaluate the source being used as a spokesperson in the campaign, the type of message being used, the various channels or media where the ads appear, the target audience for the campaign, and the type of feedback that might be used to monitor the effectiveness of the campaign.

Those responsible for most of the advertising and promotion decisions for consumer products are brand managers (client side) and account executives (agency side). These individuals are usually well-paid, well-educated marketing professionals living in urban areas. Consider the typical consumer for a brand such as Budweiser beer or Mountain Dew soft drinks. What problems could these differences present in developing an IMC program for these brands? How might these problems be overcome? (LO 5-1) The brand managers and account executives are likely to be very different from the heavy users of brands such as Budweiser or Mountain Dew. The marketing and advertising executives will, as noted, be highly educated with a college degree and perhaps a graduate degree such as an MBA while the users of these brands are more likely to be blue-collar types who have a high school education and perhaps some college. The marketing and advertising executives will probably have higher paying jobs and have different lifestyles, values, and interests than the consumers who are heavy users of these brands. These differences may make it difficult for the marketing and advertising personnel to develop advertising and promotional messages that appeal to these consumers and communicate effectively with them. These problems can be overcome by conducting marketing research on the users of these brands to gain insight and understanding into factors such as their lifestyles, values, interests, opinions, and the like. Advertising and promotional messages can also be pretested to ensure that the re understood by these consumers and interpreted in the manner intended. What is meant by encoding? Discuss how encoding differs for various types of advertising messages such as radio and television commercials, print ads, and digital/online ads. (LO 5-2) Encoding refers to the process by which the sender of a communication puts thoughts, ideas, or information into a symbolic form using words, symbols, pictures, and the like. The encoding of a television commercial involves the use of visual images, sound, motion, color, and words, which provide advertisers with the opportunity to develop very creative messages. The encoding of a radio commercial is limited to the use of sound, which usually comes in the form of words read by an announcer and/or music. However, some astute advertisers may use a process called image transfer whereby the images from a TV commercial are planted in a radio spot by using similar, or even the same, audio portion. The idea is that when consumers hear the radio message, they will make the connection to the TV commercial thus reinforcing the video images. This process is discussed in Chapter 11. Encoding of a print ad is done using visual images such as pictures as well as written information in the form of advertising copy. Many print ads for fashion brands such as clothing and cosmetics as well as luxury brand contain very few words and rely primarily upon the visual image to deliver their message. However, ads for products such as automobiles or consumer electronics may use a larger amount of copy to explain the product as well as its features and benefits. Because message recipients control the processing rate for print messages, it is possible to communicate more information to them since they can take as long as they need or want to read the copy portion of the ad. Discuss some of the reasons consumer packaged goods (CPG) marketers are allocating more of their IMC budgets to digital and social media versus traditional media such as television and print. Do you think marketers run any risks in allocating more of their budgets to digital and social versus traditional media? (LO 5-3) A number of industry experts predict that digital spending by CPG firms will continue to increase for a number of reasons. Many companies believe that the return on investment for monies spent on digital advertising media may be just as good as television or print. One reason for this is the conventional wisdom that digital is cheaper than traditional media since there is a vast supply of inventory and digital display space is relatively inexpensive, particularly ads purchased programmatically through real-time biding on ad exchanges. P&G is now purchasing a significant

percentage of its digital advertising through programmatic buying. Many CPG marketers are either cutting, or trying to control, the size and growth in their ad spending and feel that digital ads are a more efficient way to reach specific market segments. Another reason is that companies such as Nielson and ComScore have developed measurement systems for digital display advertising and online video viewing using some of the same metrics television which CPG marketers and their agencies are accustomed to using. Advanced analytics are now available for digital media that allow CPG marketers, many of whom are highly data-driven, to identify target audiences based on their purchase or other behavior. CPG marketers are also allocating more of their marketing budgets to digital media since they are conduits for sales promotion tactics, particularly price promotions. In addition, marketers recognize that consumers are spending more time online, particularly on mobile devices, and thus digital is the best medium to reach them.

CHAPTER 6 SOURCE, MESSAGE, AND CHANNEL FACTORS Chapter Overview This chapter is a continuation of the discussion of communications theory and focuses on the controllable variables that are a part of this process including source, message, and channel factors. The chapter builds on the material in Chapter 5, as decisions regarding each of these communication variables should take into account how they affect various stages or steps of the response process of the receiver. The persuasion matrix (Figure 6-1) is presented at the beginning of the chapter to provide a framework for analyzing how decisions regarding individual communication variables might influence steps in the response hierarchy. The primary goal of this chapter is to provide an in-depth examination of source, message, and channel factors and the various considerations involved in making advertising and promotional decisions for each of these communication components.

Learning Objectives 19.

Discuss the variables in the communication system and how they influence consumers‘ processing of promotional messages.

20.

Identify decision factors involved in selecting a source for a promotional message.

21.

Compare the different types of message structures and appeals that can be used in advertising.

22.

Explain how different types of channels influence the marketing communications process.

Chapter and Lecture Outline I.

INTRODUCTION

This chapter analyzes the major controllable variables in the communications process—source, message, and channel or medium. Characteristics of the source are examined along with how they affect cognitive processing. Attention is also focused on the message itself, including how structure and type of appeal influence communication effectiveness, and on issues related to the channel or medium by which the message is communicated. Source, message, and channel factors were introduced in the previous chapter as controllable elements in the communications model, and it was noted that decisions regarding each of these components must take into account how they interact with the response process.

II.

PROMOTIONAL PLANNING THROUGH THE PERSUASION MATRIX

A useful approach for combining the communication components and the stages of the response process is the persuasion matrix (see Figure 6-1). The persuasion matrix helps marketers to see how each controllable elements in the communication model interacts with the consumer response process. In the persuasion matrix, there are two sets of variables of interest including independent variables representing the controllable elements of the promotional program and dependent variables representing the response hierarchy or steps a receiver goes through in being persuaded. A major consideration facing the promotional planner is how decisions regarding each independent variable will influence the various stages of the response process. The text provides several examples of how the persuasion matrix can be used to evaluate how decisions regarding various controllable communication elements will affect the response process. Professor Notes:

III.

SOURCE FACTORS

The source of a marketing communication can be viewed as a multifaceted concept as many types of sources can be included in a promotional situation. We will use the term source to mean the person who is involved in the communication of a promotional message in either a direct or an indirect manner. A direct source is a spokesperson that delivers a promotional message, and/or endorses a product or service. Spokespeople used in advertisements or a company‘s sales representatives are examples of direct sources. An indirect source does not actually deliver a message but rather is used to draw attention to or enhance the appearance of a promotional message. Decorative models are a good example of an indirect source. Most of the theory and research associated with the study of source factors deal with the characteristics of individuals as communicators of a persuasive message and how they influence communication effectiveness. This is the approach used to examine source characteristics. The characteristics of the source often have a significant impact on the effect of their sales and advertising message. A useful framework for examining source characteristics is the classification scheme developed by Herbert Kelman, shown in Figure 6-2. This scheme recognizes three basic categories of source attributes with each involving a different process by which the source influences attitudinal or behavioral change in the message recipient.

GG.

Source Credibility—Credibility refers to the extent to which the source is perceived as having knowledge, skill, or experience relevant to the communication topic and can be trusted to give an unbiased opinion or present objective information on the issue. Information from a credible source can influence beliefs, opinions, attitudes, and/or behavior through a process known as internalization, which occurs when the receiver adopts the opinion of the credible communicator since he or she believes the information from this source is accurate. There are two important dimensions to credibility—expertise and trustworthiness. 3. Applying expertise—Marketers always strive to utilize communicators with high credibility. Spokespeople are often chosen because of their expertise, knowledge, or experience in a particular product or service category. Research has found that the perceived expertise of celebrity endorsers is more important in explaining purchase intentions than the source‘s attractiveness or trustworthiness. 4. Applying trustworthiness—While expertise is important, it is also important that target audiences find the source believable or trustworthy. Finding figures with a trustworthy image can be difficult to do. Each year, E-Poll Market Research conducts consumer surveys regarding the trustworthiness of celebrities. Some of the high-scoring celebrities as of late include Zendaya, Dwayne ―The Rock‖ Johnson, and NBA star Stephen Curry. With the increase in stealth marketing techniques, many consumers are becoming wary of endorsements made by celebrities on news programs and talk shows. There is also concern regarding the trustworthiness of sources that endorse companies and brands and make recommendations on sites such as Facebook, Instagram, TikTok, and Twitter as well as through online reviews or on blogs. In 2009 the Federal Trade Commission passed a set of guidelines requiring online endorsers and bloggers to disclose any material connection they might have to a company. 5. Using corporate leaders as spokespeople—Many companies believe the use of their president or CEO is the ultimate expression of the company‘s commitment to quality and customer service. Some examples are discussed in the text such as Virgin founder and CEO Richard Branson, and Dyson CEO spokesperson, Sir James Dyson. Marketing and advertising experts question the efficacy of using CEOs and see it more as an ego-serving move rather than a logical marketing and advertising move. Experts suggest that businesspeople should only get in front of the camera when they exude credibility and evoke positive emotions with consumers. Another concern is that a CEO spokesperson who becomes very popular may get more attention than the company‘s product/service or advertising message. It should be noted that the owners and/or presidents of smaller companies often appear in commercials as a spokesperson as well. 6. Limitations of credible sources—Marketers generally seek to use credible sources to deliver their promotional messages. However, high- and low-credibility sources are equally effective when they are arguing for a position opposing their own best interest. The sleeper effect phenomenon is another reason why a low-credibility source may be just as effective as a source high in credibility.

HH.

Source Attractiveness—A commonly used source characteristic in advertising and personal selling is that of attractiveness. Attractiveness also has several sub-components including similarity, familiarity, and likability. The process through which attractiveness leads to persuasion is identification whereby the receiver seeks some type of relationship with the source by adopting a similar position. Examples are provided of the application of source attractiveness in the selection of sales representatives, as well as in advertising through the use of celebrities and decorative models.

7. Applying similarity—Marketers recognize that people are more likely to be influenced by a message coming from someone with whom they feel a sense of similarity. Similarity is used in various ways in marketing communications: selecting salespeople, using former athletes to promote beer, and in slice-of-life commercials. Many brands attempt to create a personality figure for the company or brand that consumers will find likable. A good example of this is Progressive Insurance‘s spokesperson Flo who has become one of the most popular advertising personalities over the past decade. Many companies feel that the best way to connect with consumers is by using regular-looking, everyday people with whom the ―average‖ consumer can identify. 8. Applying likability: Using celebrities—Advertisers have long recognized the value of using celebrities such as television and movie stars, athletes, entertainers, musicians, or other wellknown figures to endorse their products and services. IMC Perspective 6-1 discusses how tennis star Roger Federer achieved great success and wealth as an endorser. Celebrities are used because they have ―stopping power‖ and draw attention to advertising messages. Another reason is the expectation that the respect, popularity, and/or admiration the celebrity enjoys will influence consumers‘ feelings and, of course, their purchase behavior toward the brand the celebrity is endorsing. However, a number of factors must be considered in using celebrities as a spokesperson or endorser such as: i)

Overshadowing the product—While a celebrity may draw attention to an ad, consumers may focus on the celebrity rather than the product or service and the advertising message, thus having a negative impact rather than the positive intended one.

ii) Overexposure—Consumers generally recognize that celebrities endorse a product or service because they are paid to do so. When a celebrity endorses a number of products they may become overexposed and lose credibility. iii) Target audiences‘ receptivity—This is one of the most important considerations for marketers selecting a celebrity endorses—does this celebrity resonate with the target audience? Attention should be given to the target audience and whether the celebrity is appropriate for the consumers in this market. For example, younger consumers may be more impressed by celebrities than older people. A number of marketers have chosen not to utilize celebrity endorsers because they have determined that they do not influence the markets they are targeting. iv) Risk to the advertiser—Marketers must consider whether there is any risk involved in having their company or products associated with a celebrity. Several well-known entertainers and athletes who were being used as advertising spokespersons have been involved in activities that were potentially embarrassing to the companies whose products they were endorsing. For example, golfer Tiger Woods was making more than $100 million per year from various endorsement deals when he was dominating professional golf. However, a number of companies including Accenture, Gillette, Gatorade, and Tag Heur terminated their deals with him when his infidelity, and other character issues, became public in 2009. Marketers recognize that the use of celebrity endorsers can be a very expensive and high-risk strategy. v) Return on investment—Perhaps the most important factor a company must consider regarding the use of a celebrity endorser is the return on investment (ROI) from using them. Marketers use celebrities to increase awareness of, and attention to, their company and/or brands as well as their advertising. However, all of these factors must result in higher sales in order to get a positive ROI from an endorsement deal. Many companies

have seen positive results from the use of a celebrity endorser, which is why brands will likely continue to use them, despite any potential drawbacks. 9. Understanding the meaning of celebrity endorsers—Advertisers should use celebrities who are connected in some way to the product or services they are endorsing. This means that marketers must understand the image and meaning celebrities project to consumers.

Grant McCracken has developed a very insightful perspective on celebrity endorsement based on meaning transfer. His model, which is shown in Figure 6-3 of the text, suggests that credibility and attractiveness don‘t sufficiently explain how and why celebrity endorsements work and offers a model based on meaning transfer. A celebrity‘s effectiveness as an endorser depends on the culturally acquired meaning he or she brings to the endorsement process. Celebrities draw these meanings from the roles they assume in their entertainment or athletic careers. The model suggests that celebrity endorsers bring their meanings into the advertisement and transfer them to the products they are endorsing. These meanings are then in turn transferred to the consumer when they purchase a product or service. The implications of the meaning transfer model should be discussed. Current examples of celebrities whose image is capitalized on by marketers who use them in their ads should be noted. For instance, Jennifer Aniston is also known for living a healthy lifestyle and promoting wellness which is reflected in her ageless beauty. This aspect of her cultural meaning helped make her a very effective endorser in advertising for brands such as Aveeno Skin Care and Glaceau Smartwater, as well as for collagen powder brand Vital Protein.

IV.

CHOOSING A CELEBRITY ENDORSER

Marketers must consider a number of factors when choosing a celebrity to serve as an advertising spokesperson for the company or a particular brand. Some advertising and marketing executives rely on their own intuition and feelings when choosing a celebrity endorser. However, many companies and ad agencies use research data such as Q-scores and other metrics, such as consumer research firm GfK MRI and market research firm E-Poll‘s service, MRI/E-Poll Celebrity Fusion, which provides detailed insight into consumer/celebrity compatibility. These types of tools measure a celebrity‘s level of familiarity and appeal among the target audience. Applying Likability Decorative Models—A common technique used by advertisers to draw attention to an ad and enhance its effectiveness involves using a physically attractive model. Often these models are used in a passive or ―decorative‖ manner rather than as active communicators. A number of factors must be considered in using decorative models, such as whether they are appropriate or relevant to the product or service being advertised and whether they will draw attention to the ad but not the product or advertising message. An interesting study is noted which found that some women actually experience negative feelings when comparing themselves with beautiful models used in ads and the images of physical perfection they represent. This might make for an interesting class discussion as to whether a marketer may not want to use a highly attractive model in its advertising. Dove‘s ―Campaign for Real Beauty,‖ and more recently, its ―Real Beauty Pledge,‖ is an excellent example of how some companies are using everyday women in their ads rather than supermodels. II.

Source Power—Source power is the final characteristic in Kelman‘s classification scheme. A source has power when he or she can actually administer rewards and punishment to the receiver.

Perceived power depends on several factors such as perceived control, concern, and scrutiny. Power influences persuasion through the compliance process whereby the receiver accepts the persuasive influence of the source and yields to the advocated position to obtain favorable reactions or avoid punishment. It is important to note that persuasion induced through the use of a communicator who relies on power may be superficial and last only as long as the receiver perceives that the source can administer rewards or punishment. The use of source power is difficult to apply in a nonpersonal influence situation such as that found in advertising. Source power has greater application to situations involving interpersonal influence such as in personal selling. MESSAGE FACTORS

The manner in which marketing communications are presented is very important in determining their effectiveness. Consideration must be given not only to message content, but also to how the information will be structured for presentation and the type of appeal that will be used. This section of the chapter examines the structure of messages and considers the effects of different types of appeals used in advertising. Message Structure—An important consideration in the development of a promotional message is the manner or framework used for structuring or communicating the information. An important aspect of message strategy is knowing the best way to communicate message points or elements. A number of message structure considerations are discussed in the text including: 10. Order of presentation—Should important message points or arguments be placed at the beginning of the message, in the middle or at the end? A primacy effect suggests that the information placed at the beginning of the message is most effective while a recency effect suggests that the arguments at the end are most effective. Determining whether to place the strongest selling points at the beginning or end of a message depends on if the target audience is opposed to the communicator‘s position, if the audience is interested in the topic, and if the message is long and detailed and presenting many arguments, among a number of other factors. 11. Conclusion drawing—Should a message draw an explicit conclusion for the audience or allow them to form their own conclusions? Research has shown that, in general, messages with explicit conclusions are more easily understood and effective. However, some studies show that the effectiveness of conclusion drawing may depend on the target audience, the type of issue or topic, the complexity of the topic, and nature of the situation. 12. Message sidedness—Should a marketing communication use a one-sided message, whereby only positive attributes or benefits of a product or service are mentioned, or a two-sided message where both strong and weak points or attributes are presented. The text discusses how Domino‘s Pizza effectively used a two-sided message whereby the company acknowledged problems with the taste and quality of its product as part of its ―Pizza Turnaround‖ strategy. Also discussed is Volkswagen‘s use of a two-sided advertising message acknowledging the diesel scandal as part of an ad campaign for its electric vehicles (Exhibit 6-13). 13. Refutation—A special type of two-sided message whereby both sides of an issue are presented and arguments are offered to refute the opposing viewpoint or negative information is referred to as a refutational appeal. Refutational messages can be useful when marketers wish to build attitudes that resist change and/or must defend against attacks or criticism of their products or the company (see the SeaWorld ad in Exhibit 6-14).

14. Verbal versus visual messages—Both the verbal and nonverbal or visual portions of an advertisement influence the way an advertising message is processed. Verbal or copy aspects of the message are important in conveying rational or factual messages, while nonverbal or visual elements of an ad are important for developing emotional and image-based associations. Imagery can have a significant impact on the way consumers process any subsequent or accompanying copy. JJ.

Message Appeals—Another important aspect of message strategy concerns the manner or style used to communicate the promotional message. One of the most important creative strategy decisions involves the choice of an appropriate appeal. Some promotional messages use rational appeals and are designed to communicate information regarding a product or service and appeal to the logical aspects of the consumer decision-making process. Other messages appeal to feelings in an attempt to evoke some type of emotional reaction. Many advertising professionals believe that effective advertising combines the practical reasons for purchasing a product with emotional values. Three types of appeals are discussed in the text: 15. Comparative advertising—Comparative advertising refers to the practice of either directly or indirectly naming one or more competitors in an ad and usually making a comparison on one or more specific product or service attributes. This form of advertising became a legitimate and popular practice after the Federal Trade Commission began advocating its use in 1972 and the networks lifted their ban on comparative advertising. A number of factors must be considered in using comparative advertising such as consumers‘ response to the ad, perceptions of credibility, characteristics of the target audience, and the company‘s position in the market. Comparative messages are often used by new brands to position themselves against established brands or by smaller market share brands to compare themselves against market leaders. Market leaders, on the other hand, are often hesitant to use comparison ads as they feel they have little to gain by showing competitor‘s products in their ads. Comparative advertising has become common in the mobile phone industry as the major providers (Verizon, AT&T, and T-Mobile) often run ads comparing themselves against one another on key attributes such as network coverage, signal quality, and price. Another good example of the use of comparative advertising by fast-growing sports drink, BodyArmour, is provided in the text (Exhibit 6-16). 16. Fear appeals—Fear appeals are used to create anxiety in the audience and arouse individuals to take action. Fear can stress negative consequences that may occur if behavior is not altered such as ads that warn people not to smoke, use drugs, or drink and drive. Exhibit 6-18 provides a good example of the use of fear appeals as it shows an ad created by the Ad Council to discourage buzzed driving by showing how getting arrested for a DUI can cost nearly $10,000 in legal fees. Fear can also be used through the threat of social disapproval or rejection that an individual might suffer if they do not use a particular product or service (such as deodorant, mouthwash, or dandruff shampoo). vi) How fear operates—Advertisers should consider how fear operates, what level to use, and how target audiences may respond before deciding to use a fear appeal message. Fear appeals can have facilitating effects by attracting attention and interest to a message and motivating the receiver to act to resolve the problem presented in the ad. However, high levels of fear can have inhibiting effects whereby the receiver may emotionally block out the message by tuning it out, selectively perceiving it or counterarguing against it. The nonmonotonic relationship between fear and persuasion is shown in Figure 6-5 and should be discussed. Attention is also given to an alternative approach to the curvilinear explanation of fear—the protection motivation model. This model suggests that both the 1-99 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

cognitive appraisal of the information in a fear appeal message and the emotional response mediate persuasion. 17. Humor appeals—Humorous ads are among the most popular and best remembered of all advertising messages. Advertisers use humor for a number of reasons including attracting and holding consumers‘ attention, putting them in a favorable mood, creating affect that may transfer to the product or service being advertised, and reduce counterarguing by serving as a distractor. A problem with humorous appeals includes the possibility of drawing attention to the ad at the expense of message content. Effective humor is also difficult to create and execute. Additionally, advertisers are often concerned that humorous advertisements will wear out faster than serious appeals. Wearout refers to the tendency of a television or radio commercial to lose its effectiveness when it is seen and/or heard repeatedly. Because of this potential, many advertisers prefer to use hard-sell, rational appeals rather than spend their ad budgets to entertain consumers. Recent research supports the idea that high-involvement products may not be as well suited for advertising humor as low-involvement products. Professor Notes:

VI.

CHANNEL FACTORS

The final controllable variable of the communications process is the channel, or medium, used to deliver the message to the target audience. Some general considerations regarding channel factors are presented here. Personal versus Nonpersonal Channels—Effective communication also depends on the channel or medium used to deliver the message to the target audience. While there are a variety of methods available for communicating a promotional message, they can be classified into two broad categories—personal and nonpersonal channels. Differences between these two types of influence channels are discussed. KK.

Effects of Alternative Mass Media—Most promotional efforts such as advertising involve nonpersonal communication through the mass media. The mass media that advertisers use to transmit their messages differ in many ways including the number and type of consumers they reach, their costs, their information-processing requirements, and qualitative characteristics. These factors will be covered in detail in subsequent media chapters. 18. Differences in information processing—There are very basic differences among alternative mass media in terms of the manner and rate at which information is transmitted and can be processed by the message recipient. Information from the print media is self-paced while information from broadcast media of radio and television is externally paced. There are important implications for advertising via each type of medium. For example, self-paced print media make it easier for the message recipient to process a long, complex message. Advertisers often use print ads when they want to present a detailed message with a lot of information. Broadcast media are more effective for transmitting shorter messages or, in the case of TV, presenting image along with words.

LL.

Effects of Context and Environment—Reactions to and interpretation of an advertising message can be a function of not only message content, but also the context or environment in which the 1-100 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

ad appears. A qualitative media effect refers to the positive or negative influence the medium may contribute to the message. For example, an ad for a high-quality men‘s clothing line might have more of an impact in a fashion magazine like GQ than in Sports Afield. Airlines, destination resorts, and travel-related services advertise in publications such as Travel + Leisure partly because its content helps excite readers about travel (Exhibit 6-22). Media reception environments are created by the nature of the television program in which a commercial appears. Consumers may be in a more receptive mood when watching an upbeat situation comedy versus a news program or documentary. MM.

Clutter—Another aspect of the media environment that is important to advertisers is the problem of clutter, which refers to all the non-program material that appears in the broadcast environment including commercials, promotional messages for shows, public service announcements, and the like. Clutter has become a major concern to advertisers as there are too many messages competing for viewers and listeners‘ attention. Studies have shown that the amount of clutter on the four major networks during prime time is running at around 13 minutes per hour, and is higher on cable channels, with an average of around 15 and a half minutes, with some networks averaging more. Thus, a viewer watching three hours of television during prime time on the broadcast and/or cable networks would be exposed to more than 100 commercials—in addition to programming promotions and public service announcements. Clutter is also viewed as contributing to advertising disengagement, which the Advertising Research Foundation refers to as a lack of excitement, interest, attention, or involvement intended to be aroused by an advertisement or advertising campaign. 19. Clutter in online advertising—The clutter problem is present in online advertising as well. A major difference that distinguishes online from offline media environments is that in the online environment the concept of ―audience‖ is replaced by that of ―users,‖ because consumers actively use online media with specific goals, and online media have interactive capability with user input and advertisers‘ programming control. Ha and McCann note that the Internet has the dual characteristics of being both a captive medium and a self-paced medium. A major factor regarding clutter in online media is that advertising formats vary greatly for Internet advertising and the captivity of the advertising to the user is determined not by the ad medium, but rather by the specific ad format.

Professor Notes:

Teaching Suggestions The material in this chapter is generally very well received by students as most of them have opinions regarding whom they consider a good or bad advertising spokesperson, or the type of message appeals they like or dislike. This chapter is designed to build on the material in Chapter 5 by discussing how decisions regarding source, message and channel factors affect the various stages of the response process. We have found that the persuasion matrix is a very effective way of showing how decisions regarding controllable communication elements interact with the various steps in the response process. It may be useful to pick a few current examples of advertising campaigns using various spokespersons such as entertainers or athletes and different types of message appeals (fear, humor, comparisons) and analyze them using the persuasion matrix. This chapter has a detailed discussion of issues regarding the use of celebrities in advertising, which is a very popular issue among students. You might engage students in a discussion of why marketers pay such large sums of money to celebrities including athletes, entertainers, and TV/movie stars to appear in their commercials. You might also encourage students to consider the risks involved in the use of celebrities. The coverage of message structure and appeals also lends itself to interesting discussions regarding the use of various types of messages such as fear and humorous appeals. You might want to visit the website for the Montana Meth project (www.methproject.org), which has examples of many different television and print ads that utilize many of the different message structure and appeals used in the chapter. It is important to note that message appeals are discussed in more detail in Chapters 8 and 9, which cover creative strategy and execution while media strategy and specific characteristics of the media are discussed in Chapters 10 through 14. These communication elements are introduced in this chapter to provide the student with an understanding of how decisions regarding these factors fit in with the overall communications process. This will provide the student with a strong foundation for evaluating media and creative decisions when this material is covered in subsequent chapters.

Answers to Discussion Questions 35. The chapter opener discusses how the NCAA’s new name, image, and likeness (NIL) program allows college athletes to accept money from businesses for using them in advertisements and other promotions. Discuss the pros and cons of NIL. Find an example of a company using college athletes as endorsers and evaluate the use of them. (LO 6-2) The National Collegiate Athletic Association was formed in 1906 to regulate college athletics and protect young athletes. The NCAA enforced its amateurism rules with a vengeance, until the U.S. Supreme Court unanimously ruled in the case of NCAA v. Alston that the NCAA is not legally allowed to limit any education-related payments to student athletes. From there the NCAA deferred to individual states to create their own rules allowing college athletes to make money in business ventures without losing their eligibility. Two NCAA regulations did remain in place: Schools are not allowed to pay a player or provide compensation for performance, and recruited athletes cannot sign any ―name, image, and likeness‖ (NIL) deal contingent upon going to a particular school. However, the new NIL rules essentially allow college athletes to profit off themselves as they can earn money in a number of ways including appearing in advertisements and promotions for a business, making personal appearances, selling ads on their social media accounts, being paid for posts on social media, selling signed memorabilia, selling merchandise, running a sports camp, and starting their own businesses. Critics are concerned that the program is quickly getting out of control as boosters at many large schools become involved. State laws and NCAA regulations contain limitations on NIL such as that 1-102 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

money cannot come from the schools or be used for recruiting athletes. The idea was that NIL money would come from businesses that actually wanted the athletes‘ endorsements and would pay a fair price for endorsements. However at many schools that play big-time college sports, big-money donors are funding ―collectives‖ which are formed by wealthy alumni and supporters and collect financial resources that are directed to athletes for the right to use their name, image, and likeness. The collectives are supposed to help facilitate NIL deals for athletes, but they are often just a way to pay athletes to play for a college sports team. Booster involvement in recruiting has always been against the rules and the NCAA announced that it is stepping up its enforcement to include any NIL violations that may involve boosters using collectives to lure recruits to their schools with the promise of a big NIL deal. The majority of college athletes are not football or basketball players at major universities, but rather participate in niche sports that have limited NIL potential. However, NIL advocates argue that all college athletes should have the right to earn additional money and profit off their name, image, and likeness. They also say the NCAA and college sports have long had an exploitive business model which has resulted in billions of dollars being made by universities and media companies from college athletes. They argue that it is long overdue for some of the money generated by college sports to hit the wallets of the players and NIL is a legitimate way to do so. Critics of NIL argue that it is not working as planned and has become the ―Wild, Wild West‖ and is out of control and getting dramatically worse. There is consideration in some areas for high school athletes to be paid under an NIL plan. For example, Paige Bueckers, a star guard on the University of Connecticut Huskies basketball team and first freshman in women‘s college basketball history to win the Wooden Award as the most outstanding player of the year, who has nearly one million followers on Instagram, charges an estimated $3,600 per post and has partnered with brands such as Gatorade and StockX. 36. Discuss how marketers can use the persuasion matrix shown in Figure 6-1 to plan their integrated marketing communication programs. Choose a TV commercial, online video, or print ad and use the persuasion matrix to evaluate how it might influence consumers’ response processes. (LO 6-1) The persuasion matrix helps promotional planners see how each controllable element in the communications process (source, message, channel, and receiver) interacts with the consumers‘ response process. Marketers must consider how decisions regarding these controllable elements of communication will affect the various stages in the response process. For example, the use of a highly attractive model may attract attention to the ad but have a negative impact on comprehension if the information presented by the model is not processed. This assignment gives the student an excellent opportunity to analyze an advertisement in terms of various communication components and how they interact with the steps of the response process. The students‘ analysis of the ad they choose should address factors such as the type of source used, the message structure or appeal, the media vehicle where the ad was seen (e.g., the magazine or newspaper or specific television program) and the target audience they think it was directed towards. They can then analyze these individual variables in terms of their impact on the various steps of the response process as shown in the persuasion matrix (Figure 6-1) such as message presentation, attention, comprehension, yielding, retention, and behavior. 37. Discuss the three primary source attributes shown in Figure 6-2 and the processes by which they can influence attitude and/or behavior change. Find an example of an advertisement or other type of promotional message that uses each source attribute. (LO 6-2)

The three primary source attributes noted by Kelman are credibility, attractiveness, and power. Credibility influences attitudes and/or behavior through a process known as internalization whereby the receiver adopts the opinion of the credible communication because s/he feels it is accurate and integrates it into his or her belief system. The two basic components of source credibility are expertise and trustworthiness. Expertise refers to the extent to which the source is perceived as having knowledge, skill, or experience relevant to the communication topic. Many ads use expert sources such as doctors and dentists to endorse products. Athletes also are examples of expert sources when they are endorsing a product or service related to their sport. For example, racecar drivers often endorse automotive products while golfers and tennis players endorse equipment related to their respective sports. Trustworthiness refers to the honesty, integrity, and believability of the source and the extent to which he or she can be trusted to give an unbiased opinion or present objective information on the issue. Expertise is used in many ways in marketing communications. Trustworthiness is also very important, and advertisers usually attempt to find spokespersons with a trustworthy image and who are not endorsing too many products. Advertisers can also use techniques such as hidden-cameras or unsolicited testimonial as a way of increasing the receivers‘ perceptions of trustworthiness of the source. Students should be asked to find an example of advertisements that use an expert source and one who is used based on his/her level of trustworthiness. The source characteristic of attractiveness operates through the process of identification whereby the receiver is motivated to seek some type of relationship with the source and thus adopts similar beliefs, attitudes, preferences, or even behavior. The components of source attractiveness include similarity, familiarity, and liking. Similarity is based on the sharing of interests, lifestyles, opinions, needs, goals and the like. Similarity is used in advertising by choosing spokespersons or individuals to appear in the ads who are similar on these dimensions to receivers in the target audience. The use of slice-oflife executional appeals are also a way of attempting to create empathy between the person in the commercial and the viewer. Another very common way of using attractiveness in advertising is through the use of celebrities from the sports and entertainment fields. In addition to their ability to attract attention to an ad, another reason for using celebrities is the liking consumers may have for them and the assumption that the respect, popularity, and/or admiration the celebrity enjoys will favorably influence consumers‘ attitudes and, hopefully, their purchase behavior. Student should have no trouble finding examples of ads that use the source characteristic of attractiveness such as those featuring celebrities including entertainers, actor/actresses, and athletes Power is a source characteristic when the source can actually administer rewards and punishments to the receiver and operates through a process known as compliance whereby the receiver accepts the persuasive influence of the source and acquiesces to his or her position in hopes of obtaining some type of reward or avoiding punishment. As a result of his/her power, the source may be able to induce another person to respond to the request or the position s/he is advocating. Power is a source characteristic that is difficult to apply in a nonpersonal influence situation such as advertising since a communicator in an ad generally cannot apply any sanctions to the receiver or determine whether compliance actually occurs. Thus, students may find it difficult to find an example of advertising that relies on power as a source characteristic. 38. IMC Perspective 6-1 discusses the tremendous success of tennis star Roger Federer as an endorser. Discuss the reasons Federer has been successful as an endorser. Find an example of a company using Federer as an endorser and evaluate its use of him. (LO 6-2) Marketers realize the value of using athletes who are recognized and often admired by their target audience as a way to draw attention to their advertising messages. Sports stars usually promote products such as athletic shoes, apparel, and sports equipment. However, the popularity of highprofile athletes often transcends sports, and they endorse a variety of other products.

There are a number of reasons for Roger Federer‘s tremendous popularity as an endorser. First, Federer is considered one of the greatest tennis players of all time as he has won an astounding 103 ATP tournaments and holds 20 Grand Slam singles titles. His eight singles titles at Wimbledon is also a record. He has been viewed as perhaps the most marketable athlete in the world for more than a decade. Federer has incredible demeanor both on and off the court and has handled both wins and losses with grace and style, which endeared him to fans and sponsors. Another major reason for Federer‘s success as an endorser is the way he has managed his career off the court. Like many tennis stars, Federer originally signed an endorsement deal with Nike in 1994 when he was just a teenager. In 2005 Federer re-signed with the sports management company IMG which he had left in 2002 go on his own, and by 2008 Federer renewed his Nike deal for 10 years, reportedly at more than $10 million per year. IMG also helped Federer secure lucrative global endorsement deals with Gillette, Rolex, Mercedes Benz, Wilson, Credit Suisse, and Moet & Chandon. By 2012 Federer was making an estimated $70 million in endorsements, which put him second on the list of the world‘s highest-paid athletes. However, that same year he made a major decision to take greater control of his off-court career when he left the sports agency giant IMG and launched his own sports agency company called TEAM 8. In 2018, he walked away from Nike and signed a 10-year apparel deal with Japanese fast fashion brand Uniqlo which guaranteed him $30 million per year, even after he retired from competition. The deal with Uniqlo covered only apparel and not shoes and Federer also signed a deal with Swiss sneaker brand On as a global ambassador that gave him equity in the company. It is estimated the deal could be worth several hundred million dollars to Federer when the company goes public. Federer retired from tennis in September 2022, saying his body would no longer allow him to compete at a high level. However, he shows no signs of slowing down as a corporate pitchman. Tennis players, like professional golfers and soccer players, are very popular from a marketing perspective as they are part of a global sport that appeals to both men and women. Most of Federer‘s sponsors have extended their endorsement deals with Federer and will go with him into his retirement and beyond. 39. Find a celebrity who is currently appearing in an advertising campaign for a specific company or brand and use McCracken’s meaning transfer model (shown in Figure 6-3) to analyze the use of this individual as a spokesperson. (LO 6-2) McCracken‘s meaning transfer model provides an interesting perspective on celebrity endorsements. According to this model, a celebrity‘s effectiveness as an endorser depends on the culturally acquired meaning s/he brings to the endorsement process. Celebrities acquire these meanings from the roles they assume in their careers as entertainers, athletes, politicians, and other areas. They then bring these meanings into the advertisements in which they appear and transfer them to the product or service they are endorsing. Students should be asked to find a celebrity who is currently endorsing a product, service or company and analyze his or her endorsement effectiveness in terms of McCracken‘s model. They should discuss how the celebrity acquired his or her meaning and whether it transfers well to the company or brand they are endorsing. For example, actor Paul Hogan was a spokesperson for the Subaru Outback SUV when it was introduced to the U.S. market in the late ‘90s. Hogan acquired his cultural meaning primarily from the role he played in the Crocodile Dundee movies as a rugged, tough guy from the Australian Outback (Stage 1 of the model). He was an excellent choice as a spokesperson for the Outback as Subaru wanted to position the new vehicle as a vehicle that combines rough-terrain driving capability with the ride and comfort of a passenger car, and the use of Hogan helps create this image. Subaru‘s use of Hogan provides a clever play off of the Outback name as well as an opportunity to transfer Hogan‘s tough and rugged image to the vehicle (Stage 2 of the model). Consumers may choose the Outback since they may be looking for these

attributes when they purchase a new car, particularly if they internalize the image of the vehicle as durable and rugged (Stage 3 of the model). Students should be encouraged to choose a current example of a celebrity who is a popular endorser and analyze the use of this person as an advertising spokesperson by using the meaning transfer model. 40. Should popular social media influencers be viewed as having the same celebrity status as more traditional celebrities such as athletes, actors, and entertainers? Why or why not? (LO 6-2) Another consideration for marketers is whether to use mainstream celebrities such as athletes, actors, and entertainers or spend their promotional budget on social media influencers and YouTube personalities who have become quasi-celebrities and are often more influential with younger audiences. Over the past two decades, the growth of social media platforms such as Facebook, YouTube, Instagram, Snapchat, and TikTok has dramatically changed the way many consume media and entertainment. YouTube has nearly 2 billion monthly users who spend an average of an hour a day on the YouTube mobile app alone. The 21st century has become the age of social media and a myriad of influencers have emerged. It has been argued that social media influencers have become the new celebrities of our age as many of them have amassed large numbers of followers and fans that rival traditional celebrities. For example, Charlie D‘Amelio, who has become famous for posting dancing and choreography videos on TikTok, has 125 million followers on the platform and another 50 million on Instagram. She has clearly achieved celebrity status among her many followers. Social media influencers become popular by posting engaging content on social media platforms and their popularity is often limited to these platforms. While it is possible for most celebrities to become social media influencers, most influencers cannot be celebrities. However, there are several reasons YouTubers influence teens and millennials more than mainstream celebrities do. According to a study conducted by Google, and many other studies, YouTube subscribers say that their favorite YouTubers understand them better and can relate to them more than do traditional celebrities. YouTube content creators develop relationships with their fan base, which leads to higher engagement, as evidenced by more views, comments, and other actions such as liking and sharing. Teens and young adults feel that YouTube personalities are more influential in setting trends and shaping popular culture than traditional celebrities. A new generation of social media influencers who create their own content and deliver it on TikTok, YouTube, Instagram, Facebook, and other platforms are becoming household names and legitimate influencers among young consumers. Chris Foster, the former chief operating officer of the Saatchi & Saatchi advertising agency, says the traditional image of a celebrity as remote, unknowable, and highly controlled by publicists is no longer persuasive or effective, because members of today‘s plugged-in generation want to feel connected to their idols and have a sense of how they spend their lives. Foster argues that a democratization of celebrity is taking place that includes three key factors—expertise, access, and identification—and popular social media personalities often stack up as well, if not better, on all three than do traditional celebrities who are paid to promote brands. 41. Discuss Volkswagen’s decision to use a two-sided advertising message acknowledging the diesel emissions scandal that occurred in 2015. Do you think this was an effective way for the company to address this issue? (LO 6-3) A two-sided message presents both good and bad points with the thought that acknowledging a shortcoming can be a way to increase message or brand credibility. Many brands choose not to use a

two-sided message as they are concerned with the potential negative impacts that could stem from them acknowledging a flaw or weakness of their brand or product. A recent example of a two-sided message is advertising done by German automaker Volkswagen in 2019 which addressed the global diesel emissions scandal that began in 2015 and had a negative impact on the company‘s image for several years. Governmental regulatory agencies in the U.S. and Europe discovered that special software installed in Volkswagen diesel-powered vehicles was designed to defeat emissions testing making them to appear be far cleaner and safer for the environment than they actually were as the vehicles were emitting more toxic fumes than permitted. The scandal drew major media attention and tarnished Volkswagen‘s long-held pro-environment positioning, in addition to costing the company billions of dollars in legal settlement costs. In 2019 Volkswagen launched a new branding campaign called ―Drive Something Bigger Than Yourself‖ which was designed to showcase its environmental plan. In the initial phase, Volkswagen aired a one-minute-and-forty-five-second TV commercial that begins with a lone figure in an open doorway surrounded by darkness. Flashbacks of news reports about VW‘s 2015 diesel scandal can be heard in the darkness as the scene shifts to a lone designer, working late and sketching electric vehicle renderings in a dimly lit room. A few seconds later we hear the opening of the classic Simon and Garfunkel hit ―The Sounds of Silence.‖ While the song plays, the designer grows frustrated but is inspired by looking at old drawings of VW‘s classic Microbus. Scenes of modern-day vehicle manufacturing are followed by the big reveal as the I.D. Buzz, an electric version of the Microbus VW that is set to arrive in the U.S. in 2023, emerges from the darkness. The ad ends with white lettering against a black background stating: ―In the darkness, we found the light. Introducing a new era of electric driving.‖ The campaign also included print ads that utilized a two-sided message. The two-sided advertisements marked the first time Volkswagen had addressed the diesel scandal head-on in its advertising in the U.S. Some ad critics questioned the strategy of using the two-sided message. For example, in a review of the ad, Advertising Age wrote: ―But by mentioning the scandal now in a new ad, the brand risks reminding buyers about an issue that many probably had forgotten about. The ad also does not explicitly apologize for VW‘s actions, which could risk angering some consumers.‖ However, many praised Volkswagen and argued that the company needed to address the scandal again in a very public way to gain the credibility needed to be successful in the electric vehicle market. The agency that created the ad noted that Volkswagen needed a clearing-of-the air moment and a big idea that would help the company turn the page and move forward. 42. Go to the website for the Montana Meth Projects (http://www.montanameth.org) and choose three ads that use various levels of fear in the message. Discuss why each ad may or may not be effective. (LO 6-3) The Montana Meth project website contains may example of print and television commercials that utilize fear appeals. The level of fear used in these ads varies and student should be able to find examples of ads with low, medium, and high levels of fear that can be analyzed for this assignment. Fear can affect persuasion in both a positive and negative manner. A message with a low level of fear can have facilitating effects if it attracts the attention and interest of the consumer and motivates them to consider how they might try to resolve the threat. This suggests that a mild fear appeal may be effective in changing attitudes and behavior of as it may get them to think about the negative consequences involved and think about how they might avoid them. Fear appeals can also have a negative or inhibiting effect, and a message that uses too much fear may cause people to tune it out, perceive it selectively, counterargue against it, or discount the likelihood of the negative consequences happening to them. One potential problem with anti-messages targeted at young people is that they tend to perceive themselves as invulnerable, and thus they may discount any negative outcomes shown in the message as unlikely to occur to them.

A number of factors should be taken into consideration in developing a fear appeal message. Young people are a market segment that may require special consideration when using a fear appeal message. This audience may be likely to discount fear appeal messages that are too strong or seen as too unrealistic. The credibility of the source used in the message may be very important and consideration given to using a source with whom this group identifies and might not easily derogate. Research on fear appeals has shown that they are more effective among nonusers of a product than users. Thus, it may be more effective to target fear appeals at those peers who are not using drugs and encourage them to take responsibility for their friends who might do so. An example of this is the designated driver program and responsible drinking campaigns used by liquor and beer companies. 43. Discuss the pros and cons of using humor as the basis for an advertising appeal. Find an example of an advertising message that uses humor and evaluate it effectiveness. (LO 6-3) Humorous ads are often the best known and best remembered of all advertising messages. Many advertisers, including GEICO, Old Spice, Snickers, Frito Lay, Amazon, Budweiser, and Bud Light, use humor appeals effectively. Humor is usually presented primarily through TV commercials and online video and to a lesser extent through radio as these media lend themselves to the execution of humorous messages. However, humor is occasionally used in print ads as well, as agency creatives can use images in combination with clever headlines and ad copy to develop humorous messages. The ad for Volkswagen‘s new park assist feature shown in Exhibit 6-21 is a good example of how humor can be used in a print ad. Humorous messages attract and hold consumers‘ attention. They enhance effectiveness by putting consumers in a positive mood, increasing their liking of the ad itself and their feeling toward the product or service. In addition, humor can distract the receiver from counterarguing against the message. A meta-analytic test of various models of how humor works in advertising showed that its effects are primarily based on affective processes and that it can distract from the processing of cognitive information such as brand beliefs and benefits. This suggests that the peripheral processing of humorous messages is dominant, and that effort devoted to processing of ad-related affective elements comes at the expense of attention to brand-related cognitions. Critics argue that funny ads draw people to the humorous situation but distract them from the brand and its attributes. Also, effective humor can be difficult to produce, and some attempts are too subtle for mass audiences. In addition, there is concern that humorous ads may wear out faster than serious appeals. Wearout refers to the tendency of a television or radio commercial to lose its effectiveness when it is seen and/or heard repeatedly. Wearout may occur if consumers no longer pay attention to a commercial after several exposures or become annoyed at seeing or hearing an ad multiple times. Some experts argue that humorous ads wear out faster than other formats because once the consumer gets the joke, the ad becomes boring. However, advocates of humor argue that funny ads are effective longer as consumers will respond more favorably to a well-executed humorous ad than a serious message. One way marketers deal with this problem is by creating "pool-outs" or multiple executions around a campaign theme that can be rotated so no one ad airs repeatedly during a short time period. For example, large advertisers such as GEICO, Snickers, Old Spice, and Anheuser-Busch InBev generally have a number of commercials available to rotate. However, this can be a problem for smaller companies that do not have a large enough budget to produce multiple commercials. 44. What is meant by a qualitative media effect? Choose a television program or magazine and discuss the reception environment created by the show or publication. Which type of companies or brands might be interested in advertising on this program or in this magazine? (LO 6-3) A qualitative media effect refers to the positive or negative influence a media vehicle has on an advertising message as a function of its quality, image, prestige, and the reception environment it 1-108 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

creates. Media vehicles such as magazines and television programs have qualitative effects since the environment they create may have an impact on readers‘ or viewers‘ mood states and the way they might process and respond to an advertisement. Students should be encouraged to choose a specific program or magazine and analyze the media environment it created. A publication such as Cosmo or Vogue will be very different from Good Housekeeping or McCall’s in terms of layout, articles, photographs, and the various products and services that are advertised. Students should be asked to describe these differences and how they might influence the way readers might respond differently to ads in these publications. For television, a popular sitcom such as Young Sheldon or Abbott Elementary provides a much different reception environment than a drama or serious news program such as 60 Minutes. Viewers of a sitcom are likely to be in a more lighthearted mood and respond more favorably to advertising than consumers watching more serious programming. Marketers recognize the value of this and often will pay higher CPM rates for ad time on sitcoms. 45. Discuss what is meant by advertising clutter and how it is a problem in various media such as television, radio, and online. What are some of the ways the media and advertisers can address the clutter problem? (LO 6-4) An aspect of the media environment of importance to advertisers is the problem of clutter, which is the amount of advertising that appears in a medium. However, for television, clutter is often viewed as including all the nonprogram material that appears in the broadcast environment—commercials, promotional messages for shows, public service announcements (PSAs), and the like. Clutter is of increasing concern to advertisers since there are so many messages in various media competing for the consumer‘s attention. Half of the average magazine‘s pages contain ads, and in some publications the ratio of ads to editorial content is even higher. However, in recent years, many marketers have shifted their ad spending to digital media, which has resulted in a significant decline in the number of ad pages in many magazines. However, clutter remains a problem for television and radio advertising, as well as online, where consumers are often bombarded with ad messages. On average, around a quarter of a broadcast hour on TV is devoted to commercials, while most radio stations carry an average of 10 to 12 minutes of commercial time per hour. The average length of a commercial break during prime time on the major networks is just over three minutes, which means viewers are exposed to a large number of ads in a short time period, making it difficult for commercials to attract and hold the attention of viewers as well as communicate effectively. Clutter has become a major concern among television advertisers as a result of increases in nonprogram time and the trend toward shorter commercials. While the 30-second commercial replaced 60-second spots as the industry standard in the 1970s, many advertisers are now using 15second spots. The advertising industry continues to express concern over the highly cluttered viewing environment on TV; the amount of clutter increased as much as 30 percent during the 1990s and has continued to increase over the past two decades. Several factors are causing the increased clutter including lower rating for TV shows as consumers spend more time online and the fact that many marketers are reducing their spending on television advertising and shifting these monies into digital ads. Thus, TV networks are inserting more commercials into programs to offset these factors and avoid revenue declines. Clutter levels have been increasing as the four major broadcast networks and cable networks increased the amount of time allocated to commercials. Broadcast networks average just over 13 minutes of commercial time per hour, while cable averages nearly 15 minutes, with some networks higher. Thus, a viewer watching three hours of prime-time programs on the major networks would be exposed to more than 100 commercials in addition to programming promotions and PSAs. The problem is even greater during popular shows, to which the networks add more commercials because they can charge more. In addition, of course, advertisers and their agencies perpetuate the problem by pressuring the networks to squeeze their ads into top-rated shows with the largest audiences. 1-109 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

Advertisers and agencies have been pressuring the networks to reduce the amount of advertising time on their programs. In 2018, several of the major networks announced that they were reducing the number of commercials they would show during prime time programming to address the clutter problem. In 2019, NBC Universal reduced commercial time another 10 percent in an effort to bring audiences a better viewing experience and provide marketers with more engaging advertising opportunities. The problem is not likely to go away, however, and advertisers will continue to search for ways to break through the clutter, such as using humor, celebrity spokespeople, or novel creative approaches.

Additional Discussion Questions (not in text) 46. Most marketers choose an advertising spokesperson or source with high credibility. Discuss some reasons why it may be unnecessary, or even detrimental, to use a source who is high in credibility. (LO 6-2) There are some situations where high source credibility may not be necessary and may even be a liability. A high credibility source is likely to be most effective when message recipients are opposed to the position advocated in the message, as the credible communicator will inhibit counterarguing and source derogation. However, a high-credibility source may not be needed when the audience has a neutral position and may even be less effective than a moderately credible source when the receiver‘s initial attitude is favorable. The reason for this is that when a low credibility source is used, the message recipients are encouraged to review personal thoughts that are supportive of their favorable position rather than attributing their feelings to the highly credible communicator. Studies have also shown that high- and low-credibility sources are equally effective when they are arguing for a position opposing their own best interest. Another reason why a low-credibility source may be as effective as a high-credibility source is the sleeper-effect phenomenon. While the immediate impact of a persuasive message may be inhibited because of its association with a low-credibility source, the association of the message with the source diminishes over time and the receiver‘s attention focuses on the information in the message. Thus, the positive effects of using a high-credibility source will diminish over time as will the initial negative impact of using a low-credibility source. 47. What is meant by a primacy versus recency effect? When might an advertiser want to try and achieve each type of effect? (LO 6-3) Primacy and recency effects deal with the order of argument placement in a persuasive message. Research on learning and memory generally indicates that items presented at the beginning or end of a message are remembered better than those presented in the middle. Presenting the strongest arguments at the beginning of the message assumes a primacy effect whereby information presented first is most effective. Putting the strongest points at the end of the message assumes a recency effect, whereby the last arguments presented are most effective. The decision to place strong arguments at the beginning or end of a message often depends on several factors including the initial position of the target audience and the length of the message. If the audience is opposed to the advertiser‘s position, it may be best to put the strongest arguments first to reduce the level of counterarguing. It may also be best to put strong arguments first if the audience has a low level of interest in the topic. However, if the audience is predisposed toward the communicator‘s position or is highly interested in the product or issue, strong arguments can be saved for the end of the message. The order of presentation can be critical when a long, detailed message with many arguments is being presented. This may be the case for ads for high involvement products where a great deal of ad copy is used or for sales presentations. However, for short messages such as a 15-second commercial, the order of presentation may be less critical. Order of presentation is also of interest in placement of spot

during a commercial break. Most advertisers prefer to have their commercials appear at the beginning or end of a pod rather than in the middle. 48. Find examples of an advertising message or campaign that uses the company CEO, president, or founder as the spokesperson. Do you think this individual is an effective spokesperson for the company? Why or why not? (LO 6-2) There are several reasons why CEOs are used as an advertising spokesperson. First, they have very pleasant personalities and come across as authentic and genuine in the commercials for their companies. CEOs who are dull, boring, or fail to positively differentiate a company or brand are not very effective as consumers are looking for the CEO to be interesting, relevant, and truly understand consumer desires. For some firms, the use of a president or CEO in their ads can help create an identity and personality for the company and/or brand. For example, Richard Branson‘s irreverence and zeal for life have helped personify the image of Virgin‘s empire of megastores, airlines, mobile phones, and soft drinks. Branson has been used occasionally in ads for various Virgin brands. Another popular CEO spokesperson is Sir James Dyson, who has appeared in ads for the company‘s vacuum cleaners, hair dryers, and other innovative products. Dyson is perceived to be authentic and genuine, which are two important traits for corporate leaders who appear in ads for their companies. Some companies feel that the use of a corporate leader as an advertising spokesperson is a way of expressing the company‘s commitment to the customer with respect to areas such as quality and customer service. The use of an owner or CEO of a company is seen as a way of giving a company a favorable image or identify among consumers. In some cases, a corporate leader may be very well known and respected and their popularity and/or favorable reputation may help enhance the image of the company. There are a number of potential problems associated with the use of a corporate leader as an advertising spokesperson. Many business leaders are not very good in front of a camera and do not make effective advertising spokespeople. They may not exude credibility or possess the type of image needed to be a good spokesperson for their company. Thus, the company may be spending money on advertising that is ineffective, or may even be perceived very negatively by consumers. Another problem with using a business leader as a spokesperson is that the image of the company may be tied too closely to that person and may create problems if this individual leaves the company or encounters some negative publicity. This was the case with John Schnatter, who appeared in more than 60 commercials for the Papa John‘s pizza chain over the past two decades and was considered one of the most effective CEO spokespersons, because he was perceived as authentic and genuine. However, during an earnings report conference call in 2017, Schnatter blamed the National Football League‘s handling of its players‘ kneeling protests during the national anthem for the chain‘s declining pizza sales. Papa John‘s had been the official pizza sponsor of the leagues since 2010. Several white supremacist groups praised Schnatter for his comments and called Papa John‘s ―the official pizza of the alt-right.‖ The controversy resulted in an extensive amount of negative publicity for the company, which pulled all advertising featuring Schnatter, who resigned as CEO less than two months later. Students should be encouraged to find an example of a current advertising campaign that uses the company CEO, president or founder as a spokesperson and evaluate whether they are effective. This strategy is very common in local marketers where retailers and automotive dealers often have their owners or CEOs appear in commercials. 49. Evaluate Domino’s decision to run an advertising campaign acknowledging the problems with the taste of its pizza as a way to promote its new recipe. Do you think this strategy was an effective way to promote its reformulated product? (LO 6-3)

Domino‘s decision to use advertising acknowledging the problems with the taste of its pizza is an example of the use of a two-sided advertising message whereby a marketer presents both positive and negative information about a product or service. Most marketers use a one-sided message mentioning only positive attributes or benefits associated with a product/service or a particular issue whereas a two-sided message presents both favorable and unfavorable information and arguments. The advantages of using a two-sided versus one-sided advertising message are that it may enhance perceptions of an advertiser‘s credibility. One-sided messages are most often used since a company may only want to mention positive attributes, benefits or features or present only favorable arguments about its product or service. Many marketers feel it is too risky to say anything negative about their own company or brands. One-sided messages are most effective when the target audience already holds a favorable position toward the topic and will not hear opposing arguments. They may also work better with less educated audiences. For those individuals with an opposing viewpoint or a better-educated audience, a two-sided message may be seen as less biased, more credible, and thus more effective. Domino‘s use of a two-sided message appears to have been a very effective strategy. The company knew there were problems with the quality and taste of its pizza, which was why they were reformulating the product. Rather than just announcing that it had changed its pizza, Domino‘s and its agency felt that it could get more attention and be perceived as more honest and sincere by acknowledging the problems. The company did take somewhat of a risk as consumers could focus only on the negative part of the message rather than hearing how they were improving the taste of their pizza. This was not the case, however, as the Pizza Turnaround campaign worked very well and led to increased sales. Studies conducted on the two-sided messages showed that consumer reactions were very positive. The two-sided messages also generated a great deal of positive publicity as Dominos was praised for conceding the shortcomings of its product and taking steps to improve the taste.

CHAPTER 7 ESTABLISHING OBJECTIVES AND BUDGETING FOR THE PROMOTIONAL PROGRAM Chapter Overview This chapter focuses on the process of setting objectives and budgeting for the IMC program. The major emphasis is on determining advertising objectives, as they are often the lead element in the promotional mix, particularly in consumer products marketing. This chapter stresses the value and importance of setting specific advertising objectives and the role they play in guiding decisions and evaluating performance. The chapter also focuses on the importance of knowing what to expect from advertising and the differences between sales versus communication objectives. The DAGMAR model is discussed as a viable approach to setting objectives with attention being given to the characteristics of good advertising goals and objectives. Limitations of DAGMAR are also discussed along with other problems firms encounter in setting objectives. The chapter then presents students with an understanding of the advertising and promotions budgeting process. The chapter discusses the theories underlying budgeting decisions and examines the various approaches to budgeting. The chapter concludes with an examination of budget allocation decisions.

Learning Objectives

50. Discuss the value of setting objectives for advertising and promotion. 51. Describe the relationship between promotional objectives and marketing objectives. 52. Discuss sales versus communications objectives. 53. Compare the value of sales objectives and communications objectives as goals for promotional programs. 54. Describe the process of budgeting for IMC. 55. Compare the economic and sales response perspectives on budgeting. 56. Compare different methods of setting budgets.

Chapter and Lecture Outline I.

INTRODUCTION

The lead-in to this chapter discusses the importance of continuing to budget for advertising during difficult times. The chapter then moves into a discussion of the value of setting objectives. It is important to communicate to the student that while setting good objectives can be complex and difficult, it is important for this to be done properly as specific goals and objectives are the foundation upon which all promotional decisions are made. Despite the importance of setting specific advertising and promotional objectives, many companies fail to do so or set them in a manner that is inappropriate or inadequate for guiding the development of the promotional program and measuring its effectiveness. Part of the problem stems from the fact that many marketers are uncertain as to what advertising and promotion can or should do and/or prefer to use sales as an objective.

II.

THE VALUE OF OBJECTIVES

One of the reasons many companies fail to set specific objectives for their advertising and promotional programs is that they fail to recognize the value of doing so. There are several important reasons for setting advertising and promotional objectives: Communications—Specific objectives serve as communication devices and facilitate the coordination of the various groups working on the campaign on both the agency and the client side. Problems can be avoided if all parties involved have a set of written and approved objectives to guide their decisions and actions.

Planning and Decision Making—Specific objectives can be useful as a guide or criterion for decision making. Advertising and promotion planners are often faced with a number of strategic and tactical options in areas such as creative, media, budgeting, and sales promotion. Choices among these options should be made on the basis of how well a strategy or tactic matches the promotional objective. Measurement and Evaluation of Results—An important reason for setting specific objectives is that they provide a benchmark or standard against which success or failure of the campaign can be measured. When specific objectives are set it becomes easier for management to measure what has been accomplished by the campaign. This has become more important as most organizations are concerned about the return on their promotional investment, so it is vital that marketers are able to set realistic objectives and then compare actual performance against measurable objectives to prove that the return justifies the expense. Professor Notes:

III.

DETERMINING INTEGRATED MARKETING COMMUNICATION OBJECTIVES

The determination of objectives for integrated marketing communication occurs after a thorough situation analysis has been conducted and the marketing and promotional problems and opportunities have been identified. A thorough situation analysis is critical as this becomes the foundation upon which marketing objectives are determined and the marketing plan is developed. Promotional objectives in turn evolve from the overall marketing plan and are rooted in the firm‘s marketing objectives. Marketing versus Communications Objectives—It is very important to emphasize to students the differences between marketing objectives versus communications objectives. Marketing objectives are generally stated in the firms marketing plan and are statements of what is to be accomplished by the overall marketing program within a given time period. Marketing objectives are usually defined in terms of specific, measurable outcomes such as sales volume, market share, profits, or return on investment. Objectives should be quantifiable, realistic, and attainable. The achievement of marketing objectives will depend upon the proper coordination and execution of all the marketing mix elements, not just promotion. Integrated marketing communications objectives are statements of what various aspects of the IMC program will accomplish. They should be based on the particular communication tasks that are required to deliver the appropriate message to the target audience. This requires the translation of general marketing goals into communication goals and specific objectives. Many promotional planners approach promotion from a communication perspective and view the objective of advertising in particular as that of communicating information or a sales message about a product or service. However, this is not always the case and leads to the debate over sales versus communication objectives. Professor Notes:

IV.

SALES VERSUS COMMUNICATION OBJECTIVES

Sales-Oriented Objectives—Many marketing managers view their advertising and promotional programs from a sales perspective and argue that sales or some related measure such as market share is the only meaningful goal for advertising and thus should be the basis for setting objectives. They take the position that the basic reason a firm spends money on advertising and promotion is to sell its products or services. Thus they argue that any monies spent on advertising should produce measurable sales results. Problems with sales objectives—Problems with this approach include: Problems in achieving sales could be a function of other marketing mix variables such as product design or quality, packaging, distribution, or price. Problems in achieving sales could be due to other macro factors such as the economy, competition, or consumer trends. The carryover effect, which suggests that the effects of advertising on sales are not always immediate and occur over an extended time period. Sales objectives offer little guidance or direction to those responsible for planning, developing, and executing the promotional program. Where sales objectives are appropriate—While there are problems in attempting to use sales as objectives for an advertising and promotional campaign, there are situations where they may be appropriate, such as: When the promotional efforts are action-oriented in nature and are designed to induce a more immediate response. For example, many sales promotion programs have sales objectives since their goal is often to generate trial or short-term sales increases. Direct response advertising which measures the success of a campaign in terms of the sales response generated by an ad. Retail advertising where short-term or direct action is sought such as during sales or special promotions. In situations where advertising plays a dominant role in the marketing program and other factors are relatively stable. Overall, advertising and promotional programs tend to be evaluated in terms of sales, particularly when expectations aren‘t being met. Thus, many marketing and brand managers under pressure to show positive sales results opt for short-term perspectives in evaluating advertising and sales promotion programs. While sales may not be an appropriate objective in many advertising situations, managers are likely to always keep a close eye on sales and market share and thus change a promotional program when those numbers decline. Communications Objectives—Many marketers take the perspective that the primary role of promotional mix elements such as advertising is to communicate and effects should be based on communication objectives, recognizing the problems associated with sales-oriented objectives. Advocates of communication objectives generally use some form of the hierarchical models discussed in Chapter 5 as a basis for setting advertising objectives. The underlying logic of these models is that as consumers pass through successive stages of the response hierarchy, they move closer to purchase, and advertising‘s purpose is to help move them through.

Communications effects pyramid—The text uses the communication effects pyramid (Figure 7-2) as a way of understanding the communication tasks to be performed by advertising and promotion. The marketer must accomplish lower level objectives such as awareness and knowledge/comprehension, which builds a strong foundation or base. Subsequent tasks involve moving consumers to higher levels in the pyramid in order to get them to the top where trial and regular use/repurchase occur. It is important, however, to point out that the percentage of prospective customers moving to each level will decline in most instances. Problems with communications objectives—It should be noted that not all marketing and advertising managers accept the idea of using communication objectives. Accomplishing communication objectives is seen as being of value only if this results in sales. Moreover, translating a sales goal into communication objectives can be difficult. For example, you might discuss what constitutes an adequate level of awareness, knowledge, liking or conviction. The text provides a number of examples of communication objectives. Figure 7-3 provides an example of the GfK International purchase funnel used by many in the automobile industry as a diagnostic model of consumer decision making. While there are problems with communication-oriented objectives, it should be pointed out that at some point a company must determine what it hopes to communicate and to whom. Communication objectives are the criterion used in the DAGMAR model, which has become one of the best known and most influential approaches to advertising planning. Professor Notes:

DAGMAR: AN APPROACH TO SETTING OBJECTIVES

DAGMAR (Defining Advertising Goals for Measured Advertising Results) is a model developed by Russell Colley for setting advertising objectives and measuring the results of a campaign against these objectives. Under DAGMAR, an advertising goal involves a communications task that is specific and measurable. A communications task involves something that can be performed by and attributed to advertising. Communication tasks in DAGMAR are based on a hierarchical model similar to those discussed in Chapter 5. While hierarchical communication effects form the basis of DAGMAR, there are other specific communications tasks that advertising might be expected to perform or help accomplish. Colley proposed that the communications task be based on hierarchical model of the communication process with four stages: 

Awareness—making the consumer aware of the existence of the brand or company.



Comprehension—developing an understanding of what the product is and what it will do for the consumer.

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Conviction—developing a mental disposition in the consumer to buy the product.

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Action—getting the consumer to purchase the product.

Characteristics of Objectives—A major contribution of DAGMAR to the advertising planning process was Colley‘s specification of what constitutes a good objective. Four requirements or characteristics of good objectives were noted:

Concrete, measurable tasks—The communications task or objective should be a precise statement of what appeal or message the advertiser wants to communicate to the target audience. The objective should be measurable in that the method and criteria used for determining if it has been properly communicated should be specified. Target audience—A good objective should specify a well-defined target audience. The target audience is usually identified in the situation analysis and may be based on the variables discussed in Chapter 2. Benchmark and degree of change sought—Another important part of setting objectives is having benchmark measures to determine where the target audience stands at the beginning of the campaign with respect to various communication response variables such as awareness, knowledge, attitudes, image, etc. The objectives should also specify how much change or movement is being sought such as increase in awareness levels, creation of favorable attitudes or number of consumers intending to purchase the brand, etc. Specified time period—A final characteristic of good objectives is the specification of the time period during which the objective is to be accomplished. The time period should be appropriate for the communication objective, as simple tasks such as increasing awareness levels can be accomplished much faster than a complex goal such as repositioning a brand. Assessment of DAGMAR—There are certain problems and limitations to DAGMAR that have prevented DAGMAR from being accepted by everyone in the advertising field. These include: 

Problems with the response hierarchy—Reliance on traditional hierarchical type response models is a problem in the original version of DAGMAR. However, the updated version of the model, DAGMAR MOD II, recognizes the need for a modified response hierarchy that is appropriate to the buying situation such as in high- versus low-involvement purchases or generally identifying the sequence of decision-making steps that apply in a buying situation.



Sales objectives—Proponents of sales objectives argue that communication objectives advocated by DAGMAR are a ―cop-out‖ and a way of ignoring the basic goal of advertising which is to generate sales. They argue that since a communication objective is of interest only if it can be shown to be related to sales, why not simply use sales as the objective?



Practicality and costs—DAGMAR is criticized for being difficult to implement and practical only for big companies with large marketing and advertising research budgets who can afford to establish quantitative benchmarks and measure communication results.



Inhibition of creativity—DAGMAR is also criticized on the grounds that it can inhibit creativity by imposing too much structure on creatives. The creative department may become too concerned with ―passing the numbers test‖ rather than developing great ideas that result in unique and effective advertising. Many advertising people have blamed the lack of great creative ideas and campaigns in the U.S. in recent years on an over-quantification of advertising objectives.

Professor Notes:

VI.

PROBLEMS IN SETTING OBJECTIVES

Most advertisers and their agencies fail to follow the basic principles and guidelines set forth in DAGMAR. They often fail to set specific objectives for their campaigns and/or do not have the proper evidence to determine the success of their promotional programs. Improving Promotional Planners‘ Use of Objectives—Advertisers and their agencies should strive to set specific and measurable objectives that serve as a guide to promotional planning and decision making. Part of this problem stems from a lack of understanding of the role and function of advertising. It is unlikely that most firms are going to set objectives following all of the criteria set forth in DAGMAR. However, promotional planners should set objectives that are specific and measurable and go beyond simple sales goals. Setting Objectives for the IMC Program—Most of the attention in the promotional area has focused on advertising since it is often the lead element in the promotional mix and advertising has traditionally been the major way of communication with target audiences. Other promotional mix elements such as sales promotion, direct marketing, and publicity are used to support and complement the advertising program. Advertising-based views of marketing communications planning, such as DAGMAR, have dominated the field for many years. However, as more companies adopt IMC, they are considering how the various promotional mix tools can be used to communicate with their customers. Advocates of IMC have called for new approaches to promotional planning and IMC. For example, Professor Don Schultz of Northwestern University advocates the use of an outside-in planning process to IMC that starts with the customer and builds backwards to the brand rather than inside-out planning. Professor Tom Duncan argues that IMC should use zero-based communications planning, which involves determining what tasks need to be done and which marketing communications functions should be used and to what extent. This approach focuses on the task to be accomplished and searches for the best ideas and ways of accomplishing it. Duncan suggests that an effective IMC program leads with the marketing communication function that most effectively addresses the company‘s problem or opportunity. It should be noted that the criteria discussed in determining advertising objectives are relevant to other promotional mix elements as well. A more thorough discussion of objectives for promotional mix elements such as sales promotion, publicity/public relations, and personal selling is provided in the chapters where these topics are covered. The consumer decision journey (as discussed in Chapter 5) is again addressed here. This journey necessitates the establishment of communications objectives, and Figure 7-5 shows the consumer decision journey as well as the objectives that marketers need to accomplish at each stage and the marketing responses necessary to help achieve those objectives. Professor Notes:

VII.

ESTABLISHING AND ALLOCATING THE PROMOTIONAL BUDGET

As noted in the text, the budgeting decision is not a trivial matter. Whether the firm is spending millions of dollars or thousands, this decision will have a direct impact on the success of the communications program. As can be seen by examining the decision sequence model presented in Chapter 1, budgeting 1-118 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

decisions are not made in isolation. These decisions require an interactive process in which the communications objectives must be taken into consideration. Likewise, the budget directly impacts the promotional mix strategies that are to be developed. The flow between the communications analysis and budget determination is a two-way interaction, meaning that while establishing objectives is an important part of the planning process, recognizing the limits of one‘s budget is important as well. Thus, both the size of the budget, and the way that it will be allocated, must be given much attention. Establishing the Budget—One of the most critical decisions facing the marketing manager is determining how much to spend on the promotional effort. However, many marketing managers fail to recognize the value of advertising and promotion and treat promotional efforts as an expense rather than as an investment. Because of this, when times are tough, the advertising budget is often the first to be cut, even though there is strong evidence that exactly the opposite should occur, as Exhibit 7-12 argues. While budgeting is one of the most critical decisions, it has been the most resistant to change in the advertising industry. In fact, budgeting approaches have changed little over the past 20 years, often following an approach based on contribution margin—the difference between the total revenue generated by a brand and its total variable costs. Theoretical issues in budget setting—Most of the models used to establish advertising budgets can be categorized as taking an advertising or sales response perspective. In this section, we discuss some of them. Marginal analysis—Figure 7-8 in the text illustrates the concept of marginal analysis. As the figure indicates, as advertising/promotional efforts increase, sales and gross margins will also increase to a point and then level off. In using marginal analysis, the firm would continue to spend promotional dollars so long as the marginal revenues created by these expenditures exceeded the incremental costs. When the dollar expenditures exceed the returns, the budget should be scaled back. In other words, the optimal budget would be at that point where marginal revenues are equal to marginal costs. While this economic model seems logical intuitively, in fact, there are two major weaknesses that limit its applicability: (1) The assumption that sales are a direct measure of advertising and promotions efforts, and (2) the assumption that sales are determined solely by advertising and promotions. Today, because of the difficulties associated with determining the effects of the promotional effort on sales and revenues, the applicability of marginal analysis is limited and is seldom used as a basis for budgeting (except for direct-response advertising). Sales response models—Two budgeting models based on sales response are discussed in the text. The first of these—the concave-downward function model—is based on the microeconomic theory of the law of diminishing returns. Essentially, the model states that as the amount of advertising expenditures increases, its incremental value decreases. The basic argument is that those most likely to buy the product are likely to do so as a result of the earliest exposures to the advertising. Additional exposures are not likely to increase the probability of their purchasing, nor is it likely to have an effect on those who are undecided or unlikely to buy. Thus, the effects of advertising would rapidly diminish. The second model—the S-shaped response curve—takes a very different approach. In this model, it is argued that initial outlays of promotional dollars will have very little impact on sales. As indicated in Figure 7-9B, in Range B an impact will begin to be noticed, carrying through to Range C, where additional expenditures have again very little impact. This S-shaped curve suggests that there are incremental values to be accrued from additional dollar outlays, but only to a point. For example, it would be argued that a

certain level of expenditures is necessary to make an impact. However, after a certain point (beginning of Range C) these dollars are unlikely to be of value. In other words, no matter how much I spend, if you don‘t want the product, advertising isn‘t going to make you buy. As with marginal analysis, the marketer would want to establish the budget at that point on the curve where the maximum return for the money is attained. Weaknesses in these sales response models render them of limited use to practitioners for direct application. The measurement problems, use of sales as a dependent variable, and other issues limit these models‘ usefulness. Additional factors considered in budget setting—In addition to considering the theoretical aspects of budget setting, a number of other factors must be taken into consideration including situational factors; customer factors; the competitive environment; etc. Figures 7-10 and 7-11 can be used to demonstrate this point quite effectively and are useful to provide a perspective of what advertisers and their agencies consider the most important factors to consider in setting the budget. Professor Notes:

Budgeting Approaches—This section discusses the variety of approaches that marketers use in establishing their budgets. These approaches can be classified as either top-down or build-up approaches (see Figure 7-12). Top-down approaches—In these methods of budgeting, the budget is established at the ―top‖ by management and is passed down to various departments. Top-down approaches generally include the following: The affordable method—(Also called the ―all-you-can-afford method.) In this approach, the firm determines what level of advertising and promotions expenditures they feel they can afford, and set this amount as the ad budget. This approach is quite common among small firms but is also be used by large firms. The logic of this approach stems from ―We can‘t be hurt with this method.‖ While this may be true, often times when this approach is used, firms do not allocate enough money to get the product off the ground and into the market. Arbitrary allocation—When budgets are set through arbitrary allocation, there is no real rhyme or reason for the amount established. Management establishes the budget on the basis of what is felt to be necessary. Sad as this may seem, the truth is that for many firms this is the method employed. Percentage of sales—Perhaps the most commonly employed method of setting budgets in large firms is the percentage-of-sales method. As noted in the text, there are a number of variations on this method, as some firms use a flat percentage of sales figure, while others may assign a percentage of the product cost to advertising with the budget based on the number of units sold (see Figure 7-13). In addition, another variation stems from which year is considered the base year for sales. One approach uses past sales histories, while the second—a percentage of projected future sales—uses projected sales figures. Many firms employ both methods, with a projection used for planning, and the final

budget adjusted according to actual sales. Figure 7-14 provides advertising-to-sales ratios by industry sector. The pros and cons of the percentage of sales approach are discussed in the text. Competitive parity—In the competitive parity method, budgets are set by matching the percentage advertising/sales ratios of competitors. There are a number of ways that managers find this information. Figure 7-14 can be used to show some percentage of sales figures, and the instructor can explain that in using a competitive parity method, companies competing in the same industries would have equal or nearly equal ratios. Smaller companies often use a clipping service, which clips competitors‘ ads from local print media allowing companies to work backwards to determine the cost of ads placed. However, few firms employ the competitive parity method as a sole means of establishing the promotional budget. Return on investment (ROI)—One of the most discussed topics in recent years is that of how to determine ROI. The basis of the ROI budgeting method approach is that advertising expenditures should be considered as an investment, returning sales as a result. Unfortunately, for many of the reasons cited in the text, the ability to demonstrate this relationship is very difficult. Summary of Top-Down Budgeting Methods—While many of the budgeting methods discussed have serious drawbacks, it is important for students to still understand these budgeting methods as these are the budgeting methods most often employed by marketers. In fact, the affordable, competitive parity, percentage of sales, and objective and task methods are those most commonly employed. Build-up approaches—The major flaw of top-down methods is that they are often not linked to objectives. A more effective method of budgeting is that offered by build-up approaches. In build-up approaches, specific objectives are established, and budgets are determined based on the costs required to attain these goals. Three such approaches are discussed in the text. Objective and task method—Figure 7-18 demonstrates the steps required in using the objective and task approach. As can be seen, the process involves using a build-up approach consisting of three steps: establishing objectives, determining the specific tasks associated with attaining these objectives, and determining the costs associated with these tasks. Monitoring and re-evaluation of these steps is critical to the success of this method. The major advantage of this approach is that the budget is driven by the objectives. The major disadvantage is the difficulty of determining which tasks will be required and how much those tasks will cost. Payout planning—By projecting the revenues that a product is expected to return over a period of two to three years, the marketer can develop a payout plan. Based on this expected rate of return, the marketer can assist in the determination of the advertising expenditures necessary. An example of a payout plan is presented in Figure 7-20. The use of the payout planning method in conjunction with the objective and task method provides managers with a much more logical approach to setting the budget than the topdown approaches. Quantitative models—As noted in the text, quantitative models have not met with the success that might have been expected of them. Most of these models have employed computer simulation models using statistical techniques such as the use of multiple regression analysis using sales as the dependent variable, which may account for much of the problem.

Summary of Budgeting Methods—Figure 7-21 provides the results of a study by Low and Mohr regarding the advertising budget setting process. As can be seen, the nature of the decision process and a variety of factors have been shown to come into play in this decision. Allocating the Budget—A number of factors influence marketers in their determinations as to how the budgets will be allocated. Recent years have seen a shifting of advertising dollars to other media including the Internet and nontraditional media. A variety of factors must be considered in determining how advertising and promotional dollars will be allocated. Allocating to IMC elements—Many advertisers are now shifting their budget dollars away from traditional ad media to digital and social media. Marketers have also used the allocation decision to stretch advertising dollars such as to consolidate and cut division expenditures, reduce agency fees, produce fewer campaigns, and rely more on targeted media. Client–agency policies—Corporate politics, policies, etc. may all impact the allocation of advertising and promotions dollars. As noted, agencies and advertisers may both have their preferences as to how monies will be spent. Market size—The size of the market will often determine how much money needs to be allocated therein. For example, smaller markets may charge less for media time, may be more easily covered, etc. than larger ones. Market potential—Certainly the potential of the market must be considered. The previously discussed concept of target marketing would dictate that market potential should be considered in the budget allocation decision. Market share goals—The market share goals established by the firm—that is, increasing or maintaining share—will impact the allocation decision. A study by John Jones concluded that (1) new brands generally receive higher than average advertising support; (2) older, more mature brands are often ―milked‖—that is, advertising expenditures are reduced; and (3) there is an advertising economy of scale operating. In another study, James Schroer suggests that to have a growing market share marketers should: 

Segment markets and focus on those where competition is weak.



Determine competitors‘ cost positions (how long can competitors spend at current or increased rate).



Resist the lure of short-term profits that result from ad budget cuts.



Consider niching strategies rather than long-term wars.

Economies of scale in advertising—Some practitioners believe that there are economies of scale that accrue to marketers holding large market shares, which allows them to spend less money due to their past successes. As noted in the text, there is little or no evidence to support this theory, and some studies show that an opposite effect may occur. Organizational characteristics—After reviewing the literature, Low and Mohr conclude that a number of organizational factors influence the budget allocation decision. These factors include: The organization‘s structure. 1-122 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

Power and politics in the organizational hierarchy. The use of expert opinions such as consultants. Characteristics of the decision maker. Approval and negotiation channels. Pressure on senior managers to arrive at an optimal budget. Professor Notes:

Teaching Suggestions We feel that from an integrated marketing communications planning perspective, this is one of the most important chapters in the text. It is very important for students to understand the importance of setting good objectives to guide the planning and development of an advertising campaign. Objectives are also important for providing a benchmark or standard against which performance can be measured and evaluated. This chapter builds on material in previous chapters, particularly Chapters 2 and 5, as it stresses the difference between marketing and sales versus communication objectives and the role of advertising in influencing sales. The DAGMAR model relies heavily on the response hierarchy models discussed in Chapter 5. Students should recognize that the specific communication objectives that are appropriate will vary depending on the buying situation. The DAGMAR model is discussed in detail as a viable approach to setting advertising objectives. A very valuable aspect of Colley‘s work on DAGMAR is the specification of the characteristics of good objectives which are discussed in the text. While most companies are not going to meet all of the criteria set forth in DAGMAR, it is important that students recognize the characteristics of good objectives. Another important issue to address in discussing this material is the difference between sales versus communication objectives. We discuss the basic characteristics of each, when they are appropriate, and problems with using sales and communication objectives. The instructor may want to find some examples of campaigns that have won awards and/or have been very effective from a communications perspective but not in terms of sales. The discussion can focus on the role of advertising and whether there are other problems or factors that may be inhibiting sales. A very good and interesting example which might be used here is to demonstrate that an advertising campaign can impact sales is presented in the discussion on GEICO. Some instructors may wish to divide the lecture into two sessions. The first can be devoted to discussing the objective setting process and the second on budgeting. In the budgeting session, we usually start the lecture with the theoretical perspective, explaining the two advertising/sales response models discussed in the text. A discussion and evaluation of each of the budgeting methods usually follows. (For example, Figure 7-13 can be very useful in demonstrating the percentage-of-sales method. It could also be noted that many companies use this as a guide in setting their budgets to remain at competitive parity.) The budget allocation decision is illustrated very well by showing Competitive Media Reporting examples of monies and percentages of budgets assigned to the media this service tracks. It is important for the instructor to demonstrate some of the strengths and weaknesses associated with both the theoretical models and the budgeting methods themselves. The major problem with the former is the fact that sales are used as the dependent variable. Students need to know that while it is sales (or some other behavior) that is ultimately sought, it is often very difficult to demonstrate directly the advertising/sales relationship—which to a large degree explains why regression-based models have also had limited success. The chapter‘s discussion of ROI demonstrates both the importance and frustration involved in attempting to make this determination. Likewise, the budgeting methods discussed are also fraught with weaknesses the student must be aware of. An effective way of demonstrating this for the bottom-up methods is to ask students to prepare a fictional budget for a product. They will very quickly realize the problems associated with trying to determine payouts and assigning costs to the tasks required to attain specific objectives.

Answers to Discussion Questions

48. During difficult times, many companies cut their advertising budgets to save money, despite the fact that evidence does not support this strategy. Explain why so many companies take this approach and why they should not. (LO 7-7) One of the most difficult decisions that a company has to make is determining the amount of the marketing communications budget. Unfortunately, there is no formula or algorithm that provides a simple and straightforward answer. According to US Ad Market Tracker, July 2022 ad spending was down 12.7 percent—the worst monthly decline since July 2020, which was itself down 17.8 percent from the previous July. As noted by Daniel Konstantinovic of eMarketer.com, a variety of factors combined to lead to this decline: (1) the pandemic lockdown was over and people were getting out of the home and back to a more normal life, (2) rising inflation led to cutbacks in consumer spending, (3) consumers were wary of a recession, and (4) advertisers were still uncertain about new privacy regulations. While advertising is often one of the first budgets to be cut in difficult times, many companies argue that this is exactly what not to do. They believe that if you believe that advertising works, then you should increase—not decrease—spending in these times. P&G, for example, believes that when factors like inflation, the pandemic, etc. occur, companies should continue to spend, citing the need to retain ―mental availability‖ of the brand. For example, during the peak of the pandemic, P&G increased its budget by 1.9 percent over the previous year. CFO Jon Moeller cited a number of factors for the increase including the need to retain existing buyers by reminding them of the benefits of P&G brands, promote trial from nonbuyers, and the opportunity to gain brand visibility. He also noted that media consumption was much higher during this period. The strategy was borne out by sales increases of 5 percent. A number of studies also support the belief that a hiatus in ad spending is detrimental to the brand. The Ehrenberg-Bass Institute conducted a study of 70 Australian consumer goods companies‘ media spend and volume sales for more than two decades. The researchers concluded, ―When financial pressures hit or a brand‘s net profit needs boosting, advertising spend is often one of the first budgets to be cut,‖ noting that the COVID-19 pandemic was one such period that led to numerous marketers making cuts when they shouldn‘t have, as ―on the average brands‘ sales fall 16 percent after one year without advertising and by 25 percent after two years.‖ After four years none of the brands reported sales higher than in the last year in which they advertised. A Nielsen report concluded that as many as 50 percent of companies globally underspend in their media plans. One of the conclusions in the report was that too many ―brands spend based on their previous spending patterns, rather than what will make an impact.‖ According to the study, ―Spending doesn‘t have to be risky when you use research.‖ 49. Why are sales and/or marketing objectives problematic for determining the effectiveness of advertising campaigns? What are some of the values offered by communication objectives? (LO 7-1) In the business world, sales results can be due to any of the marketing-mix variables, including product design or quality, packaging, distribution, or pricing. Advertising can make consumers aware of and interested in the brand, but it can‘t make them buy it, particularly if it is not readily available or is priced higher than a competing brand. Sales are a function of many factors, not just advertising and promotion. There is an adage in marketing that states, ―Nothing will kill a poor product faster than good advertising.‖ This indicates that all the marketing elements must work together if a successful plan is to be implemented. Another problem with sales objectives is that the effects of advertising often occur over an extended period. Many experts recognize that advertising has a lagged or carryover effect; monies spent on advertising do not necessarily have an immediate impact on sales. Advertising may create awareness,

interest, and/or favorable attitudes toward a brand, but these feelings will not result in an actual purchase until the consumer enters the market for the product, which may occur later. A review of econometric studies that examined the duration of cumulative advertising effects found that for mature, frequently purchased, low-priced products, advertising‘s effect on sales lasts up to nine months. The carryover effect adds to the difficulty of determining the precise relationship between advertising and sales. Another problem with sales objectives is that they offer little guidance to those responsible for planning and developing the promotional program. The creative and media people working on the account need some direction as to the nature of the advertising message the company hopes to communicate, the intended audience, and the particular effect or response sought. The primary role of an IMC program is to communicate, and that planning should be based on communications objectives. Advertising (and other promotional efforts) are designed to achieve communications such as brand knowledge and interest, favorable attitudes and image, and purchase intentions. Consumers are not expected to respond immediately; rather, advertisers realize they must provide relevant information and create favorable predispositions toward the brand before purchase behavior will occur. 50. Explain the S-shaped response curve and the concave-downward curve as they relate to budget setting. What are the differences in these two curves? Give examples of how each might be more appropriate for different products. (LO 7-6) The s-shaped response curve makes the assumption that certain levels of advertising expenditures must be reached before any noticeable impact on sales will occur. According to this model, initial outlays will have little or no noticeable impact on sales, then additional outlays will have a very noticeable effect to a point at which sales will level off and additional expenditures will again have little or no impact. The concave-downward model follows the economic model of the law of diminishing returns. That is, as the amount of advertising increases, its incremental value decreases. Thus, the effects of advertising would almost immediately begin to decrease. As can be seen, the models differ substantially in respect to the impact of advertising expenditures. In the former model, the impact of advertising will not even begin to be felt until a certain level of expenditures has been reached. Those who believe that advertising spending has a cumulative effect would adhere to this mode. In the concave-downward model, the impact takes place almost immediately, with incremental expenditures having less and less value. The models would also differ in respect to their appropriate use based on the types of products being advertised. For example, the S-shaped response curve would seem to indicate an ability of the advertising to stimulate sales, both through the provision of information and throughout persuasive capabilities. As noted, it would support the fact that ads have a cumulative effect, and the additional ad spending may lead to additional sales. The concave-downward model, on the other hand, would argue that consumers are already in a mindset to buy or not buy, and the value of the advertising is primarily to inform not to persuade. Additional levels of ad spending will not be effective in changing one‘s mind, or motivating them to purchase. If these assumptions are true, it would seem that for high-involvement products, the concave-downward model would be more likely to be operating, while the S-shaped response might better explain products for which the consumers‘ mind has not already been made up. In other words, the concave model assumes there will be little or no search, or that this search has been concluded. The ad‘s primary impact is on the decision to buy. (Otherwise, additional expenditures would be likely to be effective at the search stage.) The S-shaped model

would seem to be more effective when the decision hasn‘t yet been made, and the consumer can still be impacted by the ads. 51. Consumer purchase funnels have been criticized recently as being of little use for setting communications objectives. Some argue that their linear focus and the fact that consumers may now enter the funnel at any point make them outdated. Discuss whether this position is well founded and why or why not. (LO 7-3) Consumer response hierarchies were first introduced over a century ago and have been used by marketers in sales and advertising ever since. While consumer purchase funnels have their advocates, there are still some nonbelievers out there who contend that the funnels are too linear, and the impact of digital, social, and mobile have changed the way consumers make decisions. For example, Joe Ayyoub calls the funnel paradigm aged, saying it‘s time for a reboot, arguing that we can no longer capture customers by taking them through the linear awareness to purchase sequence. He attributes this change to the increase in digital information, including product reviews, pricing information, and social media recommendations, as well as the use of mobile by the customer while in the store. Cynthia Clark agrees with Ayyoub, noting that the buying journey has changed, with control shifting from the organization to the consumers, who are taking it upon themselves to learn as much as they can about a brand before making a purchase. Others say that in today‘s media environment, consumers tend to have entirely unpredictable and personal journeys on their way to making a purchase. There are many other marketers out there who also contend that the funnel is dead and no longer of value to marketers. Most contend that with the advent of new media, consumers have changed and can‘t be treated like they were in the past. And, given the new technologies that provide a seemingly endless amount of data to marketers, they shouldn‘t be. Mass marketing is being replaced by one-toone marketing. However, not everyone is convinced that we need to bury the funnel. A three-phase study commissioned by the Advertising Research Foundation (ARF) examined many of the issues addressed in the previously mentioned studies. The ARF study does not consider the traditional decision-making models to be dead or even of limited value. Rather, the study assumed that the models have value, but need to be examined in a new light given the impact of social and digital media. The ARF study contends that consumers are constantly considering potential purchases and evaluating brands, but at some times are in a more active shopping mode and purposefully seeking assistance so they can make a purchase decision with confidence. While various media may have an impact in the more passive state, it is in the active state where consumers rely more heavily on social media to gain information from websites, friends, product experts, and so on. Thus, no single source is driving the purchase decision, but all can contribute in different ways. 52. Sometimes it seems as though marketers have abandoned traditional media and have focused their attention on digital media only as allocations to digital media have increased so significantly while traditional media have lost allocations. Explain if this is a true fact, and discuss why, if so, it is either a smart or not-so-smart allocation of resources. (LO 7-6) There is little argument that we now live in a digital world. Those who purchase advertising time know this too. Digital is the new media darling. In 2022 in the U.S., digital ad spending was expected to hit $239.89 billion at the time of this writing. From 2017 to 2022 ad expenditures increased by 67.7 percent at a 12.1 percent annual growth rate. If forecasters are correct, from 2020 to 2025 the digital ad market will grow at an average rate of 16 percent annually. In the U.S., projections are that newspaper advertising will decline from $30.25 million in 2021 to $24.98 million in 2025, and magazine ads will decline from $13.9 million to $10.64 million. Television now accounts for 57 1-127 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

percent of video ad spending and connected TV(CTV) has gone down by 16 percent, with both expected to continue to decline. Overall, upper funnel media have experienced the greatest losses in the new allocations. Numerous industry studies have shown that most traditional media advertisers expect to decrease their expenditures in these media into the future. Some marketers have also used the allocation decision to stretch their advertising dollar and get more impact from the same amount of money. Companies have taken a number of steps, including consolidating and cutting division expenditures, reducing agency fees, producing fewer campaigns, and relying more on targeted media. 53. Some very successful companies have gained sales and market share by increasing their advertising budgets during a recession. Explain why this could be a successful strategy. (LO 7-7) Product factors such as focusing on their basis for differentiation or hidden product qualities, and appealing to emotional buying motives are some factors that might lead to success in increasing sales when competitors decrease their budgets. Additionally, a consideration of where the product is in the product life cycle would dictate strategy and could increase sales when compared to competitors who are decreasing their promotional budgets. It might also be beneficial for advertisers to focus their efforts on early exposures of their advertisements and promotions to those most likely to buy their product. 54. As more and more advertising dollars move to digital media, traditional media are losing revenue. Will traditional media no longer exist in the future? (LO 7-5) Are traditional media really dead? Not necessarily. An article in the Harvard Business Review by Christine Moorman, Megan Ryan, and Nader Tavassoli suggests that traditional advertising is alive and well, and actually headed for growth for the first time in a decade. The expected shift back to traditional advertising is expected to be led by service companies followed by product companies. Interestingly, companies that make 100 percent of their sales through the Internet are leading the way back. The authors note seven drivers behind the shift, including (1) consumers believe there is too much clutter in digital advertising, (2) consumers trust traditional ads more than digital ones, (3) they fear the coming change in third-party cookies that allow for tracking of consumers‘ activities, (4) they support the growth of podcasts (consumers trust their hosts and are influenced by their endorsements), (5) advertisers like the synergy of traditional media and digital working together, (6) companies think traditional media are sometimes a better fit for some brands than digital, and (7) businesses are concerned that digital advertising may be less effective than claimed. 55. Discuss an example of how a company‘s media strategy might change as they progress through a hierarchy of effects model (funnel). Choose any model you wish to use. (LO 7-4) Russell Colley proposed that communication tasks be based on a hierarchical model of the communication process that has four stages including:  Awareness—making the consumer aware of the existence of the brand or company.  Comprehension—developing an understanding of what the product is and what it will do for the consumer.  Conviction—developing a mental disposition in the consumer to buy the product.  Action—getting the consumer to purchase the product.

In the awareness stage, a company would likely want to utilize mass media platforms in order to make the most consumers aware as possible. National television campaigns or radio advertisements would be good strategies to increase awareness. To move consumers to comprehension, media might be more focused on providing more product-relevant information and might take the form of longform copy magazine advertisements or the like. In conviction, strategies might focus their advertising efforts on showing consumers the benefits of their product over a competitors, and providing them with a promotional incentive such as a coupon or point-of-purchase material. Finally, in the action stage, the company could use action advertising, which emphasizes that the consumer needs to act right away to not miss out on the opportunity. 56. Explain why it is so difficult to use sales as an indicator of advertising effectiveness and why communications objectives may work better. (LO 7-3) Specific objectives for the IMC program facilitate coordination of the various groups working on the campaign. Many people are involved in the planning and development of an integrated marketing communications program on the client side as well as in the various promotional agencies. The advertising and promotional program must be coordinated within the company, inside the ad agency, and between the two. Any other parties involved in the promotional campaign, such as public relations and/or sales promotion firms, research specialists, and media buying services, must also know what the company hopes to accomplish through its marketing communications program. Many problems can be avoided if all parties have written, approved objectives to guide their actions and serve as a common base for discussing issues related to the promotional program. In regard to marketing versus communications objectives, it is well known that sales and marketing objectives have too many other variables influencing their outcome. What if the communications strategy attained the sought purchase intention, but the product was not found in the distribution channel? Did the communications strategy work? Yes. Distribution failed to achieve the marketing and sales goals. Achieving communications objectives can be more precisely measured and their attainment will contribute to the achievement of marketing and sales objectives. 57. Explain some of the factors that might lead to success in increasing sales and achieving communications when competitors decrease their budgets. (LO 7-7) Product factors such as focusing on their basis for differentiation or hidden product qualities, and appealing to emotional buying motives are some factors that might lead to success in increasing sales when competitors decrease their budgets. Additionally, considering where the product is in the product life cycle would dictate strategy and could increase sales when compared to competitors who are decreasing their promotional budgets. It might also be beneficial for advertisers to focus their efforts on early exposures of their advertisements and promotions to those most likely to buy their product.

Additional Discussions Questions (not in text) 58. As noted in the chapter, there is an increased emphasis on the determination of ROI. Discuss some of the reasons leading to this increase in attention. Why is it so difficult to measure ROI? (LO 7-7) For years marketers have wondered about the impact of their promotional expenditures. While some media, like direct marketing and sales promotion, could demonstrate some of the impact of their investments, others—particularly advertising—had a much more difficult time doing so. Many advertisers recognized the difficulties associated with measuring effectiveness, and as a result, made little or no attempts to do so.

However, as the media landscape changed, particularly with the growth of direct marketing and the Internet, the importance of being able to determine which media would provide the greatest ROI increased significantly. As direct marketers were able to show the returns through measures such as cost per order, etc. the pressure on demonstrating the returns of other media naturally increased. When companies invest millions of dollars in their IMC programs, the need for accountability seems obvious. Unfortunately, the measure that most marketers want to see is the impact on sales. Thus, for the most part, when companies attempt to measure ROI, they attempt to look at the impact of various media expenditures on sales (or other marketing objectives). Because there are other factors beyond advertising and promotions that impact sales, it is often difficult to isolate the ROI of the communications programs specifically. For example, what if the IMC program is very effective, but the consumer doesn‘t like the product? What if the price is too high? What if the product is not available when the consumer goes to make a purchase? Using sales as the criterion for determining ROI, could lead to the conclusion that the communications program didn‘t work, when in fact it did. Certainly sales is the critical element that marketers want to see. However, achieving one‘s communications objectives will likely lead to increases in sales (all other factors such as price, product and distribution being in place). Thus, marketers need to understand that they must measure communications objectives and not just drop to the bottom line (sales, marketing objectives) to determine IMC effectiveness. By measuring communications objectives, the marketer may be able to isolate the contributions of the IMC program, as well as determine what other factors might be impacting. 59. Chapter 7 differentiates between communications objectives and sales objectives. Explain the difference. What are examples of communications objectives? From where are these objectives derived? (LO 7-3) As noted in the text, marketing objectives are stated in the marketing plan and refer to what is to be accomplished by the overall marketing program. These objectives are derived from the marketing situation analysis, and typically relate to sales, market share, and similar goals. Communications objectives are specifically related to what the organization will attempt to achieve with the promotional program. While these objectives are designed to assist in the achievement of the overall marketing objectives, they are not the same (though some companies may treat them as such). Communications objectives, while designed to help achieve overall marketing objectives, are those sought in the development of the communications program. Awareness, knowledge, interest, and attitude change are just a few examples of communications objectives. As with marketing objectives, communications objectives must meet the same criteria of effective objectives, e.g., measurability, attainability, and the like. Communications objectives are often derived from response hierarchy models (see Chapters 5 and 6). As noted in the text, these models may vary somewhat depending upon their original intent (to determine advertising effects, adoption, etc.), but they still meet the criteria for sound objectives, and focus on the necessity for the communications program to move potential consumers through a series of steps toward the ultimate goal. These hierarchies are supported by years of studies demonstrating their validity. As such, they serve as excellent measures of communications impact.

60. The chapter discusses the results of a study conducted by Yoo and Mandhachitara that shows that advertising spending and effects may differ in different competitive environments. Explain each of the four scenarios presented in Figure 7-16 and give examples of brands in each of these cells. (LO 75) The study focuses on the fact that advertising by competitors may not always be to the detriment of one‘s brand. In fact, there may be cumulative gains to both competitors when both advertise. Figure 7-16 provides some examples. 



Advertiser’s Advantage—In this case, one‘s brand is stronger than that of the competition. Given the competitive advantage, the brand should focus on advertising versus other promotional tools. The reason for this is that advertising serves as a reminder as well as an introduction to the brand. Given the brand‘s strength, incentives—some of which may be costly—are not required. Rather, keeping the brand in front of the consumer and maintaining a brand image may be most important. An example may be the Apple iPad versus other tablets. Apple is clearly the dominant brand, and should focus on communicating its brand image and benefits. There is no need to offer discounts. Symbiotic competition—Brands competing in a growing market that complement each other should still focus on advertising, according to Figure 7-16. The adoption of satellite radio by auto manufacturers offers consumers an attractive option to enhance their driving experience, and a competitive advantage to competitors not offering such an option. For both the automobile and the satellite radio company (i.e., BMW and Sirius), continued advertising of the brand is likely to benefit both. Zero-Sum Competition—In a mature market, one of the ways to gain market share is by taking it from the competition. Thus, increases in advertising may lead to gaining share, and may have to be matched to ward off the competition by others. Consider the competition between Energizer and Duracell, while the market for batteries is growing very slowly or may even be flat, both companies will continue to advertise in attempts to gain share and defend against the other as well. Competitor’s Advantage—In a market situation in which a company‘s brand is inferior to the competition, head to head advertising may not be the best strategy. By gaining a niche position, and focusing on promotional tools as opposed to advertising, some share may be gained. Using batteries as an example, again, consider the smaller share brands such as Panasonic, Eveready, etc. Head to head advertising battles are not likely to be effective. On the other hand, offering coupons, sweepstakes, etc. may entice the consumer to try the brand, and sales may increase.

61. Different companies believe that various media are more important than others for their marketing purposes. Discuss the various perspectives taken by these companies, and explain why everyone may not agree on the same level of importance for media. (LO 7-6) As Chapter 7 demonstrates, there are a number of factors that influence the media strategy. Communications objectives, corporate policies, politics, and the size of the budget are just a few of these. Because of the difficulty in determining a precise ROI for media, the decision is often subjective, and may not always achieve consensus. Jaguar prefers a method of tracking prospects that respond to their advertising, then providing the contact information to dealers for follow up through direct marketing, etc. Jaguar believes that this method leads to a better determination of media efficiencies. Other companies focus on other media. For example, more and more companies are spending more monies on public relations. Many marketers believe that PR may be the best medium to employ. Ries & Ries, previously published a book specifically to this point, noting that numerous companies now employ PR strategies prior to advertising, and that this medium may be more effective.

As will be clearly demonstrated in Chapters 13 and 15, other media—many not traditional—are favored by some companies. The rapid growth of digital media appeals to many companies, while others like the new media such as product placements, branded entertainment, etc., and are spending more and more monies in these areas. One of the basics of an IMC orientation is the effective and efficient uses of media. As will be evidenced throughout the remainder of this text, each medium has its advantages and disadvantages. The astute marketer will learn and understand the uses of these media for various marketing situations, adopting an integrated marketing communications strategy for the specific market situation. 62. Why is it important for marketers to set specific objectives for advertising and promotion? What criteria must these objectives meet to be valid? (LO 7-1) Objectives are necessary to effectively plan and evaluate the communications program. Think about it as taking a trip. The roadmap serves as the plan, and specific objectives are set in regard to where you want to be and when. Your progress is measured by the attainment of these objectives. It is important for marketers to set objectives for proper coordination of the promotional program elements. What is the message going to achieve? How will various media like advertising, public relations, and the Internet be used? How much money is to be spent in each medium? Secondly, as noted, communications are part of the strategic map as to what is to be accomplished, and when. Without these communications, there is no plan. Finally, communications objectives serve as a basis for evaluation of the success or failure of the program. Too many marketers fail to measure the effectiveness of their programs because they do not know what to measure. Once they understand the value of communications programs, they will be more effective in determining the proper metrics for this purpose. One characteristic of good objectives is that they are measurable; they specify a method and criteria for determining how well the promotional program is working. By setting specific and meaningful objectives, the promotional planner provides a measure(s) that can be used to evaluate the effectiveness of the marketing communications program. Most organizations are concerned about the return on their promotional investment, and comparing actual performance against measurable objectives is the best way to determine if the return justifies the expense.

IMC Exercise Students should find examples of advertisements for several products or services and discuss the specific types of objectives the marketer may have for these ads. They should explain why sales objectives may be appropriate for some ads while communications objectives are most relevant for others. Have the students attempt to determine the percentage of sales ratios for the product categories they have ads for and explain why these ratios may be as they are.

CHAPTER 8 CREATIVE STRATEGY: PLANNING AND DEVELOPMENT Chapter Overview This is the first of two chapters devoted to the area of creative strategy in advertising. This chapter focuses on the planning and development of creative strategy. We will examine the concept of creativity and the process that guides the creation of the advertising campaign as well as various types of research and information that can provide input and insight into the creative process of advertising. We discuss the 1-132 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

concept of copy platforms that are used to guide the development of advertising campaigns. Attention is also given to various approaches used for determining major selling ideas that form the basis of an advertising campaign.

Learning Objectives 23.

Describe the role of creative strategy in advertising.

24.

Discuss the creative process for advertising and inputs to this process.

25.

Describe the development of creative strategy.

26.

Examine approaches to developing the major selling ideas that are used as the basis for an advertising campaign.

Chapter and Lecture Outline I.

INTRODUCTION

One of the most important components of an integrated marketing communications program is the advertising message. It will be obvious to students that there are a myriad of ways to convey an advertising message. However, underlying all of these messages is a creative strategy that involves determining what the advertising message will say or communicate and creative tactics dealing with how the message strategy will be implemented or executed. The focus of this chapter is on the development of creative strategy while tactical issues are covered in Chapter 9. Attention is given to the creative strategy development process and various approaches to developing the big idea that will be used as the central theme of the advertising campaign and translated into messages. The opening vignette to the chapter discusses how TikTok inspires marketers to find new ways to connect with consumers and take more chances. TikTok represents the antithesis of staged and filtered content found on other social media platforms: this ―realness‖ is what attracts consumers to the platform.

II.

THE IMPORTANCE OF CREATIVITY IN ADVERTISING

The creative side of advertising is one of its most interesting aspects. The creative strategy used to communicate an advertising message is an integral part of the promotional process and is often critical to the success or failure of the campaign. Numerous examples or cases can be cited of how a good creative strategy was an important factor in determining the success of a product or service or reversing the fortunes of a struggling brand. Of course, there are also many situations where companies struggle to find a creative formula that works effectively. These companies change their creative strategy frequently in hopes of finding a campaign theme or tagline that strikes a responsive chord with consumers. It is important to understand that just because an advertisement is creative or popular among consumers does not mean it will increase sales or revive a declining brand. Attention must also be given to the issue of creative versus effective advertising, as many ads may be critically acclaimed from a creative perspective but fail to help the sales of the brand.

III.

ADVERTISING CREATIVITY

It is important to examine the concept of creativity, how it applies to advertising, and the challenge marketers face in developing creative and effective advertising. Good creative strategy and execution can be very important in determining the success of a product/service or reversing the fortunes of a struggling brand. Marketers must also consider how creative strategy can be leveraged across paid, owned, and earned media. NN.

What Is Creativity?—Creativity is one of the most commonly used terms in advertising as those who develop advertising messages are often referred to as ―creative types‖ and agencies develop reputations for their creativity. It is the creative‘s job to turn all of the information regarding product features and benefits, marketing plans, consumer research, and communication objectives into a creative concept that brings the advertising message to life. So much attention is focused on the concept of creativity because the major challenge given to those who develop advertising messages is to be creative. Creativity has been defined as ―a quality possessed by persons that enables them to generate novel approaches in situations, generally reflected in new and improved solutions to problems.‖

OO.

Different Perspectives of Advertising Creativity—Perspectives of what constitutes creativity in advertising vary. At one extreme are the ―suits‖ or ―rationalists‖ who argue that advertising is creative only if it sells the product or service. At the other end of the continuum are the ―poets‖ who judge creativity in terms of its artistic or aesthetic value and argue that creative advertising must be novel, original, and unique. The answer as to what constitutes creative in advertising is probably somewhere between these two extreme positions.

PP.

Determinants of Creativity—We are concerned with advertising creativity, which refers to ―the ability to generate fresh, unique and appropriate ideas that can be used as solutions to communications problems.‖ This perspective recognizes that creative advertising ideas are those that are novel, original, and appropriate. To be appropriate, a creative idea must be relevant or have some importance to the target audience. It is generally agreed that there are two central determinants of creativity, which are divergence and relevance. Divergence refers to the extent to which an ad contains elements that are novel different or unusual. Some of the ways divergence can be achieved in advertising include the following: 63. Originality—ads that contain elements that are rare, surprising, or move away from the obvious and commonplace. 64. Flexibility—ads that contain different ideas or switch from one perspective to another. 65. Elaboration—ads that contain unexpected details or finish and extend basic ideas so they become more intricate, complicated, or sophisticated. 66. Synthesis—ads that combine, connect, or blend normally unrelated objects or ideas. 67. Artistic value—ads that contain artistic verbal impressions or attractive shapes and colors Relevance reflects the degree to which the various elements of the ad are meaningful, useful, or valuable to the consumer and can be achieved in two ways. Ad-to-consumer relevance refers to situations where the ad contains execution elements that are meaningful to consumers. For example, advertisers may use celebrities with whom consumers identify, music that they like, or visual images and other execution techniques that capture their interest and attention. Brand-toconsumer relevance refers to situations where the advertised brand of a product or service is of personal interest to consumers. Relevance or appropriateness can also be viewed in terms of the degree to which an advertisement provides information or an image that is pertinent to the brand. The ad for KFC Hot and Spicy chicken in Exhibit 8-4 provides a very good example of creative advertising that relies on the divergence criterion of originality. A number of studies have been conducted showing that advertising creativity impacts consumers‘ responses to advertising messages across various stages of the response hierarchy, including cognitive, affective, and behavioral responses.

Professor Notes:

IV.

PLANNING CREATIVE STRATEGY

The Creative Challenge—Those who work on the creative side of advertising often face a major challenge. They must take all the research, creative briefs, strategy statements, communication objectives, and other inputs and transform them into an advertising message. Their job is to write

copy, design layouts and illustrations, and produce commercials that communicate effectively. Marketers usually hire advertising agencies to develop and implement their advertising campaigns because they are specialists in the creative function of advertising. However, it is important to point out that the development of creative strategy also involves representatives from the client side and other people in the agency as well as the creative staff. Creatives have the ultimate responsibility of developing an effective way of communicating the marketer‘s message to their customers. The creative person or team is often provided with a great deal of input and background information on the target audience, such as their demographics, needs and motives, and communication objectives. However, every marketing situation is different and requires a unique approach. Taking Creative Risks—Many creative people in agencies argue that they often follow proven approaches or formulas when creating ads because they are safe and less likely to fail. They note that their clients are very often risk averse and feel uncomfortable with advertising that is too different. It is important to note that companies who have very creative advertising are more willing to assume some risk. However, many managers are more comfortable with advertising that is straightforward in communicating with customers and gives them a reason to buy. Examples of agencies known for taking creative risks, such as Wieden+Kennedy, might be noted. Exhibit 8-5 shows an example of a creative ad developed by W+K for Nike to honor tennis great Serena Williams on her retirement. The Perpetual Debate: Creative versus Hard-Sell Advertising—The issue of how much latitude creative people should be given and how much risk the client should be willing to take is open to considerable debate. However, clients and agency personnel generally agree that the ability to develop novel yet appropriate approaches to communicating with the customer makes the creative specialist valuable—and often hard to find. Creative Personnel—A fairly common perception is that those individuals who work on the creative side of advertising tend to be somewhat unique and different from those working on the managerial or business side. It is worthwhile to discuss some of the characteristics of creative personnel in advertising and the need to create an environment that fosters, and is conducive to, the development of creative advertising. Some studies have even shown that creatives are in fact no more creative than their account-side counterparts. It is a position whose success relies on a creative environment where ideation can flow freely. Note that creativity is not the exclusive domain of those who work in the creative department of ad agencies. Integrated marketing communications requires creative thinking from everyone involved in the planning and execution of IMC programs.

THE CREATIVE PROCESS

A number of advertising people have argued that creativity in advertising is best viewed as a process and that creative success is most likely when some organized approach is followed. While most advertising people reject and/or resist attempts to standardize creativity or develop rules or guidelines to follow, most creative people do follow some type of process when approaching the task of developing an advertisement. There are several models or approaches to the creative process including those of James Webb Young, a former creative vice president at the J. Walter Thompson agency, which is similar to the approach of English sociologist Graham Wallas. Young‘s model of the creative process contains five steps:

Immersion—Gathering raw material and information through background research and immersing yourself in the problem. Digestion—Taking the information, working it over, and wrestling with it in the mind. Incubation—Putting the problems out of your conscious mind and turning the information over to the subconscious to do the work. Illumination—The birth of an idea. Reality or verification—Studying the idea to see if it still looks good or solves the problem; then shaping the idea to practical usefulness. Wallas suggests that creative thought evolves in four stages: Preparation—Getting background information that‘s needed to solve the problem through research and study. Incubation—Allowing ideas to develop. Illumination—Determining the solution. Verification—Refining and polishing the idea. Account Planning—To facilitate the creative process, many agencies now use account planning, which is a process that involves conducting research and gathering all relevant information about a client‘s product or service, brand, and consumers in the target audience. Account planning plays an important role during creative strategy development by driving the process from the customers‘ point of view. Planners work with the client as well as agency personnel, such as the creative team and media specialists, to discuss how information they have gathered can be used in the development of the creative strategy as well as other aspects of the advertising campaign. Inputs to the Creative Process: Preparation, Incubation, Illumination—These models of the creative process offer an organized way of approaching an advertising problem. Both models stress the need for preparation or gathering of background information that is relevant to the problem as the first step in the creative process. Various types of research and information can provide input to the creative process of advertising at each stage. There are numerous ways the creative specialist can acquire background information that is relevant to the advertising problem, including: 57. Background research—Informal fact-finding techniques and general preplanning input. Various ways of gathering background include: 

Reading anything related to the product or market. This often involves the use of general preplanning input, which includes books, periodicals, trade publications, websites, scholarly journals, pictures, and clipping services, which gather and organize magazine, newspaper, and online articles on the product or service, the market, and the competition, including the latter‘s ads. Preplanning input concerns trends, developments, and happenings in the marketplace.



Asking everyone involved with the product for information.

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Listening to what people are talking about in stores, restaurants, malls, etc.



Using the product and becoming familiar with it.



Working in and learning about the client‘s business. 1-137

58. Product- or service-specific research—This involves different types of studies such as attitude, market structure and positioning, perceptual mapping, and psychographic studies. In this area of research, creative people receive product- or service-specific preplanning input, which comes in the form of studies conducted on the product or service, target audience, or a combination of the two. Many of these types of studies use a variation of an approach called problem detection for finding ideas around which creative strategies could be based. This technique involves asking consumers familiar with a product (or service) to generate an exhaustive list of things that bother them or problems they encounter when using it and how often they arise. 59. Qualitative research input—This type of input includes techniques such as in-depth interviews focus groups, or ethnographic studies. Qualitative research can provide the creative team with valuable input, particularly in the early stages of the creative process. As discussed in the chapter, creative personnel in agencies often feel that their creativity can be stifled by research techniques such as focus groups and consumer surveys. Focus groups are a research method in which consumers from the target market discuss a particular topic. Many marketers and agencies prefer to use observational or ethnographic research to gain insight into consumers. This involves observing consumers in their natural environment. A good example of how research can be used to inform creative is provided in the text about Anheuser Busch InBev’s ―As Real as It Tastes‖ campaign for Michelob ULTRA Organic Seltzer. Inputs to the Creative Process: Verification, Revision—The purpose of the verification and revision stage of the creative process is to evaluate ideas that come from the illumination stage, reject any that may be inappropriate, and refine those that remain and help give them final expression. Some of the techniques used at this stage include: 

Directed focus groups.



Message communication studies.



Portfolio tests.



Pretesting of ads in storyboard or animatic form.

At this stage of the creative process, members of the target audience may be asked to evaluate rough creative layouts and to indicate what meaning they get from the ad, what they think of its execution, or how they react to a slogan or theme. They may be asked to evaluate a storyboard, which is a series of drawings used to present the visual plan or layout of a proposed commercial. It contains a series of sketches of key frames or scenes along with the copy or audio portion for each scene (see Exhibit 8-12). Or they may evaluate an animatic, which is a videotape of the storyboard along with an audio soundtrack. Pretesting and related procedures are examined in detail in Chapter 18. Professor Notes:

McGraw-Hill Connect ®: The Creative Process for the WPU Campaign

Type of Activity: Click and Drag Activity Summary: The newly appointed president of West Park University (WPU) has hired an advertising agency to develop an IMC campaign designed to attract the best student prospects and their parents to the university. Students will match the various steps in the creative process undertaken by the ad agency for developing the campaign for WPU to the steps in Young‘s model of the creative process. Activity Learning Objective: 08-02 Identify inputs to the creative process.

Concept Review:

The creative personnel in an advertising agency take all the research, creative briefs, strategy statements, communications objectives, and other input and transform them into an advertising message. Their job is to write copy, design layouts and illustrations, or produce commercials that effectively communicate the central theme on which the campaign is based. The job of the creative team is challenging because every marketing situation is different and each campaign or advertisement may require a different creative approach. Some say creativity in advertising is best viewed as a process and creative success is most likely when some organized approach is followed. This does not mean there is an infallible blueprint to follow to create effective advertising. However, most do follow a process when developing an ad. One of the most popular approaches to creativity in advertising was developed by James Webb Young, a former creative vice president at the J. Walter Thompson agency. Young's process of creativity is similar to a four-step approach outlined much earlier by English sociologist Graham Wallas in his classic book The Art of Thought. Difficulty: 2 Medium Bloom‘s: Understand AACSB: Analytical Thinking

VI.

CREATIVE STRATEGY DEVELOPMENT

The creative process is guided by specific goals and objectives and requires the development of a creative strategy or plan of action for achieving the goal. Creative strategy development actually begins with a thorough assessment of the marketing and promotional situation and a determination of what needs to be communicated to the marketer‘s target audience. Creative strategy should, however, also be based on a number of other factors that are stated in the creative brief or copy platform. Advertising Campaigns—Most advertisements are part of a series of messages that make up an IMC or advertising campaign, which consists of a set of interrelated and coordinated marketing communication activities that center on a single theme or idea that appears in different media across a specified time period. The determination of a strong idea for the campaign theme is very important, as it is the central message that will be communicated in all of the advertising and

other promotional activities and thus set the tone or direction for the development of the individual ads that make up the campaign. The theme or idea for the campaign is usually expressed through a slogan (tagline), which reduces the key idea into a few words or a brief statement. Creative Brief—The creative brief (which some agencies refer to as a creative platform or work plan, creative blueprint, or creative contract) is a written document that provides a plan or checklist that is useful in guiding the development of an advertising message or campaign. This document is prepared by the agency team or group assigned to the account and may include creative personnel as well as the account coordinator and representatives from media and research. The advertising manager and/or the marketing and product manager from the client side will also be involved in the process and must approve the copy platform. Figure 8-3 provides the ―must have elements‖ of a creative brief and developments to the creative brief creation process are also discussed in the text. The Search for the Major Selling Idea—An important part of creative strategy development is determining the central theme that will become the major selling idea or big idea for the ad campaign. Big ideas are important in business-to-business advertising as well as advertising targeting consumers. For example, Exhibit 8-15 shows the ―The Man Your Man Could Smell Like‖ ad for Old Spice Body Wash developed by Wieden+Kennedy. Other examples of campaigns with a consumer focus with effective big ideas are also provided in the text. Developing the Major Selling Idea—It is often difficult to pinpoint the inspiration for a big idea. However, there are several different approaches that can be used for developing major selling ideas and as the basis of creative strategy. Some of the best known and most discussed approaches include: 1. Unique selling proposition—This concept was popularized by the famous copywriter Rosser Reeves in his book Reality in Advertising. Its three characteristics include: 

Each advertisement must make a proposition to the consumer—show consumers the benefit.



The proposition must be one that the competition either cannot or does not offer.



The proposition must be strong enough to pull over new customers to your brand. It must be unique either in the brand or claim.

Creating a brand image—Some competing brands are so similar it is difficult to find or create a unique attribute or benefit so the creative strategy is based on the development of a strong, memorable identity for the brand through image advertising. Image advertising has become increasingly popular and is used as the main selling idea for a variety of products and services, including soft drinks, liquor, cigarettes, cars, airlines, financial services, perfume/colognes, and clothing. 60. Finding the inherent drama—The famous ad man Leo Burnett, founder of the Leo Burnett agency in Chicago, believed that advertising should be based on a foundation of consumer benefits with an emphasis on the dramatic element in expressing these benefits. Inherent drama involves finding the characteristic of the product that makes the consumer purchase it. This type of advertising bases the creative strategy on presenting the message in a warm and realistic way.

61. Positioning—The basic idea is that advertising is used to establish or position the product or service in a particular place in the consumer’s mind. Various approaches to positioning a brand are discussed in Chapter 2 and might be reviewed again here. Many of the top brands in various product or service categories have retained their leadership position because they have established and maintained a strong position or identity in the minds of consumers. Contemporary Approaches to the Big Idea—These approaches to determining the major selling ideas discussed above (USP, brand image, inherent drama, and positioning) are very popular and are often used as the basis of the creative strategy for advertising campaigns. These creative approaches represent specific ―creative styles‖ that have become associated with some of the most successful advertising creative minds and their agencies. However, it should be noted that many other creative approaches and styles are available and are often used in advertising. Some of the creative styles associated with more contemporary advertising visionaries, such as Lee Clow, chair emeritus of TBWA/Media Arts Lab, which is Apple‘s lead creative agency, are worth noting. The challenge to the creative team is to find a major selling idea and use it as a guide to the development of an effective creative strategy.

McGraw-Hill Connect ®: Creative Ideas for Four Shampoo Brands Type of Activity: Case Analysis Activity Summary: Bee & Gee is a multi-product, multi-brand, packaged goods company with a significant presence in the personal care and grooming category. Within each product category, it has numerous brands that sometimes compete with each other in the same geographical markets. Bee & Gee has four different shampoo brands that it markets to consumers in multiple countries. This activity will have the students select the best answer for each question related to the ―big idea‖ for each of their brands. Activity Learning Objective: 08-04 Examine approaches to developing the major selling ideas that are used as the basis for an advertising campaign. Concept Review: An important part of the creative strategy is determining the central theme or the major selling idea of the ad campaign. According to A. Jerome Jeweler , the major selling idea is the strongest singular thing you can say about your product or service. This claim should contain the most meaningful appeal to your target audience and should be strong enough to remain the central issue in every ad and commercial in the campaign. Difficulty: 2 Medium Bloom‘s: Analyze AACSB: Analytical Thinking

Teaching Suggestions For many students, the most interesting aspect of advertising and promotion is the creative side. Most students really do not have an appreciation for what is involved in the development of an advertising campaign. They may think that the development of a campaign and individual messages involves only the agency creative department. It is important to stress the fact that the development of a campaign involves numerous individuals from both the other departments of the agency as well as on the client side. Many students will not end up being directly involved in the design and creation of advertisements. However, creative strategy is often critical to the success of the firm‘s integrated marketing communications efforts. Thus, it is important that everyone involved with the marketing and promotional program have some understanding of the creative process that underlies the development of advertising messages, as well as the creative options available to the advertiser. Some interesting discussion can be generated over the issues of what constitutes creative advertising. Students might be asked to debate the different perspectives of advertising creativity. One side can take the ―its only creative if it sells‖ position versus the ―aesthetic, novelty/uniqueness‖ perspective. Some interesting discussions can also be generated over the issue of creative risk taking and just how much latitude the client should give the agency when it comes to creating the advertising message. For a very interesting discussion and still relevant debate over different perspectives on creativity, we suggest an article on ―Creative Differences‖ by Anthony Vagnoni, which appeared in Advertising Age on November 17, 1997. You may also want to update students on the advertising that wins the Lions awards at the Cannes International Advertising Film Festival each year. Advertising Age and Adweek have articles covering the Lions awards toward the end of June each year. You can also direct your students to the festival‘s official website at www.canneslions.com. Students should be encouraged to research advertising that has won creative awards from other organizations. For example, the Clio Awards is an international awards competition that recognizes outstanding creative work done by agencies and winners can be found on the website at clios.com/awards. Effie Worldwide sponsors the Effie Awards, given each year to marketing communication campaigns based on their proven success for a company or brand. Information about the Effie Awards can be found at www.effie.org. It is also important to discuss how research is used as an input to the creative process of advertising. Time might be spent discussing the value of both qualitative and quantitative research techniques and how they can be used to provide the creative department information that gives them more insight into the consumer. It is also interesting to spend some time discussing advertising campaign themes currently being used by various advertisers. This discussion can focus on the creative strategy being used by the advertiser, the image or position they are trying to establish for the company or brand, and what type of analysis or background research might have been used in developing the campaign. It is important to stress that advertising campaigns are often the result of extensive planning and research provided to the creative team by marketing planners and researchers on both the client and/or agency side. The text also has a brief discussion of account planning, which is becoming an important function in many advertising agencies. If you would like further information on account planning, we recommend the book Truth, Lies & Advertising by Jon Steele, who was the Vice Chairman and Director of Account Planning for Goodby, Silverstein & Partners in San Francisco. This book provides an excellent discussion of the account planning and how the Goodby, Silverstein & Partners agency has used the process in the development of many successful advertising campaigns for clients such as Adobe, Norwegian Cruise Lines, Frito-Lay, and the ―got milk?‖ campaign for the California Fluid Milk Processors Advisory Board.

Answers to Discussion Questions 1. Discuss how the social media platform TikTok is impacting advertising creativity. Do you think TikTok’s impact will continue into the future? Why or why not? (LO 8-1, 8-2, 8-3) With over 1 billion active monthly users worldwide, TikTok‘s mission is ―to inspire creativity and bring joy‖ and its surge in popularity has been driven in part by the joyful and entertaining usergenerated content on the platform. One of the things that sets TikTok apart is its engagement factor as many of the platform‘s creative formats are made for interaction and allow users to actively participate in and respond to the content they are watching. TikTok doesn‘t just allow users to share videos, it inspires them to create them and as a result they are creating new ways of thinking, living, and buying—in addition to dancing. One key to TikTok‘s success is its authenticity: it is the antithesis of the heavily staged and filtered content found across other social media platforms. TikTok‘s tagline is ―Real People, Real Videos‖ and the videos are from real people tapping into different lifestyles, trends, insights, and perspectives from around the country and the world. This suggests that advertisers should find ways to integrate such realness into their messages rather than the usual hyper-polished, aspirational content. Experts note that there are a number of other things advertisers can learn from TikTok, such as marketers do not need to spend large sums of money or have an elaborate team of decision makers to create impactful content. Advertisers also should pay attention to TikTok to gain insights into what is trending or about to happen in popular culture. TikTok itself encourages marketers to embrace the creativity, positivity, and authenticity of TikTok and create content that truly speaks to people. Many marketers are finding creative ways to connect with their target audience on TikTok, including a successful campaign by fast-food chain Chipotle. TikTok is likely to shape the future of entertainment as well as the way marketers communicate with their customers. However, TikTok is facing some political uncertainty as it is owned by a Chinese company. It has been banned by various U.S. government agencies and some universities, making its future in the U.S. uncertain. But for now, it continues to inspire marketers to find new ways to connect with consumers and take more chances. 2. Discuss the role and importance of creativity in advertising. Do you think advertising agencies often emphasize creativity at the expense of developing ads that can help generate sales for a product or service? What can clients do to avoid this problem? (LO 8-1) Perspectives on what constitutes creativity in advertising differ. At one extreme are people who argue that advertising is creative only if it sells the product. An advertising message or campaign‘s impact on sales counts more than whether it is innovative or wins awards. At the other end of the continuum are those who judge the creativity of an ad in terms of its artistic or aesthetic value and originality. They contend creative ads can break through the competitive clutter, grab the consumer‘s attention, and have some impact. As you might expect, perspectives on advertising creativity often depend on one‘s role. A study by Elizabeth Hirschman examined the perceptions of various individuals involved in the creation and production of TV commercials, including management types (brand managers and account executives) and creatives (art director, copywriter, commercial director, and producer). She found that product managers and account executives view ads as promotional tools whose primary purpose is to communicate favorable impressions to the marketplace. They believe a commercial should be evaluated in terms of whether it fulfills the client‘s marketing and communicative objectives.

Everyone involved in planning and developing an advertising campaign must understand the importance of balancing the ―it‘s not creative unless it sells‖ perspective with the novelty/uniqueness and impact position. Marketing and brand managers or account executives must recognize that imposing too many sales- and marketing-oriented communications objectives on the creative team can result in mediocre advertising, which is often ineffective in today‘s competitive, cluttered media environment. At the same time, the creative specialists must recognize that the goal of advertising is to assist in selling the product or service and good advertising must communicate in a manner that helps the client achieve this goal. Despite having different perspectives on creativity, both sides are likely to agree that creative advertising is important because it often garners more attention and can lead to deeper processing by consumers. Marketing professor Scott Koslow also notes that ―creativity gives permission to consumers to be open to what appears to be new information about a brand and brings a fresh perspective—the ultimate ‗new-news.‘‖ 3. Advertising creativity is viewed as the ability to generate unique and appropriate solutions to communication problems. This definition suggests that a creative ad is one that is novel but also relevant or appropriate. Find an example of an advertisement (either a print ad, TV commercial, or online ad/video) that is novel but not necessarily relevant to the product or services. Discuss why the client would have approved this ad. (LO 8-1) For an ad or campaign to be considered creative, it should meet the criteria of being both a unique and appropriate solution to a communication problem. Creative specialists have the responsibility of developing advertising messages that capture the attention of and persuade the target audience to consider a brand. While many ads are entertaining, they do little to contribute to the brand. Students should find a print ad or TV commercial that is novel or unique but does not contain a relevant message that encourages consumers to consider purchasing the product or service. Many of the ads that appear in magazines or TV shows targeting young people fit into this category as the focus of the advertisement is on being different or unique and breaking through all of the advertising clutter. However, these ads often communicate very little about the product or service or give consumers little, if any, reason to purchase the brand. Creative personnel are often able to convince the client that something novel or unique needs to be done to get the attention of consumers and break through the clutter. Many marketing managers defer to the judgment and expertise of agency creative personnel and give their approval for these ads. 4. Discuss the various factors that account for the way divergence can be achieved in advertising creativity. Find an example of an advertisement that reflects these various factors and explain how it does so. (LO 8-1) Divergence is viewed as one of the two key determinants of creativity (along with relevance) and refers to the extent to which an ad contains elements that are novel, different, or unusual. Robert Smith and Xiaojang Yang have identified five factors that could account for the ways divergence can be achieved in advertising, which they describe as follows. These include: 6) Originality: Ads that contain elements that are rare, surprising, or move away from the obvious and commonplace. 7) Flexibility: Ads that contain different ideas or switch from one perspective to another. 8) Elaboration: Ads that contain unexpected details or finish and extend basic ideas so they become more intricate, complicated or sophisticated. 9) Synthesis: Ads that combine, connect, or blend normally unrelated objects or ideas. 10) Artistic value: Ads that contain artistic verbal impressions or attractive shapes and colors

Students should find examples of ads that reflect one of more of these characteristics and explain how it does so. They should be able to find examples of print ads that are high in artistic value or TV commercials that reflect characteristics such as originality or flexibility. 5. The meta-analysis study of advertising creativity found that ads that have won creative awards tend to be higher in originality but had a weaker impact on consumer response. Discuss the implications of these findings for the significance of advertising creative awards. Why do you think so many agencies spend time and effort entering creative award competitions? (LO 8-1, 82) Creativity is often a key success factor in advertising, although questions remain regarding why it works better in some situations than others. The results of the meta-analysis done by Rosengren and her colleagues showed that consumers‘ response to advertising is impacted by the originality and appropriateness/relevance of an advertising message, while the findings from Reinartz and Saffert‘s research found that originality combined with elaboration and artistic value drives sales. Many who work on the creative side in agencies argue that it is important for clients to take some risks if they want breakthrough advertising that gets noticed. Advertising agencies as well as other IMC specialist organizations thrive on creativity because it is at the heart of what they do. Thus, agencies, as well as clients, must create an environment that fosters the development of creative thinking and creative advertising. Thus, agencies pursue creative awards in order to validate these claims. 6. Assume that you have been hired as an account planner by an advertising agency and assigned to work on the development of an advertising campaign for a new brand of bottled water. Describe the various types of general and product-specific preplanning input you might provide to the creative team. (LO 8-2) General preplanning input includes overall information on trends, developments and conditions in the marketplace that would be relevant to the marketing of the product. In the case of a new brand of bottled water, the advertiser would want to know about a number of trends and developments affecting the beverage market such as the increasing popularity of new age drinks and environmental concerns over the use of plastic bottles. Information on the changing lifestyles of consumers and how this might affect their beverage consumption would also be relevant, as would product specific information on the bottled water segment of the beverage market. Product-specific preplanning input includes information that is directly relevant to the product or service. Usage and attitude studies regarding bottled water users and nonusers in particular, could be performed, as well as psychographic studies. Problem detection studies could be performed to determine what changes or improvements consumers would like to see in bottled water (e.g., taste, flavors, nutritional supplements, packaging changes). The outcome of a problem detection study may provide input for product improvements, reformulations, or new brands. It would also be important to have information on the type of advertising being used by competitors such as Evian, Dasani, Arrowhead, Propel, and other brands. 7. Many advertising creative personnel are opposed to research and analytics as they argue that they stifle the creative process. Discuss the problems, as well as the value, of using research and analytics as input to the process of creating advertisements. (LO 8-2, 8-3) Today, advertising is becoming more science and less art. Data-savvy marketers have access to a seemingly never-ending stream of information and insights into their customers and are relying heavily upon data and analytics, which is forcing creativity to take a back seat to more data-driven approaches. Just about every element of an IMC campaign can be tracked, tested, and reported,

particularly for digital advertising where impressions, clicks bounce rates, time on site, and many other metrics are now readily available. Many in the advertising industry argue that this focus on analytics and metrics is killing creativity, as it is leaving important concepts such as brand building, emotional connections, and customer loyalty low on the list of priorities for many companies. Studies have shown that a high percentage of those working in marketing and advertising feel that a culture of measurement is stifling creativity as more emphasis is placed on data-driven practices, rather than creative methods of campaign planning and execution. While most advertising creatives are not opposed to pretesting of their ideas, most feel that the data should be used to inform creative decisions, not to make them. They argue that too heavy a reliance on ad testing and meeting norms and other metrics hinders the creative process and often stops innovative ideas from coming to life. Moreover, they note that ad testing methods elicit only conscious responses and cannot truly capture how consumers might respond emotionally and subconsciously to a creative message. The challenge facing advertising is finding the right balance between analytics and creativity, particularly as marketers become more and more interested in measurable, data-driven results. Ultimately, creativity and analytics need to be balanced and marketers must find ways to achieve a symbiotic relationship between art and science. Those working on both the agency side and client side of the business must recognize that it is a combination of creativity and analytics that is likely to yield the best outcomes, not just one of them alone. 8. IMC Perspective 8-2 discusses the various creative approaches used by companies to advertise automotive insurance. Research has shown that advertising by insurance companies has little impact on consumers’ final decision of what insurer to go with. Given this, why do you think auto insurance companies such as GEICO, State Farm, Progressive, or Allstate spend so much money on advertising? (LO 8-3, 8-4) Automobile insurance companies face a unique marketing challenge as regardless of age, gender, or socio-economic status, all drivers need insurance. In fact, some form of liability coverage is required by law in all 50 states. This opportunity presents a challenge as auto insurers must market their service to a wide range of consumers who represent a broad spectrum of characteristics including age, education, and income, as well as purchase motives. As a result, in recent years auto insurance companies have created a diverse range of (expensive) advertisements designed to appeal to many different types of consumers. The goal of these campaigns is to attract and retain as many customers as possible by encouraging consumers to switch from one insurance company to another. Likewise, the advertising strategy of some auto insurers is to use a big-budget, multi-pronged advertising approach with several creative campaigns running simultaneously. The idea behind this is to break through advertising clutter and attract attention, as well as avoid the problem of wear-out that often results when consumers tire of seeing and/or hearing the same advertising message repeatedly. 9. Discuss the role of an advertising slogan in an advertising campaign and some of the factors that should be considered in developing an effective slogan. Find an example of a good tagline as well as one that does not communicate effectively. Discuss the reasons why you view these as either good or bad examples of advertising slogans. (LO 8-3) An advertising slogan or tagline is used to express the central theme or message that is being communicated in an advertising campaign. The slogan should serve as a summation line that

succinctly expresses the company or brand‘s positioning, as well as the message it is trying to deliver to the target audience. Marketing experts note that a good tagline must break through the advertising clutter, differentiate the company or brand, and be memorable. The tagline is a hardworking collection of words that should give you that ‗aha‘ moment every time you see or hear it. A slogan or tagline is the brand‘s sound bite and is often all you can expect consumers to remember. Long-time marketing executive Steve Cone argues that creating strong slogans is a marketer‘s most important job but today is a forgotten part of marketing planning. He suggests that advertising messages should contain ―powerlines,‖ or powerful taglines, which he describes as ―words that are well-chosen and have the power to awe, inspire, motivate, alienate, subjugate, and in a marketing context, change the buying habits of consumers.‖ He argues that since we are bombarded by so many advertising messages, a powerline can do the heavy lifting and break through all of the sensory overload. Students should find examples of slogans or taglines that they think are very good or effective in meeting these criteria, as well as those that do a poor job of communicating because they use meaningless phrases that do little, if anything, to differentiate the brand or company using it from their competitors or providing an identity for the brand. 10. What is a creative brief? Discuss the various elements that should be included in a creative brief and why they are important. (LO 8-3) The creative brief is a document which specifies the key elements of the creative strategy for an advertising campaign and serves as the basis for communication between a client and the ad agency. While creative briefs vary from agency to agency, there are a few key elements which are generally included in each one. These include a brief description of the issue or problem the communication must address or solve. Perhaps it is that consumers are not aware the brand or product exists. This would be important for creative to know. It should also include communication objectives. Along the same lines as above, creative should have a clear picture of what this communication must achieve. It should also have a clear description of the target audience. This will dictate a lot about the creative elements of the advertisement. It could also provide any relevant insights that could drive creative work. It would also likely include a description of the key benefits of the product or service and the major selling idea that must be communicated. This would likely impact the copy as well as the visual elements of the ad. It should also include a description of the reason to believe/supporting information—why should consumers believe that this product does what you say it will do? Additionally, it should provide a description of the tone of the advertising and a description of the brand‘s personality. This certainly impacts the types of visuals, fonts, and copy used. Finally, it should describe deliverables (is it a print ad that‘s needed? If so, what size and when is it needed by?) and a description of the measures of success, or how will we know that the creative achieved what we wanted it to do. This should be tied back to objectives. 11. Find an example of an ad or campaign that you think reflects one of the approaches used to develop a major selling idea such as unique selling proposition, brand image, inherent drama, or positioning. Discuss how the major selling idea is reflected in this ad or campaign. (LO 8-4) Jeweler refers to the major selling idea as ―the strongest singular thing you can say about your product or service. This should be the claim with the broadest and most meaningful appeal to your target audience.‖ O‘Toole describes the big idea as the insight that synthesizes the product benefit with consumer needs or desires. Major selling or big ideas should attract the consumers‘ attention, get a reaction, and differentiate the advertiser‘s product or service from the competition. There are four approaches discussed in the text for developing major selling ideas that can serve as the basis of the creative strategy. These include the unique selling proposition, creation of a brand image, the use of inherent drama, and positioning. Students should bring in examples of ads that they feel are examples of each approach to developing a major selling idea and describe the logic of their selection.

Additional Discussion Questions (not in text) 12. Explain what is meant by creative strategy and creative tactics in advertising. Find an example of an advertising campaign and evaluate the creative strategy and tactics used in the ads. (LO 81) Creative strategy determines what an advertising campaign and messages will say or communicate. It is best viewed as a process designed for determining what the advertising should communicate about the product or service and the big idea that will be used as the central theme of the advertising campaign. Creative tactics focus on how the advertising campaign and messages will be communicated with regard to areas such as various appeals and execution styles as well as the tactical issues involved in the design and production of advertising. Students should find an example of a current advertising campaign and evaluate the creative strategy and tactics used in the ad. They should analyze the creative strategy in terms of the big idea used as the central theme of the advertising campaign as well as the type of appeal, execution style, and tactical elements used in the individual ads that are part of the campaign. 13. Television commercials are often developed that rely on unusual creative tactics and have very little relevance to the product or service being advertised. Creative personnel in agencies defend the use of these strange messages by noting that they are novel and break through the clutter. Evaluate the pros and cons of this argument. (LO 8-1) Creative personnel do face a major challenge, as they must develop ads that will break through the clutter that occurs in various media such as television, radio, online, magazines and newspapers and grab the attention of the viewer, listener, or reader. This can be particularly difficult in the broadcast media and online as consumers watching TV, listening to radio, or surfing the Internet are often trying to avoid ads rather than pay attention to them. While consumers may be more receptive to advertising in magazines or newspapers, the vast numbers of ads that appear in most publications makes it very challenging for an ad to be noticed. Thus, creative personnel argue that they must use novel tactics such as startling images, sexual or suggestive appeals, or very irreverent ads that can break through the clutter and be noticed by consumers. It often appears that the goal of these ads is to entertain the viewer or listener rather than to deliver a strong message to them. These types of ads often do not contain a message that is relevant to the product or service but do manage to be noticed and register a brand name or attribute association. Creative personnel will also argue the main goal of advertising is to create and maintain top-of-mind awareness and novel or unusual ads are an effective way of doing this. Those who are from the ―it is not creative unless it sells‖ school of advertising argue that the goal of advertising should be to deliver relevant information that helps sell the brand. They do not accept the breaking through the clutter, capturing attention, or creating controversy argument as viable excuses for developing ads that do not deliver a relevant message or communicate a selling point. They expect advertising to do more than maintain brand awareness and feel that creative personnel must be challenged to do more than develop irreverent or unusual messages. 14. Evaluate the debate over creative versus hard-sell advertising. Discuss the arguments for and against each perspective. Who should be responsible for judging the creativity of an ad—clients or agency creative personnel? (LO-8-1) There has been an ongoing battle in advertising between those who believe ads should move people and those who feel they should just move product. The ―suits‖ or ―rationalists‖ on the hard-sell side argue that the primary function of advertising is to sell the product or service. They take the position that advertising is not creative unless it sells and should be driven by sales results rather than creative awards. They argue that the high costs of commercial production and media time are making it more 1-148 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

important than ever for advertising to produce measurable results. They also note that there is tremendous financial pressure on businesses to produce results so they are looking for campaigns that can move the sales needle. Those advocating the hard-sell approach often feel that the more selling points or information in an ad, the better its chances of moving the consumer to make a purchase. They argue that the goals of an advertising message or campaign should be to deliver relevant and favorable impressions to consumers, which will help sell a product or service. The impact of advertising on sales is the real measure of its creativity and is more important than whether it is innovative or wins awards. On the other side are the ―poets‖ or proponents of creativity, who argue that advertising has to build an emotional bond between consumers and brands or companies rather than focusing on product features and benefits. They feel that it has become very difficult to differentiate a company or brand based on functional features, as most products have become indistinguishable from their competitors. They argue that in today‘s highly competitive marketplace where many companies offer high-quality products at similar prices, strong brand images are the key to differentiating a product or service. Their perspective is that consumers are tired of seeing traditional forms of advertising for products such as automobiles that focus on sleek appearances and advanced features. They argue that consumers want to see ads that are more entertaining, fun and make them feel good. The ―poets‖ also defend the advertising art and entertainment approach by noting that this type of advertising is needed to break through the clutter as well as the consumers‘ boredom barrier. Moreover, they note that highly creative ads are often effective, even though it is difficult to quantify their impact on sales. They argue that creativity cannot be judged solely based on sales since and might argue that advertising that is unique or different is often needed to break through the competitive clutter, grab the consumer‘s attention, and have some impact. They are more likely to view creativity in terms of the ad‘s ability to generate an emotional response and create certain feelings or images that can be transferred to the brand. Those involved with an advertising campaign must understand the importance of balancing these two perspectives. The position of creative personnel must be respected, and they should be given some latitude in developing advertising messages. However, the creative team should recognize that ads that are creative only for the sake of being creative often fail to communicate a relevant or meaningful message that will help sell a product or service. There are numerous examples of advertising campaigns that have won awards for creativity but failed to sell the product (e.g., Alka-Seltzer). When this occurs, the agency usually loses the account, and the client looks for a new approach that will help move the sales needle. Students can be asked to debate these two perspectives on advertising creativity. There is no easy answer to the second part of this question as ideas and perceptions regarding what constitutes a creative ad vary among those who are involved with and evaluate advertising. The issue of who should have the responsibility for judging the creativity of an advertisement is debatable. Obviously creative personnel are probably best able to evaluate an ad in terms of criteria such as its novelty, uniqueness, and artistic merits. However, the client may be in the best position to evaluate the ad in terms of its ability to communicate the intended sales message to the target audience. Ideally, there should be agreement between the creative specialists and client. The client does not want creativity for creativity‘s sake but rather a creative message that effectively communicates with consumers. On the other hand, the client must respect the creative insight and background of the agency. 15. Discuss the key characteristics of a unique selling proposition. What are some of the factors an advertiser must consider in developing an advertising campaign that uses a USP as the basis for the major selling idea? (LO 8-4)

The famous advertising copywriter Rosser Reeves developed the concept of the unique selling proposition (USP). The concept of a USP is that it offers the consumer a specific feature or benefit that is important to them and unique to this particular brand. The three characteristics of a USP are that each ad must make a proposition to the consumer that tells them the benefit they will get by buying the brand; the proposition must be one that the competition either cannot or does not offer; and the proposition must have motivating power and thus be able to convince consumers to buy the brand. Students should be encouraged to find an example of an advertisement that they feel uses a USP as its major selling proposition. The ad should be evaluated against the three characteristics of USPs discussed here and in the chapter. 16. The chapter discusses how advertising agencies are sometimes fired even though they create award-winning ads and campaigns for their clients. Evaluate the decision by companies such as AB InBev to dismiss their ad agency and hire a new one even though the agency has done award-winning creative work for the company/brand. (LO 8-1) DDB had been the agency for Anheuser Busch‘s two major brands, Budweiser and Bud Light, for 30 years before AB InBev terminated the relationship in 2011. The decision by AB InBev to switch agencies came as somewhat of a surprise given the excellent creative work DDB had done for the two agencies over the past three decades. In 1981, the agency helped launch Bud Light, which is now the leading brand of beer in the U.S. market, and developed a number of award-winning campaigns such for the brand such as the ―Real Men of Genius‖ radio campaign and ads featuring the Spuds McKenzie mascot dog. DDB also created the popular ―Whassup?‖ campaign for Budweiser as well as numerous commercials featuring the iconic Clydesdales. Commercials for Budweiser and Bud Light developed by DDB were among the most popular on the Super Bowl each year as Anheuser Busch has been the major advertiser on the big game. One of the reasons AB InBev may have switched agencies is that while Bud Light and Budweiser are the two leading brands of beer in the U.S., both brands have struggled to increase their sales during the economic downturn that began in 2009. Thus, AB InBev decided it was time to change its creative direction for both brands. The company had begun using other agencies for Budweiser in countries such as Brazil even though DDB was the global agency of record and had an office in the country. AB InBev also began asking other agencies to submit creative ideas for its U.S. advertising for the brands, which was a sign of a strained relationship with DDB. As discussed in Chapter 3, marketers often will consider changing agencies when sales are struggling, and they feel that a fresh creative approach is needed. AB InBev had relegated DDB to the sidelines several years ago and decided to use a campaign developed by the agency Anomaly as its main creative campaign called ―Grab Some Buds.‖ In early 2012, DDB was replaced by the two agencies on the Bud Light account, McGarry Bowen and the independent agency Translation. However, McGarry Bowen lasted only eight months before being terminated with more of the creative work going to Translation. In 2013, AB InBev changed agencies for Bud Light once again, moving to BBDO, which positioned it as a brand for spontaneous fun with the ―Up for Whatever‖ campaign. However, two years later, as sales continued to decline, the Bud Light account was moved from BBDO to Wieden+Kennedy. A spokesperson for AB InBev suggested that BBDO was trying too hard to appeal to young adult drinkers, noting that Bud Light is a brand that appeals to everyone and that everybody who is young at heart should be attracted to the brand, not just young adults. 17. Discuss the types of research that can be used by an advertising agency during the preparation, illumination, and incubation stages of the creative process. Find an example of an advertising campaign that has used research as input to the creative process and discuss how they have done so. (LO 8-2, 8-3) Many agencies, particularly larger ones with strong research departments, have their own research programs and specific techniques they use to assist in the development of creative strategy and 1-150 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

provide input to the creative process. In addition to the various quantitative research studies, qualitative research techniques such as in-depth interviews or focus groups can provide the creative team with valuable insight at the early stages of the creative process. Focus groups are a research method whereby consumers (usually 10 to 12 people) from the target market are led through a discussion regarding a particular topic. Focus groups give insight as to why and how consumers use a product or service, what is important to them in choosing a particular brand, what they like and don‘t like about various products or services, and any special needs they might have that aren‘t being satisfied. A focus group session might also include a discussion of types of ad appeals to use or evaluation of the advertising of various companies. Ethnographic research involves studying consumers by observing or interacting with them in their natural environment such as in their homes, at work, or at play. This type of research can be very valuable as input to the creative process as it provides insight into the behavior patterns, purchase motives and idiosyncrasies of consumers that are gained by observing or interacting with them. For example, researchers at Procter & Gamble used ethnographic research whereby they observed consumers in their homes during the early morning hours when they were preparing and enjoying a cup of coffee. Insight was gained into the importance of the ritual of having a cup of coffee by observing how consumers enjoy the experience. The popular campaign for Folgers coffee that utilizes the tagline ―The best part of waking up is Folgers in your cup‖ evolved from ethnographic research done by P&G researchers. P&G sold Folgers to the J.M. Smucker Co. in 2008, which still uses the tagline in advertising for the brand. Students should be encouraged to find other examples of advertising campaigns that have used ethnographic research as input to the creative process. Sources of information for this assignment might include Advertising Age, Adweek, or the Effie or Clio Awards case studies. 18. Many advertising creative personnel are opposed to focus group research as they argue that they may inhibit the creative process. Discuss the problems, as well as the value, of using focus groups to evaluate advertising creative work. (LO 8-2) Focus groups are a qualitative research method whereby a small group of consumers are led through a discussion regarding a particular topic or issue. They can be used to gather detailed insight as to why and how consumers use a product or service, problems they might have and are looking to resolve as consumers, what is important to them in choosing a particular brand, and what they like or dislike about various brands. They can also be used to evaluate advertisements as consumers can be shown examples of current or proposed ads and asked to evaluate them. All of this information can be useful to those involved in the creative process as input gathered from focus groups provides creative specialists with a better sense of who the target audience is, what they are like, their purchase motives, and what they like and dislike about various types of advertising. Malcolm Gladwell has been critical of focus groups as he argues that there is very little psychological justification for the notion that you can find out what people think about an idea, particularly a revolutionary new idea, by asking them. In his book, Blink: The Power of Thinking Without Thinking, Gladwell examines the content and origin of instantaneous impressions and argues that decisions made quickly can be as good as those made after much deliberation. Agency creative personnel have long been critical of the idea of having their ideas and work critiqued by consumers as they argue that it limits their ability to develop innovative and breakthrough advertising. Recently, focus groups have been criticized for a number of reasons. Many advertising creative people insist that good ideas do not need to be tested and that testing can weaken creative execution. They note that focus group participants often have difficulty expressing how they feel about a commercial and often mimic the responses of a dominant member of the group. It has also been argued that focus groups do not provide enough insight into consumer‘s emotional responses to an ad and may encourage consumers to think too much rather than respond the way they might while watching television. While creatives 1-151 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

may be opposed to the use of focus groups, it is very unlikely that clients will allow them to produce ads without some early indication of how consumers will respond to them. There are many examples of situations where the testing of creative concepts and even finished commercials has provided very valuable input that was used to make modifications to an ad or campaign before it ran. Companies that are spending millions in production and media costs want to be confident that their ads are going to effectively communicate with consumers and will want to test them either through focus groups or some other type of testing method.

CHAPTER 9 CREATIVE STRATEGY: IMPLEMENTATION AND EVALUATION Chapter Overview In the previous chapter, the importance of advertising creativity was examined along with the creative process of advertising. Attention was also given to various approaches for determining the big idea that will be used as the central theme of the advertising campaign. This chapter continues the discussion of creative strategy by turning attention to how these big ideas are developed into advertising messages. We will examine various appeals and execution styles that can be used in developing an advertisement along with tactical issues involved in the design and production of advertising messages. The chapter concludes with a discussion of some guidelines for evaluating the creative work of the advertising agency.

Learning Objectives 27.

Compare the different types of appeals used in advertising.

28.

Identify creative execution styles and their most appropriate applications.

29.

Compare tactics for the creation of print ads and TV commercials as well as online advertising.

30.

Discuss guidelines for clients to evaluate creative work.

Chapter and Lecture Outline I.

APPEALS AND EXECUTION STYLES

Once the major selling idea and the advertising campaign theme has been agreed upon, the creative team then turns its attention to determining the specific type of appeal and execution style that will be used to carry out the creative concept. The advertising appeal refers to the basis or approach used in the advertisement to elicit some consumer response or to influence their feelings toward the product, service, or cause. The focus in this chapter is on how the advertising message will be executed and considers the various appeals or approaches used to as well as the creative execution styles that can be used to turn the appeal into an actual advertisement. This is the way a particular appeal is turned into an advertising message presented to the consumer. QQ.

Advertising Appeals—Many different appeals can be utilized as the bases for advertising messages. At the broadest level, these approaches can be broken down into two categories or classes, which are informational/rational appeals and emotional appeals. 68. Informational/rational appeals—Informational/rational appeals focus on the consumer's practical, functional, or utilitarian need for the product or service and/or specific reasons for owning a particular brand. These types of messages emphasize facts, learning, and the logic of persuasion. The Honda Pilot ad shown in Exhibit 9-1 provides an example of a rational appeal. Examples of a number of product- or service-related appeals that would fall under the category of rational appeals are discussed including: 

Feature appeals—these focus on the dominant traits of the product or service, tend to be highly informative, and present the customer with a number of important product attributes or features that will lead to favorable attitudes and can be used as the basis for rational purchase decisions. Exhibit 9-2 provides an example of this type of appeal.

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Competitive advantage appeals—the advertiser makes either a direct or indirect comparison to another brand or brands and is usually claiming superiority on one or more attributes.

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Favorable price appeals—makes the price offer the dominant point of the message. It is most often used to announce sales, special offers, or low prices. Exhibit 9-3 shows a variation of this appeal.

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News appeals—a news or announcement about the product, service, or company dominates the ad. It is often used for a new product or service or to inform consumers about major changes or improvements to a product or service.

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Product/service popularity appeals—stress the popularity of a product by pointing out the number of consumers who use the brand, the number who have switched to it, the experts that recommend it, or the like. Exhibit 9-4 provides an example of this type of appeal.

69. Emotional appeals—Emotional appeals relate to consumers' social and/or psychological needs for purchasing a product or service. Emotional appeals have become very popular in advertising as marketers recognize that many purchase decisions are made based on feelings and emotions since rational, functional-based differentiation is often very difficult and dull. Examples of psychological states or feelings that can serve as a basis for emotional appeals are shown in Figure 9-1 of the text. The effectiveness of emotional appeals has been documented in a number of research studies by Pringle and Field, which are discussed in their

book Brand Immortality. A key finding from their research is that advertising campaigns with purely emotional content are nearly twice as likely to generate large profit gains versus campaigns using only rational content. The emotional only campaigns were also more effective than those that used a combination of emotional and rational content. One of the reasons given for why emotional campaigns work so well is that they reduce price sensitivity and strengthen the ability of brands to charge a price premium, which contributes to profitability. While emotional appeals are often executed through television commercials, many marketers are now using online videos to portray emotional appeals, which often leads to popular messages going viral. Another reason for using emotional appeals is to influence consumers' interpretations of their product usage experience through the use of transformational ads. This type of ad associates the experience of using or consuming the advertised brand with a unique set of psychological characteristics that would not typically be associated with the brand experience to the same degree without exposure to the advertisement. Advertisements using this appeal create feelings, images, meanings, and beliefs about the product that are activated when consumers use it. A transformational ad has two characteristics: 1) it must make the experience of using the product more exciting and enjoyable than that obtained simply from a description of the brand, and 2) it must connect the experience of the advertisement so tightly with the experience of using the brand that consumers cannot remember the brand without recalling the experience generated by the advertisement. The ―Only Your People‖ campaign for Vrbo found in Exhibit 9-5 is a very good example of transformational advertising. 70. Combining rational and emotional appeals—Many purchase decisions are made based on both rational and emotional motives. Thus, rational and emotional appeals may be combined in the advertisement to attempt to influence both types of purchase motives. The strongest relationship between a consumer and a brand is based on feeling or emotional attachment to the brand, and marketers are constantly searching for ways to connect with consumers on an emotional level. The Subaru campaign discussed in the text provides an example of Subaru of America making a decision to change its creative strategy from rational- to emotional-based advertising with their ―Love‖ campaign. 71. Additional types of appeals—Other appeal types discussed in the text include: reminder advertising, which has the objective of building brand awareness and/or keeping the brand name in front of consumers; teaser advertising, which is used to build curiosity and interest or excitement for a product or brand by talking about it but not showing it; and usergenerated content (UGC) whereby ads are created by consumers rather than by the company and/or its agency. The Frito Lay Doritos campaign ―Crash the Super Bowl‖ campaign was based on user-generated content as the various TV spots used in the campaign were created by consumers rather than an advertising agency. The increasing use of social media such as Facebook, YouTube, Snapchat, TikTok, and Instagram is likely to result in greater use of user-generated content by marketers as a way of getting consumers more engaged with their brands. Ads designed to enhance the image of a company (or meet other corporate goals) are referred to as corporate image advertising and are discussed in Chapter 17. RR.

Advertising Execution—Creative execution refers to the manner in which an advertising appeal is carried out or presented. A particular advertising appeal can be executed in a variety of ways and a particular means of execution can be applied to a variety of advertising appeals. Some of the more commonly used execution techniques include:

Straight-sell or factual message—This type of execution relies on a straightforward presentation of information about the product or service such as specific attributes or benefits. It is one of the most basic types of creative executions and is commonly used in print ads. 72. Scientific/technical evidence—A variation of the straight sell where scientific or technical evidence or information is presented in the ad to support a claim. Advertisers use support from doctors or other trusted agencies to support their claims. 73. Demonstration—This type of execution is designed to illustrate the key advantages or benefits of a product or service by showing it in actual use or in some contrived or staged situation. 74. Comparison—This type of execution involves a direct or indirect comparison of a brand against the competition. This has become an increasingly popular approach among advertisers. 75. Testimonial—Many advertisers present their advertising messages in the form of a testimonial whereby a person speaks on behalf of the product or service based on his or her personal use of and/or experiences with it. This is a popular approach used by marketers such as weight-loss companies as shown in Exhibit 9-13. 76. Slice of life—This type of execution is often based on a problem/solution type of format. The ad attempts to portray a real-life situation involving a problem, conflict or situation consumers may face in their daily lives. The ad then focuses on showing how the advertiser's product or service can resolve the problem. Slice-of-life executions are also becoming very common in business-to-business advertising as companies use this approach to demonstrate how their products and services can be used to solve business problems. Some business-tobusiness marketers use a variation of the problem–solution execution that is sometimes referred to as slice-of-death advertising. This execution style is used in conjunction with a fear appeal. 77. Animation—This technique uses animated characters or scenes drawn by artists or on a computer. Animation is often used as an execution technique for advertising targeted at children, such as in toys and cereal commercials. Animated characters have been used in many campaigns, including Green Giant vegetable (the Jolly Green Giant) and Keebler cookies (the Keebler elves). Some advertisers use ads that mix animation with real people. For example, Kraft Foods recently revitalized its Mr. Peanut character to make him more appealing to younger consumers. Many advertisers now rely on computer-generated animation, such as the award-winning ―Back to the Start‖ short film for Chipotle‘s Cultivate Foundation.. In 2021 Chipotle released another popular animated film called ―A Future Begins‖ that supports the next generation of farmers by shining a light on the enormous challenges facing the U.S. farming industry (Exhibit 9-15). 78. Personality symbol—This type of execution involves the use of a central character or personality symbol to deliver the advertising message and with whom the company or brand can be identified. The personality symbol can take the form of an actual person who is used as a spokesperson, animated characters or even animals. For example, the iconic Mr. Whipple, who asked shoppers, ―Please don‘t squeeze the Charmin,‖ or the Maytag repairman, who sits anxiously by the phone but is never needed because the company‘s appliances are so reliable. As discussed in Chapter 5, personality symbols such as the Pillsbury doughboy, Tony the Tiger, and Charlie the Tuna have been used for decades to promote Pillsbury‘s refrigerated dough products, Kellogg‘s Frosted Flakes, and Star-Kist tuna, respectively.

Exhibit 9-6 shows the various personality symbols used in advertising by insurance companies. 79. Imagery—This type of appeal is used when the goal is to encourage consumers to associate the brand with the symbols, characters, and/or situation shown in the ad. An imagery execution may be based on usage imagery by showing how a brand is used or performs and the situation in which it is used. It can also be based on user imagery where the focus is on the type of person who uses the brand. For example, ads for cosmetics and clothing often use very attractive models in the hope of getting consumers to associate their physical attractiveness with the brand. The ad for Yes To natural skin care products shown in Exhibit 9-18 is a good example of advertising based on user imagery. 80. Dramatization—This execution technique creates a suspenseful situation or scenario in the form of a short story and is particularly well-suited to television. Dramatizations often use the problem/solution approach as they show how the advertised brand can help resolve a problem. The challenge that faces the creative team when using a dramatic execution is how to encompass the various elements and tell the story effectively in 30 seconds, which is the length of the typical commercial. Dramatization is also now a large part of short films posted on websites and social media platforms. 81. Humor—Humor can be used as the basis for an advertising appeal. However, humor can also be used as a way of executing the message and presenting other types of advertising appeals. Humorous executions are particularly well suited to television or radio, although some print ads attempt to use this style. It is important to recognize that the success of humorous appeals often depends on how well they are executed. 82. Combinations—Many of these execution techniques can be combined in presenting an advertising message. For example, animation is often used to create personality symbols or present a fantasy. Slice-of-life ads are often used to demonstrate a product or service or as the basis for various types of emotional appeals. Comparisons are sometimes made using a humorous approach. Professor Notes:

II.

CREATIVE TACTICS

Once the creative approach, type of appeal, and execution style has been determined, attention turns to creating the actual advertisement. The design and production of an advertising message involves a number of activities such as writing copy, developing illustrations and other visual elements of the ad and bringing all of the pieces together in a finished product. Creative Tactics for Print Advertising—There are four basic components of a print ad including the headline, body copy, the visual elements or illustrations, and the layout, which brings the headline, body copy, and visuals all together.

Headlines—The headline refers to the words in the leading position of the advertisement—those that are likely to be read first or are positioned to draw the most attention. The most important function of a headline is to attract the readers‘ attention and make them interested in the remainder of the advertising message. In general, only about 20 percent of readers go beyond the headline and read the body copy below it so headlines are very important and are judged on their ability to draw readers in. There are various types of headlines including: 

Direct headlines—straightforward and informative in terms of the message presented.

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Indirect headlines—provoke curiosity and intrigue by using questions, challenges, provocations, and other methods.

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Subheads—Many ads also contain a main headline and one or more secondary headlines or subheads. These subheads usually appear in a smaller type size than the main headline and are generally larger than the type size used for the body copy. They are used to break-up or section off large amounts of body copy and highlight key sales points in the ad.

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Body copy—The main text portion of a print ad is referred to as the body copy. Body copy content depends on the type of advertising appeal and/or execution style being used. It is the heart of the advertising message but can often be quite difficult to get the target audience to read. In an attempt to get them to read it, the body copy often flows from the points made in the headline and subheads.

83. Visual elements—Another major component of a print ad is the visual elements or illustrations. Visual components often dominate print advertising and play a very important role in determining effectiveness. Visuals must attract attention, communicate an idea or image, and work in a synergistic fashion with the written portions of the message. 84. Layout—A layout refers to the physical arrangement of the various parts of the ad including the headline, subheads, illustrations, body copy, and any identifying marks. The layout shows where each part of the ad will be placed and gives guidelines to the various people working on the ad. SS.

Creative Tactics for Television—TV is a unique and powerful advertising medium because it contains the elements of sight, sound, and motion, which can be combined to create a variety of advertising appeals and executions. As with print ads, television commercials have several components which must work together to create the right impact to communicate the advertiser's message. Video—The video or visual elements are what is seen on the television screen. Decisions have to be made regarding the main focus of the visual components of a television commercial, such as the product, the presenter, scenery, action sequences, lighting graphics, color, and other factors. Audio—The audio portion of a commercial includes several elements such as voice, music, and sound effects. Voices may be heard in several ways such as through the direct presentation of a spokesperson or as a dialogue or conversation among people in the commercial. A common method for presenting the audio portion of a commercial is through a voiceover, whereby the message is delivered, or action on the screen is narrated, by the voice of an announcer who is not visible. A trend among major advertisers is to hire celebrities with distinctive voices to do the voiceovers for their commercials. Some examples of famous celebrity voiceovers are provided in the text.

Another very important part of many television commercials is music, which plays various roles and functions such as providing a pleasant background or helping create the appropriate mood or setting. Some artists are concerned about the backlash they might get when their songs are used in commercials. Many advertisers choose to use what is referred to as needledrop music. This is music that is prefabricated, multipurpose, and highly conventional. It is essentially the music equivalent of stock photography. Another important musical element in both television and radio commercials is jingles, which are catchy songs about a product or service that usually carry the advertising theme and a simple message. Jingles are a specific type of audio logo, which is a sound, an effect, a short music clip, a musical riff, or a voiceover. Planning and production of television commercials—One of the primary decisions that must be made when planning a television commercial includes determining the type of appeal and execution style to be used. Television is suited to both rational and emotional advertising appeals or a combination of the two. Commercials on television are an integral part of the IMC program for most marketers but particularly larger companies that are advertising to mass markets. 

Planning the commercial—The script is a written version of a commercial that provides a detailed description of its video and audio content. The script indicates the various audio components of the commercial such as the copy to be spoken by voices, music, and sound effects. The video portion of the script provides the visual plan of the commercial. Once the basic script has been conceived, the writer and art director get together to produce a storyboard or a series of drawings used to present the visual plan or layout of a proposed commercial. Once the client approves the storyboard, the commercial is ready to move to the production phase.

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Production—The process for commercial production involves three phases: Preproduction—all the work and activities that occur before the actual filming of a commercial. Production—the period during which the commercial is filmed or videotaped and recorded. Postproduction—activities and work that occur after the commercial has been filmed and recorded.

The activities at each stage of commercial production are shown in Figure 9-4. TT.

Creative Tactics for Online Advertising—Marketers are allocating more of their media budgets to digital ads that appear on websites, social media, and mobile devices, which are creating a new set of challenges from a creative perspective. Compared to traditional media such as television or magazines, the Internet is a more goal-oriented medium. Getting consumers to pay attention to, let alone engage or interact with, a digital ad is very difficult since doing so takes them away from the content on the web page or social media site they are visiting on their computers, tablets, or phones. Online ads often interrupt our viewing sessions, and unless they provide relevant information and/or are very creative or entertaining, it is likely they will be ignored. Role of digital ads—A variety of digital advertising formats are available to marketers including banner ads, search ads, interstitials, native ads, and videos. The type of online ad used by marketers will vary depending on the goal(s) they are trying to achieve. The goal of digital concept ads is to drive top-of-the-funnel goals such as awareness and interest, which can be

achieved through banner ads, or videos such as commercials. Content ads typically have a mid-funnel goal of enhancing consumers‘ knowledge or understanding of a product or service, which can be done by providing high-quality content with which the viewer can engage. Different types of online ads can be used to provide content such as videos, webisodes, in-feed ads to Facebook or Twitter with sponsored content, and native ads. Native advertising is a type of paid placement designed to fit seamlessly into the content that surrounds it. The design, content, and writing style of a native ad mirrors the nonpaid content around it, giving the user the impression that it really belongs. Native advertising is becoming a dominant form of content advertising, particularly in digital editions of magazines and newspapers. Exhibit 9-27 shows an ad from a native campaign run by Mercedes Benz called ―The rise of the superhuman.‖ The third form of digital advertising is commerce ads, which primarily have a bottom-of-thefunnel goal of getting consumers to take action and make a purchase. Commerce ads are the dominant form of display advertising, particularly retargeting types that follow consumers across the Web, and typically are not visually rich as their success is based on serving the right offer to consumers and can be easily measured in terms of clicks and conversions. 

Display ads—Many online display ads use large-size ad formats such as rectangular ads, horizontally oriented leaderboards, or skyscrapers that are vertically oriented and give advertisers the ability to place an ad adjacent to the website content. In terms of effective online ad formats, a study found that the best performing ad unit in terms of metrics such as brand awareness, recall, and purchase intent was the traditional pixel rectangular banner ad, noting that ads surrounding content, such as well-worn skyscraper and leaderboard units, are the least effective, as people have developed ―banner blindness.‖

Online video—The use of online video advertising is growing rapidly and is part of the tremendous growth in the viewing of videos across all online platforms including websites, YouTube, Facebook, Instagram, Twitter, Snapchat, TikTok, and other popular social media sites. The use of video for online advertising can include multiple formats ranging from the airing of a digital video or commercial in a program streaming online to more customized formats for viewing on mobile devices. Digital and Social Media Perspective 9-2 discusses how advances in smartphones, tablets, and streaming services is impacting video advertising. Professor Notes:

III.

CLIENT EVALUATION AND APPROVAL OF CREATIVE WORK

While the creative specialists determine the advertising appeal and execution style that will be used in the campaign, the client must evaluate and approve the creative approach before any ads are actually produced. A number of different people on the client side may be involved in evaluating and approving the creative work of the agency. The amount and influence of these individuals will depend on the company's organization and policies, the importance of the product to the company, the role of advertising in the marketing program, and the nature of the advertising approach being recommended. There are two basic stages in the development of advertising—creation and production. Most of the attention in this chapter has focused on the creation stage and creative process. Once the creative 1-159 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

approach has been determined and approved, the attention turns to the production process, which involves a variety of functions needed to produce the ad or commercial and put it into a finished form suitable for use by the media. The client will have the opportunity to review the final version of the advertisement after the production stage. However, it is important that a careful evaluation be made before the ad actually enters production, as this stage requires a substantial investment of time and money. Guidelines for Evaluating Creative Output—There are a number of guidelines that personnel on the client side might use to evaluate the creative approaches suggested by the agency. Some of the most important and basic criteria or guidelines that might be used in evaluating creative approaches are discussed in the text and include the following: 

Is the creative approach consistent with the brand's marketing and advertising objectives?

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Is the creative approach consistent with the creative strategy and objectives? Does it communicate what it is supposed to?

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Is the creative approach appropriate for the target audience?

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Does the creative approach communicate a clear and convincing message to the customer?

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Does the creative execution keep from overwhelming the message?

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Is the creative approach appropriate for the media environment in which it is likely to be seen?

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Is the ad truthful and tasteful?

Professor Notes:

Teaching Suggestions Nearly every student has an opinion about the quality and effectiveness of various ads and those they feel are particularly good or bad. Students should enjoy reading this chapter and learning about the various creative appeals and execution styles that can be used by advertisers. An interesting way of beginning the lecture on creative strategy is to ask students to name the TV commercial or print ad they would rate as the "most outstanding" one they have seen lately. You might then ask them how they think their list of top commercials would compare against that of ad critics. Publications such as Advertising Age and Adweek pick the best ads each year and feature them in special editions. For example, the Advertising Age Best Awards are given each year in various product and service categories and for various media including television, radio, newspapers magazines, out of home and interactive. There are a few very interesting websites that you may want to visit and direct your students to including Ad Forum (www.adforum.com), Advertising Age’s Creativity Online (https://adage.com/creativity), and iSpot TV (www.ispot.tv/browse), which provides television commercial examples along with their performance metrics. Commercials currently running can be viewed on these sites and they also include reviews of spots, industry news, and many other interesting features. A number of marketers now have their own YouTube channel where they make their commercials available as well as other videos used. For example, Nike‘s channel can be found at www.youtube.com/user/nike. This chapter does not go into a great amount of detail regarding the process of creating and producing the advertisement. If more detail is desired on areas such as art and layout, copywriting, or print and

broadcast production students might be referred to a more traditional advertising principles book such as Contemporary Advertising by William F. Arens, Michael Weigold, and Christian Arens. There are also numerous books available on the creative process such as Creative Strategy in Advertising by A. Jerome Jeweler and Bonnie L. Drewniany and Creative Advertising: Theory and Practice by Sandra E. Moriarty. Students interested in specific areas of the creative process such as copywriting or layout can be referred to books such as Creative Advertising by Mario Pricken, The Design of Advertising by Roy Paul Nelson, Advertising Copywriting by Philip Ward Burton and Fundamentals of Copy & Layout by Albert C. Book and C. Dennis Schick. The chapter opener discusses how Applebee‘s collaborated with country singer Walker Hayes to develop an advertising campaign around his hit song ―Fancy Like.‖ Another example of successful, creative advertising is provided with Dos Equis‘ ―The Most Interesting Man in the World‖ campaign.

Answers to Discussion Questions 62. The chapter opener discusses how Applebee’s collaborated with country singer Walker Hayes to

develop an advertising campaign around his hit song ―Fancy Like.‖ Discuss how Applebee’s was able to capitalize on the popularity of the song. Do you think Applebee’s will be able to partner with Hayes on future ad campaigns or will this turn out to be a short-lived advertising opportunity? (LO 9-1, 9-2, 9-3) Applebee‘s President John Cywinski recognized that the lyrics of ―Fancy Like‖ captured Applebee‘s image as an unpretentious, inviting, welcoming, and neighborly restaurant. The irresistible song was about how, when an average couple with simple tastes is looking to live it up with a night of fine dining, Applebee‘s is a big step up from a drive-through restaurant. Applebee‘s struck a deal with singer Walker Hayes and began working with him to create a commercial around the song, which was not yet a chart-topping crossover hit. Hayes‘ teenage daughter told him it needed a dance, and together they created one and posted it on TikTok. Overnight, the TikTok video hit 2.3 million views and within a few days it reached 14 million. The video spawned reenactments across TikTok and beyond—including people filming themselves doing the dance at Applebee‘s. Applebee‘s capitalized on its newfound viral fame and the free exposure by creating a series of TV commercials featuring the song and various renditions of the dance from TikTok. It also brought back the Oreo Shake, which got a shout out in the song. They photographed Walker and his wife eating and having milkshakes, and used the photos for in-store merchandising. A ―Fancy Like‖ meal was added to the menu as well. The advertising campaign also added to the popularity of ―Fancy Like‖ as many people were waiting for Applebee‘s to do something to capitalize on the hit song and TikTok video to take advantage of the momentum that had built up. Applebee‘s Chief Marketing Officer, Joel Yashinsky, noted the importance of capitalizing on cultural moments but also doing so in a way that was natural, not forced, and authentic to Hayes. Walker Hayes and Applebee‘s now have a partnership and future collaborations are planned. This seems to be a natural partnership which has the potential to be long-lasting. 63. What types of products or services are most likely to use an informational/rational appeal as the basis for an advertising message? Find an example of a specific type of informational/rational ad and analyze its use by the advertiser. (LO 9-1)

Informational/rational appeals focus on the consumer‘s practical, functional, or utilitarian need for the product or service and emphasize features of a product or service and/or the benefits or reasons for owning or using a particular brand. The content of these messages emphasizes facts, learning, and the logic of persuasion. The text identifies several types of advertising appeals that fall under the category of rational approaches, among them feature, competitive advantage, price, news, and product/service popularity appeals. For example, ads that use a feature appeal focus on the dominant traits of the product or service. These ads tend to be highly informative and present the customer with a number of important product attributes or features that will lead to favorable attitudes and can be used as the basis for a rational purchase decision. Technical and high-involvement products such as consumer electronics and automobiles often use this type of advertising appeal. The ad for the Blue Cash Everyday Card from American Express is a good example of advertising that uses a feature appeal. The copy lists the various places where card users receive cash back on their purchases as well as other security related features of the Blue Cash Everyday Card, such as purchase protection, extended warranty, and mobile fraud alerts. 64. Discuss some of the reasons emotion-based advertising appeals are effective. Find an example of a company or brand that is using an advertising campaign based on an emotional appeal and analyze its effectiveness. (LO 9-1) Emotional appeals relate to the consumer's social and/or psychological needs for purchasing a product or service. Emotional appeals are most appropriate for products and services where social and/or psychological needs and feelings are important or where consumers need to be reached on an emotional level. Many consumer products are difficult to differentiate on a functional/utilitarian basis and advertisers often turn to appeals to emotions to create feelings, images, and beliefs that can be activated when the consumer uses the product. Moreover, marketers recognize that commercials must be meaningful to consumers, as well as entertaining, and emotional appeals are often the best way to touch consumers and hold their interest. Emotional appeals are not, however, limited to consumer products that are difficult to differentiate. Appeals to emotions are also used for major purchases such as automobiles, financial investments, and many other purchases. Figure 9-1 lists various personal psychological states (safety, security, fear, joy, nostalgia, pride) as well as social-based feelings or needs (recognition, status, respect, approval) that can be used as the basis for emotional advertising appeals. Students should have no trouble finding ads that use social and psychological needs as the basis for their appeal. However, they should be encouraged to discuss whether the needs appealed to in the ad are appropriate for the product or service they are analyzing. 65. Digital and Social Media Perspective 9-1 discusses the ―Reverse Selfie‖ video used by Dove to address the issue of heavily edited selfies that young girls post on social media. Watch the video on YouTube and discuss whether you think it will be effective in addressing the problem of unrealistic beauty standards. (LO 9-1, 9-4) The media as well as the advertising industry have long been criticized for setting an unrealistic standard of beauty that most women believe they cannot achieve. In 2021 Dove renewed its fight against unrealistic beauty standards with a new campaign that highlights the damage caused by heavily edited selfies on social media. The 60-second film called ―Reverse Selfie‖ was created by Dove to expose the impossible beauty ideals of the advertising industry and media. The video features a young woman who drastically edits a picture of herself before posting it online. The film plays backward, starting with the posted selfie, then reversing the various tweaks and

staging that went into creating the image before finally revealing that it‘s not a woman at all behind the picture but actually a young girl, barely in her teens. The spot ends with the statement, ―The pressure of social media is hurting our girls‘ self-esteem. More screen time during the pandemic has made things worse.‖ This video contains a powerful message about the distortions seen on social media. It has a high presence on Instagram and other social media, and has been delivered on television globally. Dove provides additional materials to help empower teachers, parents, and young people to fight back against social pressures. While it cannot solve the issue of unrealistic beauty standards, the campaign is helping to reverse some of the negative impacts. 66. Explain the concept of transformational advertising. Find an example of a company that is using transformational ads and discuss how the ads might enhance the experience of using the product or service. (LO 9-1) A transformational ad associates the experience of using (consuming) the advertised brand with a unique set of psychological characteristics that would not typically be associated with the brand experience to the same degree without exposure to the advertisement. Transformational ads create feelings, images meanings, and beliefs about the product or service that may be activated when consumers use it and thus "transforms" their interpretation of the usage experience. There are many good examples of how companies use transformational advertising to enhance the consumption experience of consumers. McDonald‘s has used TV commercials showing parents or grandparents enjoying the experience of taking their children or grandchildren to the fast-food restaurant and enjoying a bonding experience with them. These types of commercials can be very effective as they can make the experience of a trip to McDonalds with a child richer, warmer, and more enjoyable. 67. Choose three of the advertising execution techniques discussed in the chapter and find examples of advertisements that are using them. Discuss why these companies or brands might be using these particular ad execution techniques. (LO 9-2) Creative execution is the way an advertising appeal is presented. While it is obviously important for an ad to have a meaningful appeal or message to communicate to the consumer, the manner in which the ad is executed is also important. An advertising message can be presented or executed in numerous ways. These include: 11)

Straight-sell or factual message

12)

Scientific/technical evidence

13)

Demonstration

14)

Comparison

15)

Testimonial

16)

Slice of life

17)

Animation

18)

Personality symbol

19)

Imagery

20)

Dramatization

21)

Humor

22)

Combinations

Students should be encouraged to fully describe the campaigns they select and why they fall within the particular execution style. They must also analyze whether that execution style is appropriate for that company or brand. 68. Discuss the role of headlines in a print advertisement. What is the difference between a direct headline and an indirect headline, and when might each type be used? (LO 9-3) The most important function or role of the headline is to attract the readers' attention and make them interested in the remainder of the message. Headlines can also perform a segmentation function by engaging the attention and interest of consumers who may be most likely to buy a particular product or service. Some ads use little or no body copy so the headline must work with the illustration or visual portion of the ad to communicate the entire advertising message. Subheads are secondary headlines that are usually smaller than the main headline but larger than the body copy. Subheads are often used to enhance the readability of the message by breaking up large amounts of body copy and highlighting key sales points. Their content often reinforces the headline and advertising slogan or theme. A direct headline is very straightforward and informative in terms of the message presented and the audience the ad is targeting. Examples are headlines that make an announcement or provide news or information to the reader. Indirect headlines are not straightforward but rather may be designed to create attention, interest or curiosity with questions, provocations, or challenges. Direct headlines are often used when marketers have a specific product attribute or benefit they want to communicate, or are making a promise or offering something that is very likely to be of interest to the reader. Indirect headlines are often more effective at attracting readers‘ attention and interest because they provoke curiosity, which can be a way to motivate readers to become more involved with the advertisement. Students should find an example of ads that use direct and indirect headlines. 69. Discuss the role of music in advertising. Find an example of a television commercial that is using a specific song and discuss the role the music plays in delivering the message. (LO 9-3) Music can play a variety of roles and functions in commercials. In many spots, the role of music is primarily to provide a pleasant background or to help create the appropriate mood or setting for the commercial. In some ads, the role of music is much more central to the delivery of the advertising message. It can be used to break through clutter, help establish an image or position, or add emotion or feeling. Music can work through a classical conditioning process whereby it creates positive feelings or affect that become associated with the company or brand being advertised. Music can also create a positive mood state that can make the consumer more receptive toward the advertising message. Companies/brands pay large sums of money for the rights to use these songs such as because they feel the music is central to the feeling or image they want to create in the commercial. For example, Google has used Lady Gaga‘s hit song ―Edge of Glory‖ in commercials for its Chrome web browser while Citibank has used Alicia Keys‘ song ―Girl on Fire‖ in its commercials. General Motors used the music from Led Zeppelin‘s hit song ―Rock and Roll‖ in its commercials for Cadillac as part of its effort to attract baby boomers by creating a more hip image for the brand. Other example of how music has played a very effective role in TV commercials is Meghan Trainor‘s hit song ―Lips Are Movin,‖ which resulted in a 26 percent increase in sales for the HP x360 tablet among teens and

young adults. Ford also had great success with the use of Rachel Platten‘s hit ―Fight Song‖ in commercials for its Edge SUV in 2015. Students should be encouraged to find an example of a current advertising campaign that uses a song and analyze the role the music plays in delivering the message. There are a number of advertisers that rely heavily on the use of music in their advertising such as Kia, Apple, Nike, Coca Cola, PepsiCo, and many others. 70. Discuss the challenges marketers face in developing online video advertising messages given the advances in technology around mobile devices and streaming services. (LO 9-3) Online advertising can take various forms including various types of banner ads such as skyscrapers and leaderboards, text-only ads used for paid search, webisodes, and video. Many online video ads are similar to or the same as the commercials that are aired on television. One of the challenges faced when using online advertising is that getting consumers to attend to and engage with an online ad can be very difficult as doing so takes them away from the content on the website or social media page. Television and radio ads air during commercial breaks and do not compete for viewers‘ attention during a program while print ads often appear on separate pages of a magazine or newspaper and can be easily attended to or ignored. The clutter problem that traditional media advertising faces is also an issue for online advertisers, as consumers are bombarded by online ads and often annoyed by them. As discussed in Chapter 1, most consumers are using some type of ad-blocking software to prevent ads from appearing on their computers, tablets, and smartphones. A variety of digital advertising formats are available to marketers including banner ads, search ads, interstitials, native ads, and videos. The type of online ad used by marketers will vary depending on the goal(s) they are trying to achieve. Peter Minnium of the Internet Advertising Bureau notes that digital advertising is trifurcating into three types of advertising—concept, content, and commerce ads—and their use varies based on the goals and/or objectives the marketer is trying to achieve all along the purchase funnel. The goal of digital concept ads is to drive top-of-the-funnel goals such as awareness and interest, which can be achieved through banner ads, or videos such as commercials. Content ads typically have a mid-funnel goal of enhancing consumers‘ knowledge or understanding of a product or service, which can be done by providing high-quality content with which the viewer can engage. Different types of online ads can be used to provide content such as videos, webisodes, in-feed ads to Facebook or Twitter with sponsored content, and native ads. Native advertising is a type of paid placement designed to fit seamlessly into the content that surrounds it. The design, content, and writing style of a native ad mirrors the nonpaid content around it, giving the user the impression that it really belongs. Native advertising is becoming a dominant form of content advertising, particularly in digital editions of magazines and newspapers. The third form of digital advertising is commerce ads, which primarily have a bottom-of-the-funnel goal of getting consumers to take action and make a purchase. Commerce ads are the dominant form of display advertising, particularly retargeting types that follow consumers across the Web, and typically are not visually rich as their success is based on serving the right offer to consumers and can be easily measured in terms of clicks and conversions. Critics argue that one of the major problems with online advertising is that it has been too focused on ubiquitous banner ads as marketers often try to build awareness and/or brand identity by simply buying large amounts of banner ads across a myriad on online platforms. A great deal of time and effort is devoted to optimizing media placement, retargeting, and measuring the effects of digital advertising campaigns, but less attention is given to creative considerations and the fundamentals of great advertising. However, the domination of banner ads at the top or side of a page is weakening as new online display formats are being developed that are larger, richer, and take up more of a page,

either initially or upon expansion. The Internet Advertising Bureau refers to these new formats as ―Rising Stars,‖ which include ad unit formats such as billboard sidekicks and sliders as well as various video formats. One format that has become very popular is expanding pushdown ad units that push page content down rather than expanding over it, which helps address the annoyance issue. 71. Choose a current advertising campaign and analyze it with respect to the creative guidelines discussed in the last section of the chapter. Identify any areas where you feel the campaign does not meet the guidelines and discuss why this is so. (LO 9-4) The last section of the chapter discusses criteria or guidelines that can be used for evaluating the output from the creative process of advertising. Some of these factors are not directly accessible and thus more difficult to evaluate, such as consistency with marketing and advertising objectives. However, answers to many of these questions are judgmental in nature and can be evaluated such as appropriateness for the target audience, communication of a clear and convincing message, whether the creative overwhelms the message, appropriateness for the media environment, and whether the ads are truthful and tasteful. Students should be encouraged to choose a particular campaign, conduct some research on it in the business press or trade publications, and then evaluate the creative approach as well as some of the individual ads against these guidelines. Excellent sources of information that can be helpful to students in this assignment are the ad reviews that appear in publications such as Advertising Age and Adweek.

Additional Discussion Questions (not in text) 72. Discuss the difference between an advertising appeal and a creative execution style. Find several ads and analyze the particular appeal and execution style used in each. (LO 9-1) An advertising appeal refers to the basis or approach used in the advertisement to elicit some consumer response or influence feelings toward the product, service, or cause. The creative execution style refers to the way in which a particular appeal is turned into an advertising message and presented to the consumer. A particular appeal can be executed in a variety of ways and a particular means of execution can be applied to a variety of advertising appeals. For example, an informational appeal that focuses on a product's features or advantages can be executed through a straight-sell or factual message, a demonstration, or a comparison. A particular execution technique such as animation could be used for an informational/rational appeal or for an emotional appeal. Students should be encouraged to analyze the particular appeals and execution styles used in selected ads. 73. Discuss how teaser advertising might be used to introduce a new product or brand or to reposition an existing brand. What factors should marketers take into consideration when using a teaser campaign? (LO 9-1) Teaser advertising is designed to build curiosity, interest, and/or excitement about a product/service or brand by talking about it but not actually showing it. Teasers can also be used to draw attention to upcoming advertising campaigns and generate interest and publicity for them. Teaser ads are often used to introduce a new product or brand such as automobiles, movies or television shows. They can also be used to reposition an existing brand as the curiosity and interest they generate can create some excitement and intrigue that can help increase consumer involvement and make them more receptive to subsequent advertising. When using a teaser campaign marketers will have to consider several factors. They must make sure the teaser generates enough interest and/or curiosity among the target audience to be effective. If the message is too subtle, consumers may not even attend to it. Marketers must also be careful not to extend their teaser campaigns too long as this can create confusion among consumers or even generate negative reactions. As noted in the text, you have to give consumers 1-166 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

enough information to hold their attention and interest yet maintain some level of mystery, intrigue, and/or curiosity. 74. Why do many advertisers pay large sums of money to celebrities to do the voiceovers for their commercials? Do you think consumers recognize the voices of the celebrities doing the commercials? Is it necessary that they recognize them for the commercials to be effective? (LO 9-3) Advertisers will often pay huge sums of money to celebrities just to have them do the voiceovers for their commercials. Some celebrities prefer this more subtle form of product endorsement as they do not have to appear in the ads and thus can avoid the potential negative image of being perceived as ―selling out‖ and pitching products. Advertisers and agencies that pay these large sums of money for celebrity voiceovers argue that a voice which consumers have heard before is reassuring and makes the message more effective. They also argue that some celebrities have very distinctive and engaging voices that communicate very effectively. It is difficult to say whether consumers recognize the celebrities doing the voiceovers in many commercials. A number of major advertisers have celebrities with distinctive voices do the voiceovers for their commercials. Actor Morgan Freeman does the voiceover commercials for Visa and Under Armour; Allison Janney is the voice behind Kaiser Permanente commercials, and Hyundai has used actors Paul Rudd and Judd Apatow in some of its TV spots. Other celebrities who have been paid large sums of money to do voiceovers for commercials include Jon Hamm for Mercedes-Benz, George Clooney for Budweiser, Julia Roberts for Nationwide Insurance, Viola Davis for Delta Air Lines, and Bill Hader of SNL fame for Planters peanuts. However, most consumers probably do not recognize the celebrities doing the voiceover in many commercials. It is not necessary that consumers recognize the celebrity‘s voice for the commercial to be effective. Distinctive voices are often part of the talent offered by actors and actresses as they may be help them be perceived a certain way (honest, humble, sincere, funny, and the like). The voice characteristics that help make them popular entertainers may also be effective for television commercial voiceovers.

CHAPTER 10 MEDIA PLANNING AND STRATEGY Chapter Overview Chapter 10 introduces the concepts involved in media planning. The chapter begins with an overview of media planning by introducing some key terms and concepts. At this point, the text points out that media planning is as much an art as it is a science. A number of problems associated with the planning process are discussed. The role and purpose of the media plan follows with a presentation of the steps required in developing this plan. After an in-depth discussion of the elements of the media plan, the chapter presents information regarding the use of computers in the planning process. The characteristics of various media and sources of media information are presented at the end of the chapter.

Learning Objectives 75. Define the key terminology in media planning. 76. Explain how to develop a media plan. 77. Describe the purpose of media objectives.

78. Describe how to develop and implement media strategies. 79. Compare the characteristics of various media.

Chapter and Lecture Outline I.

AN OVERVIEW OF MEDIA PLANNING

This overview presents a brief discussion of the factors involved in the media planning process and illustrates the fact that media planning is an involved process influenced by a variety of factors including the nature of the media, the overall marketing strategy, and the product or service being advertised. Some Basic Terms and Concepts—Some of the critical terms necessary for understanding media planning are presented including: o

Media planning—the series of decisions involved in delivering the message to the target audience.

Media objectives—the goals sought by the media plan.

Media strategies—the plans of action designed to attain the media objectives.

Medium—the general category of media channels such as broadcast, digital, print, direct marketing, outdoor, etc.

Media vehicle—the specific carrier in a media category (television, magazines, etc.).

Reach—the number of potential audience members exposed once to a media vehicle in a given period of time.

Coverage—the potential audience that might receive a message through a vehicle.

Frequency—the number of times the receiver is exposed to the media vehicle in a given time period.

UU.

The Media Plan—The goal of the media plan is to find a combination of media that will enable the marketer to communicate the message in the most effective manner possible at minimum cost. The activities involved in this plan are detailed in Figure 10-2.

VV.

Problems in Media Planning—A number of problems are identified, each of which directly impacts the planning process. These include: o

Insufficient information—Certain data that could be of use to media planners simply is not always available to media planners. In addition to insufficient measures, the timing of measurements is also a problem. For example, sweeps periods in February, May, July, and November are used for measuring TV audiences and setting advertising rates. This information is then generalized to succeeding months, so future planning decisions must be made on past data that may not reflect current behaviors.

Inconsistent terminologies—Different media present different standards of measurement for costs and in reporting data. The advent of the Internet brought about a whole new lexicon of terminologies. Additionally, terms that actually mean different things are sometimes used synonymously, adding to the confusion.

Time pressures—Often in advertising, a false sense of urgency dictates time pressures resulting in decisions made on improper planning and analysis of the markets and/or media.

Difficulty measuring effectiveness—Since it is often quite difficult to measure the effectiveness of advertising and promotions in general, it is often also quite difficult to determine the relative effectiveness of various media or media vehicles. 1-169

An understanding of these problems is critical to the proper design of the media plan. Professor Notes:

II.

DEVELOPING THE MEDIA PLAN

The process of developing the media plan involves a series of stages (see Figure 10-4). These stages are essentially the same as those presented in the decision sequence model presented in Chapter 1, except now they are involved directly with media decisions. These stages include: 1. Market analysis 2. Establishment of media objectives 3. Media strategy development and implementation 4. Evaluation and follow-up. Professor Notes:

III.

MARKET ANALYSIS AND TARGET MARKET IDENTIFICATION

To Whom Will We Advertise?—The discussion of target marketing is reviewed, though now the emphasis is on media, and some of the sources of information that are available to assist in making this decision. Secondary sources of information such as MRI-Simmons are described. A brief discussion of the use of index numbers and their use in determining target markets is also provided. The index number is considered a good indicator of the potential of a market. It is a measure of the percentage of users in a demographic segment divided by the percentage of the population in the same segment multiplied by 100. WW.

What Internal and External Factors Are Operating?—As in the overall situation analysis, both internal and external factors will directly influence the media decisions. Various services provide media spending figures for various industries down to the campaign or product level.

XX.

Where to Promote?—The decision as to where to promote at this point involves geographical considerations. Once again, the discussion turns to the use of secondary information and indices as aids in making this decision. a. Using indexes to determine where to promote—A number of critical terms are introduced including: i)

Survey of buying power index—This index charts the potential of a particular metro area, county, or city relative to the United States as a whole. When used in combination with other market information, the survey of buying power index helps the marketer determine which geographic areas to target. 1-170

ii) Brand development index (BDI)—This index helps marketers factor the rate of product usage by geographic area into the decision process. iii) Category development index (CDI)—This index provides information on the potential for development of the total product category rather than specific brands. When this information is combined with the BDI, a much more insightful promotional strategy may be developed. The calculation of both BDI and CDI is provided, based on actual examples. Figures 10-9 and 10-10 are useful ways of presenting strategies evolving around BDI and CDI. Professor Notes:

IV.

ESTABLISHING MEDIA OBJECTIVES

Media objectives relate to the goals to be attained by the media program, and as such should be limited to those that can be accomplished through media strategies. Such objectives are often expressed in terms of coverage, reach, frequency, scheduling, etc. Professor Notes:

DEVELOPING AND IMPLEMENTING MEDIA STRATEGIES

After determining what is to be accomplished (media objectives), planners must determine how to achieve those objectives. The Media Mix—Many media strategies require a combination of media to be used. The media mix involves the determination of the various channels to be used. The objectives of the plan, the budget, and other factors, will directly impact this decision. By employing a media mix, advertisers can add more versatility to their media strategies, since each medium contributes its own distinct advantages. YY.

Target Market Coverage—Figure 10-12 provides a graphic illustration of market coverage possibilities. Of course, the marketer would like to achieve full coverage through a combination of media. As noted, this is not a likely outcome, and decisions have to be made that involve tradeoffs between less than full market coverage and over coverage or waste coverage in which the media coverage exceeds the target audience. Figure 10-13 shows how information from MRISimmons can be used to match media to target markets.

ZZ.

Geographic Coverage—The strategy of geographical weighting, in which geographic areas receive differential amounts of media emphasis, is discussed.

AAA. Scheduling—The primary objective of scheduling is to time promotional efforts so they will coincide with the highest potential buying times. Because it may not be feasible (or necessary) to maintain a constant advertising schedule, marketers will typically employ one of three scheduling alternatives:

BBB.

Continuity refers to a continuous pattern of advertising—that is every day, week, or month (food products, laundry detergents, etc.). The key is that a regular/continuous pattern is developed.

Flighting is a scheduling method in which there are intermittent periods of advertising and nonadvertising (used by banks, snow skis, or seasonal products, etc.)

Pulsing is a combination of the two previous methods, in which a continuous schedule is used, though the amount of monies spent will vary throughout the time period (beer).

Reach versus Frequency—Given that advertisers have differing objectives, and are constrained by budgets, the media decision usually involves a trade-off between reach and frequency. This decision is essentially one of exposing more persons to the ad, or exposing fewer persons more often. In making this decision, the media planner must take into consideration a number of factors involving reach and frequency including: b. How much reach is necessary?—As described in the hierarchies in Chapter 5, the first stage of each model requires awareness of the product and/or brand. The more people are aware, the more they are likely to move to each subsequent stage. Achieving awareness requires reach—that is, exposing potential buyers to the message. c. What frequency level is needed?—Frequency is the number of times one is exposed to the media vehicle in a specified time period (usually 13 weeks). Decisions on frequency are often not made on hard data as data on frequency can often be misleading. d. Establishing reach and frequency objectives—If one ad is placed on one TV show one time, the number of people exposed is the reach. If the ad is placed on two shows, the total number exposed once is unduplicated reach. The reach of two shows includes a number of people who were reached by both shows. This overlap is referred to as duplicated reach (see Figure 10-17). Both unduplicated and duplicated reach figures are important. Unduplicated reach indicates potential new exposures, while duplicated reach provides an estimate of frequency. A measure of potential reach in the broadcast industry is the TV (or radio) program rating. e. Using gross ratings points—To determine how much advertising volume or weight is necessary to accomplish advertiser‘s objectives, marketers rely on ratings (the number of people reached) and frequency (the average number of times exposed) figures. A summary measure that combines the program rating and the average number of times the home is reached during this period (frequency of exposure) is a commonly used reference point known as gross ratings points (GRPs), which equals reach times frequency. GRPs are based on the total audience the media schedule may reach using a duplicated reach estimate. Target ratings points (TRPs) refer to the number of people in the primary target audience the media buy will reach—and the number of times. Unlike GRP, TRP does not include waste coverage. f.

Determining effective reach—Effective reach is the percentage of a vehicle‘s audience reached at each effective frequency increment. This concept is based on the assumption that one exposure to an ad may not be enough to convey the desired message. Average frequency is another calculation used by advertisers that represents the average number of times the target audience reached by a media schedule is exposed to the vehicle over a specified period.

g. Effective frequency—It is also necessary to know how much frequency is necessary to impact other communications objectives. h. Recency—Recency refers to how recently a consumer is exposed to a message, particularly after a purchase. Some campaigns employ recency planning—which focuses on short interval reach at minimum frequency levels as close to the purchase decision as possible. CCC.

Creative Aspects and Mood—In developing a media strategy, marketers must consider both creativity and mood factors. i.

Creative aspects—Creative aspects of the ad may require the use of specific media. For example, television may be required to implement certain types of creative campaigns.

Mood—The mood that a medium creates may carry over to the ad itself. For example, certain magazines may create various moods as they are being read. The message may require a specific medium and a certain media vehicle to achieve its objectives.

DDD. Flexibility—The media strategy must be flexible enough to respond to marketing threats and opportunities, as well as to adjust for changes regarding availability and/or in the media themselves. Flexibility may need to address the following:

EEE.

Market opportunities—Have new market opportunities arisen that the advertiser needs to take advantage of or leverage?

Market threats—Have internal or external factors posed a threat to the firm and changed the media strategy originally dictated?

Availability of media—Is a desired medium not available? Is there desired space and time in the medium?

Changes in media or media vehicles—A change in the medium or in a particular vehicle may require a change in the media strategy

Budget Considerations—It is obvious that costs must be considered in the determination as to which media will be employed. Two types of costs must be addressed—absolute cost—which is the actual cost to place the ad in the medium—and relative cost—or the relationship between the price paid for advertising time or space and the size of the audience delivered. k. Determining relative costs of media—A comparison of media vehicles is usually necessary. These are some cost bases used: iv) Cost per thousand (CPM)—The cost to reach 1,000 people. v) Cost per ratings point (CPRP)—Used in broadcast media, it provides information on the cost efficiency of one program over another. vi) Daily inch rate—For newspapers, cost-effectiveness is based on the daily inch rate, which is the cost per column inch of the paper. vii) Target CPM (TCPM)—Calculates CPMs based on the target audience, not the overall audience. viii) Readers per copy—Many advertisers and platforms want to use the number of readers per copy as the true circulation. ix) Pass-along rate—Included in the readers per copy, this is a measure of those besides the original purchasers who have also read the paper or magazine.

Digital pricing models—Purchasing an ad in digital media entails a different basis for pricing, and a different means for determining relative cost comparisons. It is difficult to make comparisons across various media. x) Bidding—The buyer participates in an auction to purchase placement for the ad format. xi) Programmatic—Refers to a bidding process which takes place in milliseconds through designed software.

Professor Notes: VI.

EVALUATION AND FOLLOW-UP

As with other elements of the advertising/promotional program, the media program also requires evaluation to determine its effectiveness. Essentially, two questions need to be answered: (1) How well did these strategies perform the media objectives established; and (2) How well did this media plan contribute to the attainment of the overall marketing and communications objectives? Professor Notes:

VII.

CHARACTERISTICS OF MEDIA

There are a number of sources of information available that define the various advantages and disadvantages of media. Figure 10-26 lists the major media and the characteristics or advantages and disadvantages of each. VIII.

APPENDIX A

Appendix A provides an example of a media flow chart for ASICS America. Professor Notes:

Teaching Suggestions Both the length and complexity of this chapter make it a difficult one for students to comprehend. The chapter contains a large number of terms, definitions, and formulas. Unfortunately, there is no way to ignore all of these, as they are critical to the students' learning of media planning and strategy and are the ―buzzwords‖ with which they will need to become familiar to participate in the advertising world, regardless of which side of the buying-selling process they may be on. One suggestion is to break the chapter into two lectures. In the first, the terms, formulas, etc., as well as an overview of the planning process can be discussed. The second lecture can be more specific, focusing on some of the objectives to be accomplished, discussing reach and frequency trade-offs, effective reach, and the like.

Answers to Discussion Questions 1. If you watch linear television for any length of time, you are certain to see a number of commercials repeated to the point of overkill. Why do advertisers show the same ads so many times over and over again? What impact does this have on the viewers? (LO-4) There are no concrete statistics on the number of advertisements that the average person is exposed to in a given day. However, advertisers know that it is a lot. Marketers have long wrestled with how much is too much and how many exposures of a message are too much for a consumer. For many years, the optimal number of exposures to a television commercial was 3 times with 10 exposures being seen as excessive and ineffective. While a number of studies have demonstrated this may no longer be exactly correct, no defining research has led to its being replaced. Fewer than 3 exposures is considered insufficient reach, while more than 10 is considered overexposure and thus ineffective reach. This exposure level is no guarantee of effective communication; different messages may require more or fewer exposures. More recently, a number of scholars have argued that the three-exposure theory was applicable in the 1970s when consumers were exposed to only about 1,000 ads per day. Now that they are exposed to as many as 3,000 to 5,000 per day, this number may no longer be valid. In addition, the fact that there are so many more media available to viewers today would increase the number of exposures required (some have estimated that the number today may be as much as 10,000 exposures per day.) Despite the fact that commercials clutter has risen steadily, consumers have more options by which they can avoid ads, which impacts exposures. The bottom line is that no one really knows how many exposures occur in one day, so we have to use our best estimates. A number of factors must be considered, and concrete rules do not always apply. The decision is often more of an art than a science. 2. Explain the differences between the three methods of scheduling. Give examples of products and/or services that might use each form. (LO-1) The text discusses the various scheduling options available to the marketer. Given the fact that there are always budgetary constraints, and that some products/services do not need to be marketed yearround, scheduling allows for more efficient allocation of advertising and promotional dollars. The scheduling options available are: Continuity—A continuous schedule refers to constant advertising throughout the year, either daily, weekly, or monthly. Products that would be most likely to employ this scheduling method include products that would be used consistently throughout the year with no seasonal variations. For example, toothpaste, mouthwash, laundry detergent, etc.

Flighting—This schedule has intermittent periods of advertising, with times when there is advertising and others when there is none. The ―on‖ advertising time is referred to as flights. Seasonal products (snow skis), swimwear, and other products primarily consumed at some times of the year but not all year-round would employ this method. Banks have used flighting, recognizing that consumers are much less involved in making banking decisions around the holiday season in November and December. One of the advantages of flighting is the ability to extend the limited ad budget. Pulsing—A combination of the previous two methods, pulsing employs a continuous schedule with periods of increased advertising to take advantage of intermittent opportunities. A good example of this is beer advertising, which takes place continuously, but increases at holiday times, particularly Memorial Day, the Fourth of July, and Labor Day. 3. Describe some of the factors important in determining frequency levels. Pick at least one from each of the categories and give an example of how it might impact frequency levels. (LO-4) Optimal frequency is that point at which the number of exposures is the exact amount necessary to communicate one‘s message. Research conducted years ago has placed this number at a frequency level of three. Less than that number leads to the potential for communication to fail. More than three results in overexposure and waste coverage. Thus the marketer would like to have the receiver receive exactly three exposures—nothing more, nothing less. The reach-versus-frequency decision, while critical, is difficult to make. Many factors must be considered, and concrete rules do not always apply. The decision is often more of an art than a science. Factors influencing frequency can be grouped into three categories: marketing factors, message or creative factors, and media factors. Marketing Factors       

Brand history. Is the brand new or established? New brands generally require higher frequency levels. Brand share. An inverse relationship exists between brand share and frequency. The higher the brand share, the lower the frequency level required. Brand loyalty. An inverse relationship exists between loyalty and frequency. The higher the loyalty, the lower the frequency level required. Purchase cycles. Shorter purchasing cycles require higher frequency levels to maintain top-ofmind awareness. Usage cycle. Products used daily or more often need to be replaced quickly, so a higher level of frequency is desired. Competitive share of voice. Higher frequency levels are required when a lot of competitive noise exists and when the goal is to meet or beat competitors. Target group. The ability of the target group to learn and to retain messages has a direct effect on frequency.

Message or Creative Factors     

Message complexity. The simpler the message, the less frequency required. Message uniqueness. The more unique the message, the lower the frequency level required. New versus continuing campaigns. New campaigns require higher levels of frequency to register the message. Image versus product sell. Creating an image requires higher levels of frequency than does a specific product sell. Message variation. A single message requires less frequency; a variety of messages requires more. 1-176



Wearout. Higher frequency may lead to wearout. This effect must be tracked and used to evaluate frequency levels.  Advertising units. Larger units of advertising require less frequency than smaller ones to get the message across. Media Factors      

Clutter. The more advertising that appears in the media used, the more frequency is needed to break through the clutter. Editorial environment. The more consistent the ad is with the editorial environment, the less frequency is needed. Attentiveness. The higher the level of attention achieved by the media vehicle, the less frequency is required. Low-attention-getting media require more repetitions. Scheduling. Continuous scheduling requires less frequency than does flighting or pulsing. Number of media used. The fewer media used, the lower the level of frequency required. Repeat exposures. Media that allow for more repeat exposures (for example, monthly magazines) require less frequency.

4. Marketers often rely on demographics as the basis for target marketing and as a result look to differences in product usage based on these criteria as well as their media habits. Explain why relying strictly on demographics could cause a less than optimal media strategy. (LO-2) The index number is considered a good indicator of the potential of the market. An index number over 100 means use of the product is proportionately greater in that segment than in one that is average (100) or less than 100. But just because the index for a particular segment of the population is high, that doesn‘t always mean it is an attractive segment to target. The high index may be a result of a low denominator (a very small proportion of the population in this segment). In Figure 10-7, the 18- to 24-year-old age segment has the highest index, but it also has both the lowest product usage and the lowest population percentage. A marketer who relied solely on the index would be ignoring a full 82 percent of product users. 5. What is ―pass along rate‖? Does this figure have any relevance to media buyers these days? Explain why or why not. (LO-1) Using the number of pass-along or secondary readership has the potential to be extremely inaccurate. The pass-along or secondary readership rate is quite difficult to accurately determine. For example, how many people read a copy of Marie Claire magazine left in a doctor‘s office? Or how many people in a household read a magazine only for it to then be passed along to even more readers in their extended family? While there is some research that attempts to estimate this, the numbers provided about pass-along rates are quite subjective and to utilize them would be inaccurate and inappropriate to fully rely on. While the number of readers per copy makes intuitive sense, it has the potential to be extremely inaccurate. The actual number of times the magazine changes hands is difficult to determine. While CPM has its flaws in audience measurement (over or underestimating cost-efficiencies, only provided quantitative estimates of the value of media, not good for intermedia comparisons), CPM is still helpful in assisting planners and buyers in comparing media vehicles and is a much more accurate number than previously used figures. 6. Media use different cost bases to provide measures of relative costs (for example CPM, CPRP, etc.) In an attempt to provide a standard basis for comparison across media, many have adopted CPM as the standard to make these costs easier to understand. Marketers have argued that CPMs cannot be 1-177 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

used as a comparison across media. Explain why they feel this way and why you agree or disagree with this position. (LO 10-5) The adoption of the various media to use CPM as a standard basis helps to at least provide some ability to compare relative costs, however, problems remain given the differences in the media characteristics themselves. In addition, there are some problems inherent with the use of CPM‘s themselves.  



The cost per thousand may overestimate or underestimate the actual cost effectiveness. CPM may also underestimate cost-efficiency. Magazine advertising space sellers have argued for years that because more than one person may read print copy, the actual reach is underestimated. They want to use the number of readers per copy as the true circulation. This would include a pass-along rate, estimating the number of people who read the magazine without buying it. In addition to the potential for over- or underestimation of cost-efficiencies, CPMs are limited in that they make only quantitative estimates of the value of media. Although they may be good for comparing very similar vehicles (such as news magazines like Time and The Week), they are less valuable in making intermedia comparisons—for example, CPM for magazines versus Internet banner ads.

7. Explain what an MRI-Simmons report is. How do advertisers use this report? Pick any product and discuss what the report would tell you about that product‘s users. (LO 10-2) The MRI-Simmons report provides consumer information and media usage characteristics of the population. Often, numbers provided by MRI-Simmons are used in combination with the media planner‘s own figures. These reports provide information on which consumer groups are more or less likely to engage in a certain activity or buy a certain product. Refer to Figure 10-6 example on users and potential users of sparkling water and seltzer products. 8. Given that we know that sometimes print media may be passed on to more than one viewer (for example more than one member of a household may read the newspaper), why don‘t advertisers rely more on the readers-per-dollar figure than CPM? (LO 10-1) Problems arise because the cost bases used by different media often vary and the standards of measurement used to establish these costs are not always consistent. For example, print media may present cost data in terms of the cost to reach a thousand people (cost per thousand, or CPM), broadcast media use the cost per ratings point (CPRP), and outdoor media use the number of showings. The advent of the Internet brought about a whole new lexicon of terminologies. Audience information that is used as a basis for these costs has also been collected by different methods. Finally, terms that actually mean something different (such as reach and coverage) may be used synonymously by some, adding to the confusion. 9. Figure 10-10 in the text discusses how to use BDI and CDI indexes. Give an example of products that may be at each of the four positions described in the figure. Explain your reasoning. (LO 10-2) BDI compares the percentage of the brand's total US sales in a given market area with the percentage of the total population in the market. The resulting BDI indicates the sales potential for that brand in that market area. CDI provides information on the potential for development of the total product category rather than specific brands. (Student examples and analysis will vary for each of the four categories indicated below.)  

High BDI and high CDI: This market usually represents good sales potential for both the product category and the brand. High BDI and low CDI: The category is not selling well, but the brand is; probably a good market to advertise in but should be monitored for declining sales. 1-178

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Low BDI and high CDI: The product category shows high potential, but the brand is not doing well; the reasons should be determined.  Low BDI and low CDI: Both the product category and the brand are doing poorly; not likely to be a good place for advertising. 10. Explain the meaning of reach and frequency as it may relate to digital media. Are these traditional measures of any value to digital advertisers? Explain your answer. (LO 10-1) Reach is a measure of the number of different audience members exposed at least once to a media vehicle in a given period of time. While it might appear that reach would be a number of uses to advertisers in digital spaces as they could potentially measure how many times someone saw an ad, this is impossible to do in a digital space as it is a click that advertisers care about and count in digital spaces. It is much more relevant to an advertiser to know that a consumer clicked on an ad that would take them to a page where they could take action rather than simply knowing that they saw an ad. Frequency refers to the number of times the receiver is exposed to the media vehicle in a specified time period. While a measure of frequency might be beneficial to advertisers, the much more detailed analysis that programmatic ad buying software can provide about viewership of an ad are overall much more informative to digital advertisers than reach and frequency.

Additional Discussion Questions (not in the text) 11. Some business to business advertisers (for example, copy machine companies) advertise on NFL Sunday and/or Monday Night football games. As might be expected, such a buy would lead to a high level of waste coverage. Explain what is meant by waste coverage. Discuss whether this might or might not be a good media buy. (LO 10-3) Waste coverage refers to overexposure, in which the media coverage exceeds the target audience. If the media reaches people who are not sought as buyers and are not potential users, then it is potentially wasted, and of little or no value to the marketer. At first glance, an ad for a copy machine that is used in business markets (as opposed to home use) may seem like a lot of money. How many of those people watching a pro football game are now, or ever will be, in the market for purchasing such an expensive machine? In fact, it may not be such a bad buy after all. While there certainly will be a large amount of waste coverage, many marketers are willing to live with that due to the fact that to reach the same amount of the target audience through more targeted media might be even more expensive. In other words, buying ads in Office Management magazine and other business-related periodicals may actually cost more than the television ad to reach the same amount of people. Thus, the large waste coverage is acceptable. In addition, one never knows when new buyers may enter the market, and the exposure would not hurt. Finally, word of mouth, or reaching influencers or users (not necessarily buyers), may also be of value. 12. Explain the differences between CPM and TCPM. Give examples of a company or product that might select one of the methods versus the other. (LO 10-1) As products and brands become more and more targeted, the use of CPM has been on the decline. As you can imagine, years ago with less market differentiation and more use of mass media, CPM was a good standard by which to compare the relative costs for various print media. However, as markets continue to be segmented into smaller and smaller segments, the marketing strategies of companies

have led to more and more targeting. TCPM is considered by many to now be the more relevant relative cost measure. Nevertheless, there are companies who may still make use of the CPM measure. Companies that reach very broad audiences, and those with offerings to a variety of target segments—for example, automobiles, and furniture stores, CPM may have more relevance. That is not to say that these companies do not also employ TCPM, just that the broader cost comparison may still be of benefit. For companies targeting specific markets, such as 18 to 24 year olds, males versus females, etc., TCPM will have more relevance. The question is which medium will most cost efficiently deliver the message to these segments—as opposed to the general reading audience. 13. The text lists both internal and external factors that might impact the media strategy. Provide examples of each and discuss how they might impact the media plan. (LO 10-3) Both internal and external factors may affect the development of the media plan. Internal factors include the size of the media budget, managerial and administrative capabilities, or the organization of the agency. External factors include the economy, changes in technology, competitive factors, and the like. The size of the media budget will obviously impact the number of media vehicles that the buyer can consider. Obviously, the larger the budget, the more options that can be considered. Managerial factors may include the number of employees and the experience and/or expertise that they have regarding media strategy development. Should there not be enough managerial talent to develop a media plan, outside agencies may be required. The organization of the external agency may also have an impact on the media plan. Larger, IMC oriented agencies are more likely to be involved with more media options. Smaller agencies may focus attention of advertising and/or public relations or other media with which they feel comfortable. Changes in the economy may directly impact the media plan. As the economy improves or recesses, media costs may rise and/or fall, making some media cost prohibitive. In addition, more advertisers may result in less media available. Changes in technology—for example, the advent of cable television and the Internet—may make more options available to the media planner. Finally, the competition may also force the planner to reconsider his/her media strategy. 14. As noted in the chapter, there is a trade-off between reach and frequency for advertisers with a limited budget. Explain what this means. Under which circumstances would a planner wish to emphasize reach? Frequency? (LO 10-3) In an ideal world, advertisers would like to maximize reach and frequency. Unfortunately, in the real world, they are faced with budgetary constraints. Given budget limitations, the media planner is forced to choose between reach and frequency. Given specific objectives of the plan, one or the other may be emphasized. Maximizing reach at the expense of frequency is more logical when the message is simple and easily understood, the receiver is in the early stages of the response hierarchy (for example, awareness and/or interest) and the target audience is broad. For example, campaigns targeting cola users use very simple messages and are targeted to a broad audience. Thus reach is important. When the consumer is at a higher level in the response hierarchy, for example, comprehension, retention, etc., or the message is more complex, and/or the target audience is narrowly defined, frequency may be a more important objective. For example, messages that have a lot of copy, and may be more difficult to comprehend must consider the importance of effective frequency. One or two exposures may not be enough to achieve the media objectives. Likewise, a narrowly defined target market may allow for an emphasis on frequency, and the minimization of waste coverage, thus placing less emphasis on reach.

15. Explain the differences between CPM and readers per copy. Which is the most valuable relative cost comparison for advertisers to use? Why? (LO 10-1) Cost per thousand (CPM) is a computation used in evaluating the relative cost of various media vehicles that represent the costs of exposing 1,000 members of a target audience to an advertising message. Readers per copy is a cost comparison used for magazines that estimates audience size based on pass-along readership. While the number of readers per copy makes intuitive sense, it has the potential to be extremely inaccurate. The actual number of times the magazine changes hands is difficult to determine. How many people in a fraternity read each issue of Sports Illustrated or GQ that is delivered? How many people in a sorority or on a dorm floor read each issue of Cosmopolitan or Vanity Fair? How many of either group read each issue of Bloomberg Businessweek? While research is conducted to make these determinations, pass-along estimates are very subjective and using them to estimate reach is speculative. These figures are regularly provided by the media, but managers are selective about using them. At the same time, the art of media buying enters, for many magazines‘ managers have a good idea how much greater the reach is than their circulation figures provided. In addition to the potential for over- or underestimation of cost-efficiencies, CPMs are limited in that they make only quantitative estimates of the value of media. Although they may be good for comparing very similar vehicles (such as Time and The Week), they are less valuable in making intermedia comparisons, for example, CPM for magazines versus Internet banner ads. 16. Figure 10-26 discusses the advantages and disadvantages of media. Describe any factors that may be taking place that might change the disadvantages or advantages of various media. (LO 10-5) As you can see from this figure, each medium has advantages and disadvantages that it offers. For example, think about TV. Clearly, one of the advantages of TV is its wide exposure, and ability to achieve reach. But trends show that younger audiences are moving away from watching TV, preferring YouTube and other media. As the audience‘s viewing habits change, so too will the advantages of various media. Another example is newspapers. Newspaper readership is on a major downward trend. Fewer young people are reading papers, particularly in print. As a result, coverage may no longer be an advantage. While students say they read the news online (if you believe that!), this is a different form of newspaper. Now a digital version, there may be no coupons to cut, the versions may be shorter, and the ―art of newspaper reading‖ is going away (browsing, etc.). Advertisers have learned this, which is why newspapers are in trouble financially. You can take every medium in that list in Figure 10-26, and recognize changes that are occurring that will alter their advantages and disadvantages. As the new digital media mature, they will change as well. 17. One of the more popular metrics now being used in nontraditional media (digital, social media, etc.) is engagement. This term has also been used in evaluating traditional media. Explain what is meant by engagement. Is this term being used the same in referring to both traditional and nontraditional media way? (LO 10-1) The term engagement is nothing new to media planners and has been discussed for the past few years but with still no agreement as to exactly what it means. The reason for such attention stems from the fact that current traditional metrics, while still useful, are considered insufficient for today‘s media planners, who are inundated with media options from which to choose. One of the terms that they have not only settled on, but have become fixated upon is engagement. 1-181 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

For the most part, engagement refers to the degree of involvement the viewer demonstrates with the message. Others have also considered relevance, intent, etc. There is no consensus today on the meaning of the term. The basic concept is that more involved readers, watchers, and/or users will be more interested in the communication than will those merely exposed. For example, if I am in the market for a car, I may spend more time ―engaged‖ with the ad. Online if I spend more time on a page, I may be considered as more engaged. More engaged consumers are supposed to remember and prefer the brand. While certainly relevant, engagement has not yet shown to be as important as one might expect. While some research studies show that engaged viewers may demonstrate higher recall and like the ad better, as well as take some behavioral action after exposure to the ad, skeptics say ―so what‖? They argue that engagement may be explained by mere involvement with the product or service category, and of course involved consumers would be more inclined to reflect the same results. They argue that engagement is nothing new. Whether it is engagement or involvement, or relevance, or others on the list, all of these terms reflect the assumption that more interest in the ad is likely to occur. While this is certainly an advantage over mere exposure, it does not mean that engagement has provided some major breakthrough. 18. Discuss the differences between CDI and BDI. When would an advertiser use these indexes? (LO 102) BDI compares the percentage of the brand's total US sales in a given market area with the percentage of the total population in the market. The resulting BDI indicates the sales potential for that brand in that market area. CDI provides information on the potential for development of the total product category rather than specific brands. Figures 10-8, 10-9, and 10-10 provide an excellent summary of how BDI and CDI can be calculated and used to develop marketing strategies. The use of these indices provides marketers with insights into the market potential for the product or brand. This, in turn, provides information regarding the amount of media emphasis, weighting, etc. to be allocated. Of particular value is Figure 10-10. This figure essentially sums up the value of BDI and CDI to marketers in developing their marketing strategies.

IMC Exercise Have students access MRI-Simmons online and examine the profiles and media usage characteristics for a particular product. Have them review the indices and examine them carefully to determine if they seem logical. Have them present their findings to the class, describing the media strategy that should be employed to reach them.

CHAPTER 11 EVALUATION OF MEDIA: TELEVISION AND RADIO Chapter Overview The purpose of this chapter is to examine the media of television and radio. We examine the general characteristics of television and radio as well as their advantages and limitations as advertising media. Attention is given to how advertisers use TV and radio as part of their media strategy, how they buy television and radio time, how audiences are measured and evaluated for each medium, and how rates are 1-182 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

determined. Recent developments in the area of audience measurement for television are examined. Various factors and developments that are likely to change the future role of television and radio as advertising media vehicles are also discussed.

Learning Objectives 31.

Describe the role of television as an advertising medium and its advantages and limitations.

32.

Discuss how television advertising time is purchased for network and local television as well as cable television.

33.

Discuss how television viewing audiences are measured and developments in audience measurement.

34.

Discuss the role of radio as an advertising medium and its advantages and limitations.

35.

Discuss how radio advertising time is purchased.

36.

Discuss how radio audiences are measured and developments in audience measurement.

Chapter and Lecture Outline I.

TELEVISION

Television has virtually saturated households throughout the United States and many other countries and has become a mainstay in the lives of most people. They rely on TV for news and information, and it is their primary form of entertainment. The penetration and popularity of television makes it the predominant form of mass media. It has often been noted that television represents the ideal advertising medium with its ability to combine visual images, sound, motion, and color that allow advertisers to develop the most creative and imaginative appeals. While television has numerous advantages, it also has some problems and limitations as an advertising medium. FFF.

Advantages of Television 1. Creativity and impact—The interaction of sight and sound offers tremendous creative flexibility and makes possible dramatic, lifelike representations of products and services. TV commercials can be used to convey a mood or image for a brand as well as to develop emotional or entertaining appeals that help make a dull product appear interesting. 2. Coverage and cost-effectiveness—Nearly everyone, regardless of age, sex, income, or educational level, watches at least some TV and most do so on a regular basis. Marketers selling products and services that appeal to broad target audiences find that TV lets them reach mass markets, often very cost effectively. 3. Captivity and attention—Television commercials are intrusive in that they impose themselves on consumers. Unless we make a special effort to avoid commercials, most of us are exposed to thousands of them each year. The increase in viewing options and the penetration of DVDs, DVRs, remote controls, and other automatic devices have made it easier for TV viewers to avoid commercial messages. However, the remaining viewers are likely to devote some attention to many advertising messages. 4. Selectivity and flexibility—TV has often been criticized for being a nonselective medium since it is difficult to reach a precisely defined market segment. However, some selectivity is possible due to variations in the composition of audiences because of program content, broadcast time, and geographic coverage. Sports programming has become particularly popular among advertisers since they attract the difficult to reach, younger, male audience and are usually watched live. A number of companies and brands are also using sponsorship deals with the networks that broadcast the games as a way to reach college students, as well as football and basketball fans. IMC Perspective 11-1 discusses the importance of live sports to the broadcast and cable networks and the challenges they are facing from streaming services.

GGG. Limitations of Television 5. Costs—The absolute costs for commercial time can be very high, particularly on the major networks. Production costs for quality commercials can also be prohibitive. The production costs for a national brand commercial average more than $350,000 and can be much higher for spots that are more elaborate. Major companies with national brands will produce several commercials as part of their advertising campaigns which increases production costs. 6. Lack of selectivity—Advertisers who are seeking a very specific, often small, target audience find the coverage of TV extends beyond their geographic market, reducing its cost effectiveness particularly within a local market area. Audience selectivity is improving as

advertisers target certain groups of consumers through the type of program or day and/or time when they choose to advertise. However, TV still does not offer as much audience selectivity as radio, magazines, direct mail, or online ads for reaching precise segments of the market. 7. Fleeting message—Most TV commercials are only 15- or 30-second spots and leave nothing tangible for the viewer to examine or consider. Fifteen-second spots have become more prevalent over the past five years and now account for nearly 60 percent of the commercial activity on network TV, while 30-second spots account for 30 percent. Fifteen-second spots are even more popular on cable networks and represent 64 percent of the commercials versus 29 percent for 30-second ones. Increasing media costs have contributed to shortened commercials and 15-second spots are considered to be just as effective as longer ones. 8. Clutter—The problems of fleeting messages and shorter commercials are compounded by the fact that the advertiser‘s message is only one of many spots and other non-programming material seen during a commercial break. Clutter also increases when the networks and individual stations run promotional announcements for their shows, make more time available for commercials, and redistribute time to popular programs. 9. Limited viewer attention—The increased penetration of DVRs and prevalence of remote control channel changing or zapping is creating a major problem for advertisers. Studies have shown that nearly a third of a TV program‘s viewing audience is lost during commercial breaks as they stop watching television or switch to another channel. Another major problem for advertisers is when viewers bail out during a commercial break by changing channels or fast-forwarding (zipping) through ads and promotion spots. Thus, the challenge facing networks, as well as advertisers, is how to discourage viewers from changing channels during commercial breaks and be more receptive to the advertising. Some networks use a splitscreen or ―double-box‖ format that continues to show the live action on one side of the screen while a commercial is shown on the other side. The use of the double box format has become common during some live sports programs. Also concerning is how TV viewing patterns are being impacted by another time-shifting technology—video on demand (VOD)—that is offered by cable operators as well as satellite services. 10. Distrust and negative evaluation—TV commercials are probably the most criticized form of advertising because of the intrusiveness of the medium. However, recent studies have shown that trust in television advertising has increased. Professor Notes:

II.

BUYING TELEVISION TIME

There are a number of options available to advertisers purchasing television time. The instructor should point out that the purchase of television advertising time is a very specialized part of the advertising business, particularly for large companies spending huge sums of money and advertising on a national or regional basis. The various considerations involved in the purchase of television time are examined. Network versus Spot—A basic consideration that faces all advertisers is the allocation of their television media budget among network versus local or spot announcements. It is important to cover each of the ways television time can be purchased including:

11. Network advertising—A common way by which advertisers disseminate their messages is by purchasing airtime from a television network, which assembles a series of affiliated stations or affiliates to which its supplies programming. A major advantage of network advertising is that it simplifies the purchasing process for advertisers who want to reach broad target audiences. These affiliates, most of which are independently owned, contractually agree to preempt time during specified hours for programming provided by the networks and to carry the national advertising within the program. In addition to The CW and the four major networks (ABC, CBS, NBC, Fox), there are also several Spanish-language networks in the United States. Spanish-language television networks such as Univision and Telemundo are becoming increasingly popular and provide advertisers a way to reach the fast-growing Hispanic market. Most prime-time commercial spots, particularly on the popular shows, are sold during the up-front market while time can also be bought during the scatter market that runs throughout the TV season. The major networks as well as their cable counterparts often reserve at least 10 percent or more of their inventory of advertising time rather than offering all of it for sale during the up-front market. 12. Spot and local advertising—Spot advertising refers to commercials shown on local television stations, with the negotiation and purchase of time being made directly from the individual stations. All non-network advertising done by a national advertiser is known as national spot advertising, whereas airtime sold to local firms is known as local advertising. A major problem for national advertisers is that spot advertising can be more difficult to acquire, since the time must be purchased from a number of local stations. Additionally, there are more variations in pricing policies and discount structures of individual stations than networks. However, this problem has been reduced somewhat by the use of station reps, individuals who act as sales representatives for a number of local stations in dealings with national advertisers. 13. Syndication—Advertisers may also reach television viewers by advertising on syndicated programs which are sold or distributed to local stations. There are three basic types of syndicated programs: Off-network syndication—reruns of network shows that are bought by individual stations (The Big Bang Theory, Family Guy). Off-network syndication shows are very important to local stations because they provide quality programming with an established audience. First-run syndication—shows produced specifically for the syndication market (The Kelly Clarkson Show, The Dr. Phil Show, TMZ, Inside Edition.) Advertiser-supported or barter syndication—both off-network and first-run syndicated programs offered free or for a reduced rate to local stations but with some advertising time pre-sold to national advertisers and the remainder available for sale by the local station. Top-rated barter syndicated programs include Wheel of Fortune and Jeopardy. Syndication now accounts for more than a third of the national broadcast audience and generates advertising revenue comparable to any of the big four networks. Syndicated shows have become more popular than network shows in certain dayparts such as daytime, early prime time, and late fringe. Methods of Buying Time—Television advertisers must also make decisions regarding the method by which they will advertise on a program. The options to be discussed include:

14. Sponsorships—Under a sponsorship arrangement, an advertiser assumes responsibility for the production and content of the program as well as the advertising that appears within it. Companies choose to sponsor programs for a variety of reasons discussed in the text. 15. Participations—Most advertisers either cannot afford the costs of sponsorship or want greater flexibility than sole sponsorship permits. More than 90 percent of network advertising time is sold as participations, with multiple advertisers buying commercial time or spots on a program produced by the network or an outside production company that sells the show to the network. 16. Spot announcements—Spot announcements are bought from the local stations and generally appear during the adjacent time periods of network programs (hence the term adjacencies). Spot announcements are most often used by purely local advertisers but are also utilized by companies with no network schedule or by large advertisers that make dual use of network and spot advertising. Selecting Time Periods and Programs—Another consideration in buying television time is the selection of the particular time period and program during which the commercial will be shown. Considerations here include the selection of a specific time period or daypart segment and audience size and demographic composition. Common television dayparts are shown in Figure 11-2 of the text. The different dayparts are important to advertisers because they attract different demographic groups. Cable Television 17. The growth of cable—Cable television or CATV (community antenna television) is probably the most significant development in the broadcast media. Cable subscribers receive an average of more than 200 channels, including the local network affiliates and independent stations in various markets. Many cable and ADS also carry superstations, independent local stations that send their signals nationally via satellite to cable operators to make their programs available to subscribers. Programming on superstations such as TBS and WGN generally consists of sports, movies, and reruns of network shows. Figure 11-3 shows the most popular cable networks along with the type of programming they carry. 18. Advertising on cable—As with broadcast TV, cable can be purchased on a national, regional, or local (spot) basis. Many national advertisers are turning to spot advertising on local cable systems to reach specific geographic markets. Spot cable is also becoming very popular among local advertisers since they find it very affordable. The growth in spot cable advertising is also being facilitated by the use of interconnects, where a number of cable systems and networks in a geographic area are joined for advertising purposes. These interconnects increase the size of the audience an advertiser can reach with a spot cable buy. 19. Advantages of cable—Cable television has some important advantages including the opportunities it offers for narrowcasting or reaching very specialized markets though stations such as ESPN (sports), MTV (music/reality shows), or CNN (news) and the various other channels. Cable TV also offers lower rates and greater flexibility in the types of commercials that can be used. The low costs of cable make it a very popular advertising medium for local advertisers such as retailers. 20. Limitations of cable—Limitations of cable include the fact that it is still overshadowed by the major networks as it has less desirable programming and production than broadcast television. Another drawback is audience fragmentation as the ratings for most cable channels

is very low. The prime-time program rating for most cable programs is only about a 1 or 2. Lack of penetration is also a problem, particularly in some major market areas. 21. The future of cable and subscription television—Cable and ADS are important parts of the media strategy for nearly all advertisers using television. Cable, like the major broadcast networks, faces competition from other viewing options such as streaming services. Cable‘s image as a stepchild in program development and acquisition has changed. As cable penetration increases and its programming quality continues to improve, more advertisers are discovering its efficiency and ability to reach targeted market segments. However, a major problem facing the industry is the increase in cord-cutting, which refers to households dropping traditional pay-TV services such as cable or satellite TV. Measuring the TV Audience One of the most important considerations in using television advertising concerns the size and composition of the TV viewing audience. Audience measurement is critical to the advertiser since they want to know the size and characteristics of the audience they are reaching when they buy time on a particular program. Audience size and composition are important to the network or station as these figures determine the amount they can charge for commercial viewing time. Programming decisions are made based on audience size and composition. Audience measures—A major source of network TV and local audience information is the Nielsen Company since Arbitron exited the TV ratings business at the end of 1993 due to steep financial losses. There are some important terms and various types of information the rating services provide, which should be covered: a. Television households—the number of households in a market with at least one operable TV or monitor. Nielsen estimates that 122 million U.S. households that own at least one television set or monitor that can be used to watch TV. b. Program rating—probably the best known of all audience measurement figures—the percentage of TV households in an area that are tuned to a specific program during a specific time period. c. Ratings point—a figure that represents 1 percent of the TV households in a particular market tuned to a specific program. d. Households using television (HUT)—the percentage of homes in a given area where TV is being watched during a specific time period. This figure is sometimes referred to as sets in use and is always expressed as a percentage. e. Share of audience—the percentage of households watching TV in a specified time period that are tuned to a specific program. Share figures are important because they reveal how well a program does with the available viewing audience. f.

Total audience—the total number of homes viewing any five-minute part of a program.

National audience information—Nielsen provides daily and weekly estimates of the size and composition of the national viewing audiences for programs aired on the broadcast and major cable networks. To measure the viewing audience, Nielsen uses the people meter, which is an electronic measuring device that records not only what is being watched but also by whom in the sample of 40,000 Nielsen households used to determine the national ratings. Exhibit 1113 shows Nielsen‘s people meter.

Local audience information—Information on local television audiences is provided by the Nielsen Station Index (NSI). These measures are taken using the national audience measurement and a measure of TV viewership in 56 markets using electronic or metered technology. This includes people meters as well as a Portable People Meter (PPM), which is a wearable, page-size device that electronically tracks exposure to cable and satellite television; terrestrial, satellite, and online radio; as well as cinema advertising and many types of placed-based digital media. Nielsen provides NSI measures in 210 local markets known as designated market areas (DMAs). DMAs are non-overlapping areas used for planning, buying, and evaluating TV audiences and are generally a group of counties in which stations located in a metropolitan or central area have the largest audience share. The ratings period when all 210 DMAs are surveyed is known as sweeps periods. As discussed in the chapter, there are many problems with the audience estimates gathered during the sweeps periods and advertising people are calling for changes in this system. Developments in audience measurement—The advertising industry is likely to see changes in the way viewing audiences are measured. A major issue in television audience measurement over the past decade has been the need to move beyond linear TV where the viewer has to watch a scheduled TV program at the particular time it‘s offered, and on the particular channel it‘s presented on. In 2007 Nielsen began providing commercial ratings data, known as ―C3,‖ which includes measures of the average viewership of the commercials in a program, both live and up to three days after the ads on played back on a DVR. The new ratings did not track individual ads or specific time slots, but rather offered an average viewership of all the national commercial minutes in a program. The reasons behind the move to this new system and the ongoing issues associated with measurement of TV commercials are discussed in the chapter. Many television network executives began pushing for ―C7‖ ratings, which include viewership of programs and commercials up to seven days after the airing of a show. This allows for inclusion of viewers watching through DVRs and video on demand (VOD). By 2014, Nielsen was providing C3 as well as C7 viewership numbers; however, the industry continued to argue that better measurement was still needed to account for viewership across all platforms to determine total viewership of a program as well as viewing patterns. In 2016 Nielsen began rolling out its Total Audience Measurement system, which is a singlesourced platform that accounts for all viewing across linear TV, DVRs, video-on-demand, connected TV devices including streaming video devices and game consoles, enabled smart TVs, tablets, smartphones, and personal computers. The new measurement system accounts for viewers currently overlooked by current C3 and C7 metrics and also provides more insight into viewing patterns for television shows (Figure 11-4 provides a breakdown of viewership categories.) The new system can determine how much time people spend with devices overall and link program viewing to those specific devices. Nielsen is also developing a new metric called Total Use of Television (TUT), which adds connected TV usage to linear viewing to provide a complete view of TV usage. Professor Notes:

III.

RADIO

The role of radio as an entertainment and advertising medium changed dramatically with the rapid growth in the popularity of television. Radio has evolved primarily into a local advertising medium characterized by highly specialized programming which appeals to very narrow segments of the population. Radio has survived and actually grown as an advertising media vehicle because it offers advertisers certain advantages. However, radio does have certain limitations that affect its role as an advertising medium. Today, there are more than 11,300 commercial radio stations in the United States, including 4,700 AM and 6,600 FM stations. Advantages of Radio. 22. Cost and efficiency—Radio commercials are inexpensive to produce and the absolute and relative costs for radio advertising time is generally lower than for television. The low cost of radio means advertisers can build more reach and frequency into their media schedule within a certain budget. They can use different stations to broaden the reach of their messages and multiple spots to ensure adequate frequency. 23. Receptivity—Radio often provides advertisers with a very receptive environment for their advertising messages. Consumers perceive radio advertising to be more personally relevant to them than ads on television or the Internet. 24. Selectivity—Radio allows marketers to focus their advertising on specialized audiences such as certain demographic and lifestyle groups. For example, talk radio reaches the adult market effectively while top 40 music reaches teens and young adults. Most areas have radio stations with formats such as adult contemporary, easy listening, classical music, country, news/talk shows, jazz, and all news, to name a few. Figure 11-6 shows the percentage of the radio listening audience captured by radio formats for various age groups. 25. Flexibility—Radio is probably the most flexible of all the advertising media because it has a very short closing period, which means advertisers can change their message almost up to the time it goes on the air. Radio ads can be produced and scheduled on very short notice. Radio advertisers can easily adjust their messages to local market conditions and marketing situations. 26. Mental imagery—Radio encourages listeners to use their imagination when processing a commercial message. Radio can also reinforce TV messages through a process called image transfer where the visual elements of TV commercials are implanted in a radio spot. 27. Integrated marketing opportunities—Radio provides marketers with a variety of integrated marketing opportunities such as event marketing and point-of purchase promotions. Advertisers often use radio stations and personalities to enhance their involvement with a local market and to gain influence with local retailers. Limitations of Radio. 28. Creative limitations—Radio is an advertising medium without a visual image. The radio advertiser cannot show the product, demonstrate it, or use any type of visual appeal or information. Because of these creative limitations many companies tend to ignore radio, and agencies often assign junior people to the development of radio commercials. 29. Fragmentation—The percentage of the market tuned to any particular station is usually very small.

30. Difficult buying procedures—Acquiring information, evaluating, and contracting for radio time with even a fraction of the nearly 11,300 commercial stations that operate across the country can be difficult and time consuming. This problem has diminished somewhat in recent years as the number of radio networks and of syndicated programs offering a package of several hundred stations increases. 31. Limited research data—Audience research data on radio are often limited, particularly compared with TV, magazines, and newspapers. 32. Limited listener attention—Radio programming, particularly music, is often the background to some other activity and may not receive the listeners‘ full attention. Many people who listen in their cars preprogram their radios and change stations during commercial breaks. Another factor that is detracting from radio listening in motor vehicles is the rapid growth of mobile telephones. Studies have found that commuters surveyed who own a mobile phone reported listening to less radio. Many consumers spend time on their phones while driving and also can listen to music stored on their phones or through streaming services. 33. Competition from digital media—Commercial radio faces competition from several digitalbased technologies that are affecting the listening audience such as satellite radio. The major satellite radio companies, Sirius and XM, merged in 2008 and now have nearly 30 million subscribers. SiriusXM has also been adding more locally tailored programming such as traffic and weather reports, which make them more competitive against terrestrial stations in local markets. In addition to satellite, terrestrial radio is also being impacted by the popularity of music services that are being streamed over the Internet such as Pandora, Spotify, and Apple Music. Digital and Social Media Perspective 11-1 discusses the growing popularity of podcasts, which are becoming a competitor for radio. 34. Clutter—Most radio stations carry an average of nearly 10 minutes of commercials every hour. During the popular morning and evening rush hours, the amount of commercial time may exceed 12 minutes. Also contributing to the clutter problem is the practice of some stations offering ―commercial-free‖ blocks of music to attract listeners. In 2010 Clear Channel, which is now known as iHeartMedia, Inc., began offering advertisers a new service known as contextual radio ads that can automatically insert radio commercials immediately after specific programming or certain kinds of content, including other ads. A number of companies have been using the service to better target their radio advertising messages. Buying Radio Time The purchase of radio time is similar to that of television in terms of purchasing options as advertisers can make either network, spot or local buys during various time periods or dayparts. Various options should be discussed including: Network radio—There are seven major national radio networks, such as CBS Radio, Cumulus, Westwood One, and Premiere. Advertisers can reach a national audience by advertising on one of the networks. There are also more than 100 regional radio networks across the country. An important trend is the number of syndicated radio programs that offer advertisers a package of several hundred stations. The Jim Rome Show is an example of a popular syndicated program. Spot radio—National advertisers can use spot radio to purchase airtime on individual stations in various markets. The purchase of spot radio provides greater flexibility in selecting markets, individual stations, and airtime and adjusting the message for local market conditions. Local radio—Most radio advertising is done by local companies who purchase advertising time from stations in local markets. 1-191 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

Time Classifications The broadcast day for radio is divided into various time periods or dayparts. The size of the radio listening audience varies widely across the dayparts, and advertising rates follow accordingly. The largest audiences (and thus the highest rates) occur during the early morning and late afternoon weekday drive times. Various dayparts for radio are shown in Figure 11-7. Audience Information One problem with radio is the lack of audience information that results from the vast number of radio stations with small, fragmented audiences. Developing precise measures of radio listenership is difficult because of the nature of the medium and the many station options available. Two major radio rating services should be discussed: Nielsen audio—This measurement covers nearly 265 local radio markets with two to four ratings reports per year by having a sample of representative listeners in each market maintain a diary of their radio listening for seven days. Various figures measured by Nielsen Audio include person estimates, ratings, and share. Nielsen Audio also recently began measuring listenership to webcasts of radio stations. The three basic estimates in the radio ratings report are 1) person estimates—the estimated number of people listening, 2) rating—the percentage of listeners in the survey area population, and 3) share—the percentage of the total estimated listening audience. These three estimates are further defined by using quarter-hour and cume figures. The average quarter-hour (AQH) figure expresses the average number of people estimated to have listened to a station for a minimum of five minutes during any quarter-hour in a time period. Cume stands for ―cumulative audience,‖ the estimated total number of different people who listened to a station for at least five minutes in a quarter-hour period within a reported daypart. The average quarter-hour rating (AQH RTG) expresses the estimated number of listeners as a percentage of the survey area population. The average quarter-hour share (AQH SHR) is the percentage of the total listening audience tuned to each station. RADAR—Another rating service now owned by Nielsen is RADAR (Radio's All Dimension Audience Research). RADAR measurements are based on information collected throughout the year by means of diary interviews from a probability sample of 400,000 respondents aged 12 and older. Professor Notes:

Teaching Suggestions This chapter is designed to provide the student with a general understanding of the media of television and radio. Radio and television are probably the most pervasive media in the lives of most American consumers. The instructor may want to direct the students‘ attention to the statistics cited in the text regarding penetration of radio and television and the amount of time spent with these media. It is important for students to understand the general characteristics of television and radio including their specific strengths and weaknesses, the role they play as advertising media vehicles, how television and radio time is purchased and how audiences are measured and evaluated for each medium. For nearly 80 years, the broadcast media of radio and television have been a dominant part of the lives of most Americans. Radio was a major news, information, and entertainment medium from the 1920s to the early 1950s. The introduction of television as a mass medium began in 1950 and has seen unprecedented growth over the past three decades, both as an entertainment and advertising medium. Much of the growth in the popularity of television has come at the expense of radio, although the latter has been experiencing a resurgence in popularity. Today, television is changing as an advertising medium as the growth of cable has led to a fragmentation of viewing audiences and the major networks are facing a decline in the size of the viewing audiences they attract. An interesting and informative website that you may want to visit is that of the Television Advertising Bureau which can be found at www.tvb.org. The nature of television as an advertising medium has changed dramatically in recent years and will continue to do so with the evolution of digital technology. The trend toward shorter commercials and the resulting clutter problem, the growth of cable and concomitant decrease in network viewing audiences, the continued penetration of digital video recorders (DVRs), video on demand (VOD), and Internet streaming services such as Netflix, Hulu, and Amazon Prime are likely to have a profound impact on television as an advertising medium. Advertisers are increasingly calling for more precision in audience measurement such as measures of commercial viewing rather than simply program viewership. The instructor should encourage the student to explore these changes and consider their impact on advertising in terms of not only media planning, but also creative strategy and sales promotional programs. It is important to keep informed about the changes occurring in the areas of audience measurement as well. The chapter discusses the ongoing battle between the television networks and advertisers over the measurement of television viewing audiences and how they are being impacted by new technologies such as digital video recorders. When teaching this chapter, we encourage you not to contribute to the ―Rodney Dangerfield‖ problem of radio by giving it only limited attention. Radio has become a very viable media option for national as well as local advertisers. Examples of the creative and effective use of radio are readily available just by spending some time listening to the medium. Since students tend to be heavy listeners of radio, you might ask them to record some radio ads that could be discussed in class. The Radio Advertising Bureau has a very informative website (www.rab.com) which you may want to visit for some interesting material and information on the effective use of radio by various advertisers. There are several interesting developments in radio that can be discussed including the growing popularity of various formats such as talk radio and webcasts of radio stations. Radio is facing more competition from cable television as advertising rates on local cable stations are often comparable to radio and there is the added advantage of TV‘s visual impact and creative options. Attention should also be given to the growth of satellite radio and SiriusXM, which was formed by the merger of the two companies. While satellite radio offers more options to listeners, both companies are finding it difficult to attract subscribers.

Answers to Discussion Questions The chapter opener discusses the rapid adoption of streaming services by television viewers. Discuss how streaming is impacting the television industry and the business models of the major broadcast and cable networks. How can the networks respond to the challenges they are facing from streaming services? (LO 11-1, 11-2, 11-3) Contributing to the problems facing the traditional broadcast and cable networks is the increase in cord cutting, which refers to households dropping traditional pay-TV services such as cable or satellite. The percentage of U.S. households with cable or an alternative delivery system has steadily declined over the past decade going from 88 percent in 2013 to 66 percent in 2022. While a major reason for cord cutting is the cost of pay TV services, an increasingly important factor is the rapid growth of streaming services. More than 80 percent of television households in the U.S. have a TV set that can access the Internet through a smart TV or connected device. In 2022, nearly 85 percent of U.S. households subscribed to at least one streaming service. While the cost of pay TV is a major reason that viewers are switching to streaming, consumers also feel that streaming services meet their viewing needs. In fact, many TV viewers are opting to subscribe to more than one service. The growth in streaming services and their ability to attract viewers has become a major problem for the traditional broadcast and cable networks. In 2022 streaming viewership reached new highs as streaming accounted for 3% of total TV viewing time in the U.S.—an increase of 23% compared to the previous year. Cable TV viewership was a little behind at 34%, while broadcast‘s share of TV viewing was at 21%, down 25% from a year earlier. The new viewership numbers show that streaming has become a top choice for TV viewers, mainly driven by exclusive and original content that can‘t be found on cable or broadcast television. The major networks have recognized the shift to streaming by TV viewers and are developing their own streaming services. NBC programs can be viewed on Peacock while CBS has the Paramount+ streaming service. The ABC Network is owned by The Walt Disney Company which has the Disney+ streaming service. Disney also owns ESPN and launched the ESPN+ streaming service in 2018 which is targeted to avid sports fans. Discuss the advantages and limitations of television as an advertising medium and how these factors affect its use by major national advertisers as well as smaller local companies. (LO 11-1, 11-2) Television has often been described as the ideal advertising medium because of the many advantages it offers. These include the opportunity TV offers for developing creative and imaginative messages with high impact; its wide coverage and ability to reach large audiences in a cost-effective manner; the captive nature of the TV viewing audience which usually results in attention to commercials; and the selectivity and flexibility television offers for reaching various types of target audiences, particularly with the growth of cable television. These factors are very important to major advertisers such as automobile companies or packaged goods marketers. These companies are generally trying to reach mass audiences with their advertising messages and television is an excellent media vehicle for doing this. However, they can also take advantage of the selectivity TV offers through various programs or cable channels to reach more targeted audiences. Automobile companies and packaged goods marketers also rely heavily on the creativity and impact that is possible through TV commercials. These companies use the sight, sound, and visuals offered through television to create high impact ads, develop images for their brands, and develop emotional or entertaining appeals. Television advertising can be particularly valuable for creating emotional or entertaining appeals that help make a low involvement product more exciting or interesting. Of course, there are limitations to television as an advertising medium, even for major advertisers with large budgets. Television can be a very expensive medium for national advertisers and production costs for high quality commercials are also very high. The viewing audience for television programs is becoming increasingly fragmented with the increase in the number of channels available 1-194 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

to viewers. Clutter also continues to be a problem as the average amount of non-programming time averages more than 15 minutes during prime time and even more during the daytime. The increase in the number of homes with digital video recorders has also become a problem as many households are recording shows and skipping through commercials when playing them back. For smaller local companies, television has become a more viable medium in recent years. Local companies such as retailers, car dealers, restaurants, and other merchants are spending a greater portion of their media budget on TV, particularly on local cable where the rates are low and they can target a specific market segment. Being able to use TV allows them to take advantage of the creative power of television. However, local companies also face some of the same problems as national advertisers such as audience fragmentation and competition from other media. Local companies also often lack the budget to produce high-quality TV commercials, which can limit the effectiveness of the commercials they run on television. Discuss the reasons behind the popularity of sports programming on television and why television networks are willing to pay such large sums of money for the rights to televise sporting events. How can the broadcast and cable networks respond to the challenges they are facing from streaming services owned by the major tech companies for the rights to sporting events? (LO 11-1, 11-2) Sports programming in general has become particularly important to advertisers as sporting events are often watched live. Because viewers are watching live, there is a higher likelihood that the viewer will see the advertiser‘s commercial rather than simply fast-forwarding through them or subscribing to a viewing service that is commercial-free. Advertisers are particularly attracted to advertising on sporting events because they are a good way to reach young men who are very valuable and elusive target audience, meaning it is very hard to reach this audience on such a large scale with any other programming. A new variable has been entered into the equation for determining sports rights as the behemoth tech companies, bolstered by their deep pockets and strong desire to boost viewership of their streamingsubscription services, have entered the bidding arena for media rights held by the NFL, NBA, and MLB. They see it as a market that is ripe for change and an arena in which they are all well positioned to compete with their streaming services. The tech giants are eager to position themselves for a future without cable as traditional television viewers continue to cut the cord and trade cable packages for streaming services. The traditional broadcast and cable networks recognize that their hold on live sports is tenuous. However, with TV viewing habits being so closely tied to sports programming, they risk major disruption to their businesses if they are unwilling to pay the exorbitant fees to retain marquee live sports rights. Several major networks such as ABC and CBS are already less dependent on live sports and have focused on attracting viewers with non-sports programming. However, live sports is really the last category of exclusively must-see programming on television. It will be interesting to see if the traditional business model of the networks can survive or will succumb to the competition from the big tech companies who are likely to use sports to build their streaming services. Discuss whether the major broadcast and cable networks should consider reducing the number of commercials that air during their programs. What are the pros and cons of doing so? (LO 11-1, 11-2) Television networks hope that their plans to reduce the number of commercials and offering new, more limited pod formats will provide a more positive viewing experience for television viewers. They also hope that advertisers will pay more for the opportunity to advertise during shorter breaks 1-195 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

with less clutter. This would ideally result in a more attentive and receptive audience. The pros of reducing commercials include less clutter for both viewers and advertisers, less frustration from consumers about being exposed to too many ads, and a more attentive audience. The cons include that advertisers will have to be willing to pay more for the advertisements to make it worthwhile for the network to have fewer commercials. Additionally, while an overhaul of the industry may need to happen, it might be quite complex for advertisers and networks to reconfigure a system that has been in place for many years. What are the various options available to advertisers for purchasing advertising time on television? How does the use of these options differ for national versus local advertisers? (LO 11-2) A number of options are available for purchasing advertising time on television. Advertisers can purchase time in a variety of program formats, and it can be purchased on a national, regional, or local basis. Advertisers can also sponsor an entire program, participate in the sponsorship of a program, or use spot announcements between programs. For national advertisers, one of the basic decisions is whether to purchase network versus local or spot announcements. Most national advertisers purchase advertising on the major networks to provide national coverage and supplement this with regional or local spot purchases. When network advertising is purchased, the commercial is shown on all of the affiliated stations in all designated market areas. National advertisers will also use spot advertising (also referred to as national spot advertising), which refers to commercials shown on local TV stations with time purchased directly from the individual stations. Spot advertising offers the national advertisers flexibility in adjusting to local market conditions as they can purchase more time in areas where market potential is greatest or where additional advertising support is needed. Local advertisers want to purchase television time on stations whose coverage is limited to the geographic markets in which they do business. This is done by purchasing spot ads on local network affiliates, independent stations, or local cable networks. Choose one of the major cable networks listed in Figure 11-3 and analyze it as an advertising medium. Discuss the audience profile for viewers of programming on this cable network and the type of advertisers that might want to reach them. You might visit the website of the cable network for information on its viewing audience. (LO 11-2) There are many advantages to advertising on cable TV including the opportunity for narrowcasting or reaching a very specialized target market. Students should select a cable network from the list shown in Figure 11-3 and develop a profile of it by visiting the chosen cable network's website. Using the information provided, they can discuss the target audience reached by this network, the programming, and the types of companies that might choose to use it as part of their television advertising media plan. They also might watch some shows on the network and discuss the types of commercials used by the advertisers with respect to factors such as creative style and execution, length, and format. What is meant by over-the-top (O T T) viewing of television? Discuss how the growth in O T T is impacting the television industry and TV advertising. (LO 11-1, 11-2) Another delivery system has emerged known as vMVPD which stands for Virtual Multichannel Video Programming Distributor. This is also known as O T T (over-the-top) or streaming TV which represents content that is delivered directly to viewers via a streaming service over the Internet, bypassing the traditional cable or satellite box. Examples of these streaming services include Sling TV, Hulu Live TV, fuboTV, and YouTube TV. The channel lineups for O T T streaming services are similar to cable packages as they include content from the major broadcast and cable networks as well as from other streaming providers. However, they often include fewer channels and lower subscription prices.

In 2022, 71 percent of the 122 million television households watched TV through a pay subscription service including those with O T T streaming services. However, a major problem facing the industry is the increase in cord-cutting, which refers to households dropping traditional pay-TV services such as cable or satellite TV. The percentage of U.S. household with cable or an alternative delivery system has declined from 88 percent in 2013 to 66 percent in 2022. These are clearly challenging times for the television industry, and changes will be needed to retain viewers as well as advertisers, many of whom are shifting more of their media budgets to online and social media where they can reach younger consumers with highly targeted video ads. The broadcast and cable networks recognize that competing against streaming services requires quality programming, as well as finding ways to reduce the number of commercials in TV shows while maintaining revenue and profits. The networks must also move more quickly toward making addressable TV advertising, which allows different commercials to be shown to different households watching the same program, which is more available to marketers. An estimated 60 million households in the United States can be serviced via addressable ads on traditional cable and satellite TV, and the number will increase. However, it may take time for the broadcast and cable networks, as well as local stations, to gather the audience data needed to support the use of addressable ads on a large scale. Discuss the methods used by Nielsen to measure the size of the viewing audience for national as well as local TV programs. Do you think the measurement techniques used provide valid estimates of the size of national and local viewing audiences? Do you think advertisers should have to pay for viewers who watch TV shows on a time-shifted basis on their DVRs or video on demand? (LO 11-3) Nielsen has a national TV ratings service that provides daily and weekly estimates of the size and composition of the national viewing audiences for programs aired on the broadcast and major cable networks. To measure the viewing audience, Nielsen uses a national sample of approximately 40,000 homes carefully selected to be representative of the population of U.S. households. The widely cited Nielsen ratings are based on the viewing patterns of this cross section of homes, which are measured using electronic metering technology (the people meter). Nielsen‘s local market measurement service is called the Nielsen Station Index (NSI), which measures viewing audiences in 210 local markets known as designated market areas (DMAs). DMAs are nonoverlapping areas used for planning, buying, and evaluating TV audiences and are generally a group of counties in which stations located in a metropolitan or central area achieve the largest audience share. NSI reports information on viewing by time periods and programs and includes audience size and estimates of viewing over a range of demographic categories for each DMA. In addition to the national audience measurement, Nielsen also measures TV viewership in the 56 largest local markets using electronic or metered technology. This includes people meters as well as a Portable People Meter (PPM), which is a wearable, page-size device that electronically tracks exposure to cable and satellite television; terrestrial, satellite, and online radio; as well as cinema advertising and many types of place-based digital media. Concern over the measurement system used by Nielsen involves the use of the paper diaries to measure viewing in local markets. The system requires households in the sample to keep a tally of what is being watched and by whom. With so many channels now available, along with the increase in viewing through DVRs and on smartphones, tablets, and computers, it has become very challenging for the Nielsen panelists to accurately record all of their television viewing in the diaries. Many homes do not return completed diaries and many of those that are returned are often not filled out.

For years, the television and advertising industries have been calling for changes in the way TV viewing audiences are measured at both the local and national levels. They have argued that new digital technologies are leading to major changes with regard to when, where, and how people watch television. Many of those working for the television networks as well as in advertising argue that the Nielsen measurement system is being overwhelmed by the explosion in the number of TVs, delivery systems, program options, and viewing platforms available. Advertisers and media planners have argued that these developments are having a major impact on audience size and composition and on the way advertisers use and should pay for TV as an advertising medium. A major issue in television audience measurement over the past decade has been the need to move beyond linear TV, where the viewer has to watch a scheduled TV program at the particular time it‘s offered and on the particular channel it‘s presented on. This has been partially addressed by development of the Total Audience Measurement system, which is a single-sourced platform that accounts for all viewing across linear TV, DVRs, VOD, and connected TV devices. While advertisers view Nielsen‘s new system as a significant improvement, there is still concern over how viewing audiences are measured. There has been a call for the use of more passive measurement systems that require less involvement by people in the metered homes and can produce more accurate measures of the program-viewing as well as commercial-viewing audiences. Despite the concerns with Nielsen, the company is deeply entrenched in the media ecosystem, and it is unlikely that viable alternatives to its audience measurement system will emerge soon. What are the advantages and disadvantages of advertising on radio? Discuss how radio advertising can be used by national versus local advertisers. (LO 11-4) Advantages of advertising on radio include its low cost and efficiency. Radio commercials are inexpensive to produce and the cost of advertising time on most stations is relatively low. This allows advertisers the opportunity to build more reach and frequency into their media schedules. Another major advantage of radio is the high degree of audience selectivity available through various program formats and geographic coverage of the numerous stations. Radio is also a very flexible medium with very short closing periods for running a spot and also offers the potential for mental imagery in the creation of a commercial. Many radio stations also offer valuable merchandising assistance and support to advertisers. Disadvantages of radio include creative limitations due to the absence of a visual image, a high level of audience fragmentation because of the large number of stations, chaotic buying procedures for purchasing radio time, limited amount of research data on radio audiences, and limited listener attention (particularly in cars where station changing occurs frequently or where commuter are talking on cellular telephones). Radio is most likely to be used by local advertisers such as retailers who are trying to reach consumers in their trade area. However, radio has also become a popular medium for national advertisers, particularly those with products and/or services which appeal to hard-to-reach audiences such as teenagers. National advertisers can purchase time on network radio and the growing number of nationally syndicated programming such as sporting events and talk radio shows. Discuss reasons for the growing popularity of podcasts and their impact on radio listenership. What types of companies are likely to advertise on podcasts? (LO 11-4, 11-5) Radio is facing another form of competition from the podcasting industry, which has exploded over the decade. A podcast is a collection or series of digital audio files that are made available for downloading or listening via the Internet to a computer or mobile device. The number of podcasts available to listeners has increased tremendously in the past few years. There were more than two million active podcasts available in 2022 (versus a quarter of that three years earlier), with over 48 million episodes available.

In addition to the growth of podcast audiences, there are several more reasons for the growing popularity of podcasts among advertisers. Podcast listeners have a median age of 34, which is younger than that of broadcast radio (47) and network television (57). Moreover, the percentage of monthly podcast listeners among 12-to-34-year-olds has grown to just over 50 percent, which provides advertisers with another way to reach this coveted age group with their messages. Advertisers like podcasts as the audio content is amenable to conveying information and messages to listeners as they are generally a very captive audience. Research shows that podcast advertising generates four times better recall than online display advertising and is more effective in generating engagement because audiences pay such intense attention to and value the podcast content. Podcast hosts often are perceived as influencers in the sense they are making an implied endorsement of the brands being advertised, which can result in listeners taking action. The type of companies likely to advertise on podcasts is broad, as it is estimated that nearly 60 percent of U.S. consumers aged 12 and older listen to podcasts. Podcasting is becoming a big business and is yet another way for many marketers, including major advertisers such as Procter & Gamble, Amazon, Disney, and General Motors, to reach consumers with their ads.

Additional Discussion Questions (not in text) Television is often described as a mass medium that offers little selectivity to advertisers. Do you agree with this statement? What are some of the ways selectivity can be achieved through TV advertising? (LO 11-2) For many years, television was essentially a mass medium as there were only three major networks, which accounted for over 90 percent of the prime-time viewing audience. However, some selectivity has always been available due to variations in program content, broadcast time and geographic areas. For example, Saturday morning cartoon shows appeal primarily to children while weekend sports programs are watched primarily by males. Geographic selectivity is possible through local spot ads in specific markets. With the growth of cable TV, television has become less of a mass medium. The major networks now account for less than 50 percent of the prime-time viewing audience and the market has become very fragmented. The selectivity of TV has increased significantly, as advertisers can reach groups with specific interests such as sports, news, music, the arts or business on cable channels. There is even greater segmentation within these television programming categories. For example, the Golf Channel is a new cable network devoted entirely to the sport. There are cable networks devoted to a variety of music genres, such as MTV, VH1, and Country Music Television, as well as to business and financial news (CNBC) and home decorating and gardening (HGTV). Discuss how the growth of Spanish-language television networks in the United States such as Univision and Telemundo affects the media strategy of marketers targeting the Hispanic market. (LO 11-2) As discussed in the chapter, the Hispanic market is very large as there are now 62 million Hispanics living in the U.S., which is 19 percent of the population. The availability of Spanish-language TV stations is important to marketers who want to reach this segment. Companies recognize that Spanish language TV networks such as Univision and Telemundo are the best way to reach the Hispanic market as these networks have larger viewing audiences than network shows in a number of big city markets with large Hispanic populations. As more companies develop marketing programs and commercials specifically for the Hispanic market, Spanish language television networks will become increasingly important as a way to advertise to this market segment. The Hispanic population is also younger and is having a greater influence on the direction of pop culture, which makes them an important market for advertisers..

Discuss how the concept of imagery transfer can be used in radio advertising. Find an example of a radio campaign that is using this concept and evaluate it. (LO 11-2) Imagery transfer refers to a technique whereby the images of a TV commercial are implanted into a radio spot. This can be done by establishing the video image of a TV commercial and then using the audio portion as the basis for the radio message so that consumers hearing the radio spot will make the connection to the television ad. Large national advertisers who are running integrated campaigns using both media often do coordination of radio and television commercials. Students should be encouraged to find and evaluate current examples of campaigns using image transfer techniques. Discuss some of the factors that media buyers should take into consideration when buying advertising time on radio. (LO 11-3) Media buyers take a number of factors into consideration when buying advertising time on radio. First, they must decide whether they want to make a network, spot or local buy. National advertisers such as automobile companies or major business-to-business marketers are likely to purchase time on one of the three major radio networks since they are generally trying to reach a national audience. Companies who are interested in buying time in certain geographic markets would make a spot buy while local companies such as retailers will be the major purchasers of radio time on local stations. A second major factor to consider is the audience that can be reached through various radio stations. Radio allows companies to focus their advertising on certain demographic and lifestyle groups. Various radio formats vary in popularity among different age groups. Radio stations also can appeal to listeners with various interests through programming that focuses on specific topics such as news, sports, finance and investments, computers, cars, and many other areas. Cost factors are also taken into consideration when buying radio time. As with any other type of media, media planners consider both the absolute and relative cost of advertising time on radio. Radio stations generally promote their ability to reach specific target audiences, which increases the efficiency of an advertiser‘s budget. Evaluate the use of sweeps ratings periods as a method for measuring local television viewing audiences. Do you feel think sweeps ratings provide reliable and valid estimates of local television viewing audiences? How might they be improved? (LO 11-3) As discussed in the chapter, there are a number of problems with the sweeps ratings periods used to measure local TV viewing audiences. One of the major concerns is over the tactics used by the networks and their local affiliates to bolster their ratings during the sweeps periods such as special programming, contests games, and other promotional gimmicks. These extraordinary programming and promotional efforts during the sweeps periods pull in extra viewers and negatively affect the validity of audience measurements for the remainder of the year. They may inflate the size of the viewing audience for a particular network show or a local newscast and result in advertisers having to pay higher rates for advertising time during the other nine months of the year. The advertising industry argues that the only real solution to the problems associated with the use of the sweeps is to do away with the ―sweeps period‖ and move to a system of continuous audience measurement. However, a continuous measurement system like that used for the national ratings would be very expensive and the television and advertising industry would have to be willing to pay a higher price for local ratings information. What is a commercial rating and how does this measure differ from a program rating? Discuss why advertisers and media planners prefer commercial ratings rather than program ratings. (LO 11-3) A commercial rating is a measure of the number of viewers of actual commercials in a program rather than the program itself. Traditionally, Nielsen provided advertisers and media planners with program ratings, which are a measure of the percentage of households in an area tuned to a specific television

program during a specific time period. However, the advertising industry has long argued that there is a need to measure the viewing audience of the commercials rather than just the program since many TV viewers switch channels when commercials come on or fast-forward through them if the show was recorded on a DVR. In 2007, Nielsen began providing commercials ratings known as C3, which includes measures of the average viewership of the commercials both live, and up to three days after the ads are played back on a DVR. The new ratings do not track individual ads or specific slots in the commercial pod, but rather offer an average viewership of all the national commercial minutes in a program. Many television network executives began pushing for ―C7‖ ratings that include viewership of programs and commercials as many as seven days after live airing of a TV show, arguing that viewership of many programs continued to increase over a seven-day period. By 2014 Nielsen was providing C3 as well as C7 viewership numbers; however, the industry continued to argue that better measurement was still needed to account for viewership across all platforms to determine total viewership of a program as well as viewing patterns. Obviously, advertisers and media planners prefer commercial ratings since they have always argued that viewership of commercials is much lower than viewership of programs and they do not want to pay for eyeballs that are not watching their advertising messages. Discuss the way Nielsen measures the listening audience for radio stations. Do you think the rating methods are providing reliable measures of radio audiences? (LO 11-6) The listening audience for radio is measured by Nielsen Audio, which covers over 250 local radio markets with two to four ratings reports per year. Nielsen has a sample of representative listeners in each market who maintain a diary of their radio listening for seven days. Audience estimates for the markets are based on these diary records and reported by time period and for selected demographics in the Radio Market Report. In the top 50 markets, Nielsen Audio uses the Portable People Meter (PPM), which is a wearable device that electronically tracks what consumers listen to on the radio by detecting identification codes embedded in the programming. There is considerable concern over the validity of the audience measurement numbers gathered by Nielsen, particularly in markets that rely on the diary method. Critics argue that most panelists do not fill out the diaries on a regular basis and often do not provide accurate reports of their listening behavior. The estimates of listenership by demographic groups can also be unreliable as the number of panelists in specific demographic segments is often small and only a few listeners can influence the ratings numbers. The Portable People Meter provides more accurate and reliable measurement and advertisers are pushing Nielsen to expand the use of PPMs beyond the top 50 markets. Discuss how radio stations, as well as advertisers, can deal with the clutter problem on radio and draw attention to their commercials. (LO 11-5) One of the problems facing radio, like most other advertising media, is clutter as most radio stations carry an average of nearly 10 minutes of commercials each hour and during the popular early morning and evening drive times, the amount of commercial time may exceed 12 minutes. Some stations have begun offering ―commercial free‖ blocks of programming time (such as music), but this often results in listeners switching to another station when they begin airing commercials. The clutter problem for radio is compounded by the fact that many people listen to radio in their cars and can easily change channels or may choose to listen to music on their phones rather than radio. Advertisers deal with this problem by trying to develop creative commercials (often by using humor) or may hire a local celebrity to help attract the attention of listeners. Some radio stations have addressed the clutter problem by reducing the number of commercials aired each hour, which is more appealing to both listeners as well as advertisers. The radio industry is looking for other ways to make radio advertising more valuable to marketers. In 2010 Clear Channel, which is now known as iHeartMedia, Inc., began offering advertisers a new 1-201 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

service known as contextual radio ads that can automatically insert radio commercials immediately after specific programming or certain kinds of content, including other ads. A number of companies have been using the service to better target their radio advertising messages. Students should be asked to identify examples of an advertiser who might benefit from the contextual programming service.

CHAPTER 12 EVALUATION OF MEDIA: MAGAZINES AND NEWSPAPERS Chapter Overview This chapter continues the analysis of the major media of advertising by examining the two primary types of print media—magazines and newspapers. The characteristics of each medium are examined including the different types of magazines and newspapers and their advantages and limitations as advertising media. Attention is given to audience measurement for magazines and newspapers, their rate structures, and the purchase of advertising space in each. The discussion of each medium concludes with a discussion of future developments that will influence their role and the nature of magazines and newspapers as advertising media.

Learning Objectives 80. Compare magazines and newspapers in terms of their value as advertising media. 81. Discuss magazine circulation and readership as well as audience information and research for magazines. 82. Describe how advertising space is purchased for magazines. 83. Discuss future trends and developments for magazines and how they will influence their use as advertising media. 84. Describe the newspaper audience and audience information and research for newspapers. 85. Discuss how advertising space is purchased for newspapers and rates are determined. 86. Discuss future trends and developments for newspapers and how they will influence their use as advertising media.

Chapter and Lecture Outline I.

INTRODUCTION

Magazines and newspapers have been in existence as advertising media for more than two centuries and until the 1920s were the only major media available to advertisers. Despite the growth and competition of the broadcast media, newspapers and magazines have remained important to both their readers and advertisers. Magazines have become a highly specialized medium that reaches specific target audiences in both consumer and business markets. Newspapers are still one of the primary advertising media in terms of both ad revenue, as well as number of advertisers, and are particularly important to local advertisers. Advertising revenue is extremely important to magazines and newspapers as few, if any, could survive without it. However, both magazines and newspapers are facing significant challenges from digital media.

II.

THE ROLE AND VALUE OF MAGAZINES AND NEWSPAPERS

Magazine readership has remained strong despite the growth of new media options; nearly 90 percent of adults 18+ read print and digital editions of magazines, and they read an average of seven issues per month. Additionally, the majority of U.S. adults read a newspaper each week across a variety of technology platforms. The role of magazines and newspapers differs from broadcast media the majority of them reach a selective audience and can be valuable in reaching specific types of consumers and market segments. However, the characteristics of each medium, their advantages and limitations as advertising media vehicles, and their role in the media mix are quite different. Professor Notes:

III.

MAGAZINES

Magazines serve the educational, informational, and entertainment needs and interests of a wide range of readers in both the consumer and business markets.. While some magazines are general mass-appeal publications, most target specific types of audiences in both the consumer and business markets. The wide variety makes magazines an appealing medium to a vast number of advertisers. Although TV accounts for the largest dollar amount of advertising expenditures among national advertisers, more companies advertise in magazines than in any other medium. HHH. Classifications of Magazines—A useful way of classifying magazines is provided by SRDS, the primary reference source on magazines for media planners, which divides the publications into three broad categories based on the audience to which they are directed. a. Consumer magazines—Those bought by the general public for information and/or entertainment. SRDS divides 2,800 domestic consumer magazines into 80 classifications or groupings such as general interest, news, sports, travel, and fitness. Consumer magazines represent the major portion of the magazine industry in terms of advertising revenue, accounting for nearly two-thirds of all advertising dollars spent in magazines.

b. Farm publications—The consumer SRDS category consists of magazines directed to farmers and their families. There are about 300 publications targeted to nearly every possible type of farming or agricultural interest. These are broken down into nine classifications ranging from general-interest magazines for all types of farmers to those in specialized agricultural areas. Farm publications are not classified with business publications because historically farms were not perceived as businesses. c. Business and health care publications—These are magazines or trade journals published for specific businesses, industries, or occupations. Kantar Media SRDS breaks down nearly 4,700 print and 4,800 digital U.S. magazines and trade journals into nearly 200 market classifications. There are also approximately 2,700 publications in the health care category, of which 1,225 are digital. Major categories of business publications include those directed to specific professional groups, industrial magazines directed to various manufacturing and production industries, trade magazines, general business publications, and targeted health care publications. III.

Advantages of Magazines d. Selectivity—One of the main advantages of using magazines as an advertising medium is their selectivity, or ability to reach a specific target audience. Most magazines are published for special interest groups or activities. Magazines also offer selectivity through specific demographic and geographic editions that they publish. Thus, magazines can play an important role in the media plan for companies that want to reach a specific target market. Magazines also offer demographic selectivity through special editions and geographic selectivity through purchasing ad space in specific geographic editions of national or regional magazines. e. Reproduction quality—One of the most valued attributes of magazine advertising is the reproduction quality of the ads. Magazines are generally printed on high-quality paper stock and use printing processes that provide excellent reproduction, in black and white or color. The reproduction quality of magazines provides an opportunity for innovative creative work by advertising agencies, which is also being done in digital versions of magazines as well. f.

Creative flexibility—Some magazines offer a variety of special options that can enhance the creative appeal of the ad and increase attention and readership. Examples include gatefolds, which enable advertisers to make a striking presentation by using a third page that folds out and gives the ad an extra-large spread; bleed pages, which are those where the advertisement extends all the way to the edge of a page with no white space around the ad; inserts; pop-ups; and creative space buys such as half or quarter page ads.

g. Permanence—Magazines are often kept for reference and/or read over several days giving them a longer shelf life than other media. One benefit of the longer life of magazines is that reading occurs at a less hurried pace and there is more opportunity to examine ads in considerable detail. Studies have found that consumers retain 33 percent of their magazines for future reference. h. Prestige—Companies whose products rely heavily on perceived quality, reputation, and/or image often buy space in prestigious publications with high-quality editorial content whose consumers have a high level of interest in the advertising pages. While most media planners recognize that the environment created by a magazine is important, it can be difficult to identify it. Subjective estimates based on media planners‘ experience are often used to assess a magazine‘s prestige, as are objective measures such as reader opinion surveys.

Consumer receptivity and engagement—Magazines are generally purchased because the information they contain interests the reader, and ads provide additional information that may be of value in making a purchase decision. Consumers consider magazines to be the primary source of information for a variety of products and services and they are very receptive to advertising in magazines. Media planners recognize that one of the major advantages of advertising in magazines is the ability of the medium to engage readers and hold their attention. Research has shown that engagement with an advertising medium is important because it is directly related to increased ad recall and specific actions taken such as searching for additional information about an advertiser‘s brand, visiting its website, saving an ad for future reference, and purchasing a product or service, as well as recommending it to others.

Services—Some magazines have merchandising staff that call on trade intermediaries like retailers to let them know a product is being advertised. Magazines also offer services such as split runs whereby two or more versions of an ad are printed in alternate copies of a particular issue of a magazine. This allows the advertiser to determine which ad generates the most responses or inquiries.

JJJ. Disadvantages of Magazines k. Costs—The absolute cost of advertising in large mass-circulation magazines like People, Reader’s Digest, and Better Homes and Gardens can be very expensive, particularly for popular positions such as back covers or inside front covers. However, like any medium, magazines are usually evaluated on a relative cost perspective using cost per thousand (CPM) or target CPM measures, which were discussed in Chapter 10. l.

Limited reach and frequency—Magazines are generally not as effective as other media in offering reach and frequency. The percentage of adults reading any individual publication tends to be much smaller, so magazines have a thin penetration of households. Thus, companies who want to reach mass markets have to buy space in a number of magazines.

m. Long lead time—Most major publications have a 30- to 60-day lead time, which means space must be purchased and the ad must be prepared well in advance of the actual publication date. However, advances in digital publishing and the use of computer-based production methods are also reducing the amount of lead time required to run an ad in a publication. n. Clutter and competition—Clutter is a problem for magazines as the average consumer magazine contains ads on 33 percent of its pages, while some magazines contain ad content on more than half of their pages. The clutter problem for magazines is something of a paradox: the more successful a magazine becomes, the more advertising pages it attracts, which leads to greater clutter. Clutter is often less of a problem for magazines versus other media since consumers tend to be more receptive and tolerant of ads. They also can control their exposure to a magazine ad simply by turning the page. Some advertisers combat this by creating their own custom magazines to sidestep the advertising clutter problem as well as to have control over editorial content. KKK. Magazine Circulation and Readership—Two of the most important considerations in deciding whether to utilize a magazine in the media plan are the size and characteristics of the audience reached by the publication. Important considerations include the circulation of the publication as well as its total readership. o. Circulation—Circulation figures represent the number of individuals who either receive a publication through subscription or store purchase. The number of copies distributed to

original subscribers or purchasers is known as primary circulation and is used as the basis for the magazine‘s rate structure. Many publications base their rates on guaranteed circulation and provide rebates if the number of delivered magazines fall below the guarantee. Many publishers became unhappy with guaranteed circulation since it requires them to provide refunds if guarantees are not met but results in a bonus for advertisers when circulation exceeds the guarantee. p. Circulation verification—These services are provided by several companies to ensure circulation figures for magazines are accurate. This is a very important service since circulation figures are the basis for magazine advertising rates. Consumer magazines and farm publications are audited by the Alliance for Audited Media (formerly known as the Audit Bureau of Circulations) while certain business publications are audited by the Business Publications Audit (BPA) of Circulation. Many business magazines are published on a controlled-circulation basis, which means that copies are sent (usually free) to individuals the publisher believes can help build an audience and have influence on a company‘s purchase decisions. Circulation verification services provide media planners with reliable figures regarding the size and distribution of a magazine‘s circulation that help them evaluate its worth as a media vehicle. q. Readership and total audience—In addition to primary circulation figures, advertisers may be interested in the number of people that a publication reaches as a result of secondary or passalong readership, which occurs when the primary subscriber gives a magazine to another person or when the magazine is read in a doctor‘s office, beauty salon, etc. Total audience/ readership of a magazine can be determined by taking the readers per copy (primary and secondary) and multiplying this figure by the circulation of an average issue. LLL. Audience Information and Research for Magazines—Media planners are interested in the match between a magazine‘s readers and the advertiser‘s target audience. Information on readers' demographic, lifestyle, and product usage characteristics are available from studies conducted by the magazines themselves as well as from syndicated research studies. The primary sources of information concerning magazine audiences are: 

SRDS Consumer Media Advertising Source



SRDS Business Media Advertising Source



MRI-Simmons Business Publication Audits,

These studies provide a broad range of information on the audiences of major national and regional magazines including demographic, lifestyle characteristics, and product purchase and usage data. Audience information for business publications is generally more limited than for consumer magazines. MMM. r.

Purchasing Magazine Advertising Space Cost elements—While magazine rates are primarily a function of the circulation and readership of the publication, rates will vary in response to a number of other variables including size of the ad, position, particular editions chosen (geographic, demographic), any special mechanical or production requirements and the number and frequency of insertion. An important consideration for advertisers when buying space in a magazine is whether they want some type of preferred placement or pay for a run-of-book ad that can appear anywhere in the magazine, at the discretion of the publisher. There are a few preferred positions

magazines make available to advertisers including first cover (outside front), second cover (inside front), third cover (inside back), and fourth cover (outside back), which are considered to be very desirable positions in the magazine, particularly the back cover for which there is often a waiting list. Advertising space is generally sold based on space units such as full page, half page and quarter page, although some publications quote rates based on column inches. Ads can be produced in black and white, black and white plus one color, or four colors. Magazine networks offer the advertiser the opportunity to buy space in a group of publications in a package deal. Exhibit 12-15 shows an ad promoting the Ivy League Magazine Network, which is a consortium of alumni magazines for Ivy Leagues schools along with Stanford and the University of Chicago. Rate comparisons for magazines are generally made based on the cost per thousand (CPM) criterion along with targeted CPMs. NNN. The Future for Magazines—Many publications have seen their number of advertising pages decline and have found it difficult to raise rates to offset the reduction in ad pages. And while advertising revenue has been decreasing, publishers‘ other major revenue stream, circulation, has also been declining for most magazines. Today, advertising in digital editions of magazines has now surpassed print. In fact, many magazines have ceased publishing their print editions are now available only online. Magazines are also facing challenges such as rising costs of ink and paper and increases in postal rates. They also face strong competition for consumer attention from television, streaming services, the Internet, and social media. s. Stronger editorial platforms—Magazines with strong editorial platforms that appeal to the interests, lifestyles, and demographics of consumers and market trends will have the best chance of attracting readers and advertisers. Lifestyle publications targeting women have done well, as have well-targeted men‘s publications. t.

Circulation management—Circulation maintenance and attempts to increase circulation have become major challenges in the magazine publishing industry. Circulation is the second major source of revenue for most publications, and they must carefully consider the costs of attracting and maintaining additional readers or subscribers. Some publications have begun selling magazine subscriptions on Facebook by allowing users of the social media site to expand blurbs of magazine content that are common in news feeds into full articles that contain ads as well as options to subscribe.

Digital magazines—Many magazines are keeping pace with the digital revolution and the continuing consumer interest in technology by making their publications available online. As more magazines become available online, the industry will have to address important issues regarding audience measurement and readers‘ exposure to and interactions with online advertising. Marketers are also recognizing that there are opportunities to integrate their advertising in online publications with the environment and editorial content by using native advertising, which is an ad that takes the look and feel of the surrounding content. Another form of online delivery is digital editions of magazines developed specifically for tablets such as the iPad and devices using the Android operating system. For example, Exhibit 12-19 shows the digital ecosystem for Women‘s Health which extends well beyond its print edition. The magazine industry recognizes that it must continue to respond to the changes in media consumption patterns and the challenges it faces as more marketers shift their advertising monies to digital. However, publishers still feel there are inherent advantages of traditional print magazines to advertisers and have gone on the offensive to promote them. Professor Notes:

IV.

NEWSPAPERS

Newspapers are the second major form of print media and represent the largest of all advertising media in terms of total advertising volume. In 2022, an estimated $11.2 billion was spent on newspaper advertising which represents about 4 percent of the total advertising expenditures in the United States. Newspapers are an especially important advertising medium to local advertisers such as retailers. However, newspapers can also be a valuable medium to national advertisers as well. Types of Newspapers—The vast majority of newspapers are daily publications serving a local community. However, there are other types of newspapers with special characteristics that make them valuable to advertisers. Classifications of newspapers include: u. Daily newspapers—Published each weekday and found in larger cities and towns across the country. Daily newspapers can further be classified as morning (70 percent) and evening (30 percent). Many daily newspapers also publish Sunday editions. v. Weekly newspapers—Most weekly newspapers originate in small towns or suburbs where the volume of news and advertising is not adequate to support a daily paper. Weeklies appeal primarily to local advertisers in the community because of their limited geographic focus. w. National newspapers—Newspapers in this with national circulation including The Wall Street Journal, The New York Times, and USA Today. National newspapers appeal primarily to large national and regional advertisers who use specific geographic editions. x. Special-audience newspapers—There are a variety of papers that offer specialized editorial content and target specific groups. Advertising Age and Marketing News are examples of special-audience newspapers as are college newspapers. Newspapers targeting various religious groups compose another large class of special-interest papers. y. Newspaper supplements—Although not a category of newspapers per se, many papers include magazine type supplements, primarily in their Sunday editions. These include syndicated magazines such as Parade as well as local supplements produced and distributed by the paper itself. Note that Parade has been distributed in newspapers nationwide for 80 years but published its last print edition in late 2022 and now appears in digital editions only. OOO. Types of Newspaper Advertising—Advertising in newspapers can be divided into different categories which include: Display advertising—Display advertising is found throughout the paper and generally use illustrations, headlines, white space and other visuals in addition to copy text. The two types of display advertising in newspapers are local and national (general) are discussed in the text. z. Classified advertising—Classified advertising is arranged under subheads according to the product, service, or offering being advertised and run in the classified section of the newspaper. Major categories include employment, real estate, and automotive. Many papers have moved classified ads online, no longer publishing in their print editions or doing so sparingly. aa. Special ads and inserts—Special ads in newspapers include a variety of governmental and financial reports and notices and public notices. Preprinted inserts do not appear in the paper itself but are printed by the advertiser and then distributed with the newspaper. These include circulars, catalogs, and brochures in specific circulation zones. PPP. Advantages of Newspapers

Market penetration—In most areas, daily readership of newspapers can be nearly 50 percent among households with higher incomes and education levels. bb. Flexibility—Newspapers are flexible in terms of requirements for producing and running the ads and from the creative options they make available to advertisers. cc. Geographic selectivity—Advertisers can vary their coverage by choosing a paper that reaches the areas with the greatest sales potential. Most major newspapers offer advertisers various geographic or zone editions within their market. Local advertisers are also very interested in the geographic selectivity of newspapers. dd. Reader involvement and acceptance—An important feature of newspapers is consumers‘ level of acceptance and involvement with the paper, including the ads it contains. Consumers are generally very familiar with the various sections of the newspaper and knowledgeable about the types of ads they contain. Many consumers actually purchase a newspaper because of the advertising it contains. Consumers use retail ads to determine product prices and availability and to see who is having a sale. ee. Services offered—Many newspapers offer merchandising services and programs to manufacturers that make the trade aware of ads being run for the company‘s product and help convince local retailers they should stock, display, and promote the item. Many newspapers are also excellent sources of local market information through their knowledge of market conditions and research like readership studies, consumer surveys, and various reports and market studies. Newspapers can also assist small companies through free copywriting and art services. Small advertisers without an agency or advertising department often rely on the newspaper to help them write and produce their ads. QQQ.

Limitations of Newspapers

ff. Poor reproduction—The coarse paper used for newspapers, absence of color, and the lack of time papers has available to achieve high-quality reproduction limits the quality of most newspaper ads. Newspapers have improved their reproduction quality in recent years, and color reproduction has become more available. If the visual appearance of the product is important, the advertiser does not tend to rely on newspaper ads. gg. Short life span—Because a newspaper is generally kept for less than a day, an ad is unlikely to have any impact beyond the day of publication and repeat exposure is unlikely. Consumers also spend just a short amount of time with the newspaper and may not even open certain sections. hh. Lack of selectivity—While newspapers can offer advertisers geographic selectivity, they are generally not a selective medium in terms of demographics or lifestyle characteristics. There is some selectivity available, however, with regard to the type of consumers who read various sections of the newspaper such as sports, business, entertainment, and travel. ii. Clutter—Many newspapers are now offering advertisers the opportunity to use innovative shape-based ads that use unconventional sizes and formats as those shown in Exhibit 12-26, which are offered by the Los Angeles Times. RRR. The Newspaper Audience—As with any medium, the media planner must understand the size and characteristics of the audience reached by a newspaper. Basic sources of information concerning the audience size of newspapers come from circulation figures available on newspaper rate cards, on publisher‘s statements, or through SRDS‘s Newspaper Advertising Source. Circulation figures for many newspapers are verified by the Alliance for Audited Media (AAM). Newspaper 1-209 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

circulation figures are generally reported for total circulation and three additional categories including city zone, the retail-trading zone, and all other areas. National advertisers often buy newspaper space on the basis of the size of the market area they cover. jj. Audience information—Circulation figures provide basic data for assessing newspaper audience size and their ability to cover various market areas. However, the media planner also wants to match the characteristics of a newspaper‘s readers with those of the advertiser‘s target audience. Information on the circulation, characteristics, and ad rates are available from SRDS Newspaper Advertising Source. Information on audience size and characteristics are available from commercial research services such as MRI-Simmons as well as through studies conducted by the papers themselves. SSS. Purchasing Newspaper Space—The cost of advertising space in newspapers depends not only on the paper‘s circulation but also on factors such as premium charges for color or special sections as well as discounts available. Rates paid for newspaper space also differ for national versus local advertisers. kk. General versus local rates—General advertising rates apply to display advertisers outside the newspapers designated market area or to any classification deemed by the publisher to be ―general‖ in nature. Retail or local advertising rates apply to advertisers that conduct business or sell goods or services within the DMA. The rates paid by general advertisers are, on average, 75 percent higher than those paid by local advertisers. Newspapers offer several reasons for the rate differential including added costs of serving general advertisers, the method by which general advertisers purchase ad space, and the inelastic nature of demand for national advertising space. National advertisers who constitute most of the companies paying general rates do not view these arguments as valid justification for the rate differential charged by newspapers. Many marketers sidestep the higher rates by channeling their newspaper ads through special category plans, cooperative advertising deals with retailers and local dealers and distributors. ll. Rate structures—While the column inch and standard advertising unit (SAU) are used for determining basic newspaper advertising rates, there are other options and factors which must be considered. Mention should be made of flat rates versus open-rate structures, run-ofpaper (ROP) versus preferred position rates, and combination rates for using several newspapers as a group. TTT. The Future for Newspapers—Newspapers remain an important advertising medium; however, advertising revenue for traditional print papers has declined dramatically over the past several years. Some specific issues regarding the future of newspapers that should be discussed include: Competition from other media—Newspapers will continue to battle for advertising dollars from national advertisers as problems with reproduction quality and the rate differential continue. Newspapers are concerned with competition from other media and the increasing potential to lose advertising dollars to digital media, especially online sites for classified and employment advertising. Local radio and television stations (particularly cable) are also pursuing local advertisers who traditionally relied heavily on newspaper advertising. mm. Circulation—Most of the major newspapers in the United States have been experiencing a decline in circulation and are seeking ways to respond to the problem, such as by emphasizing readership measures and developing online versions of their papers. Circulation revenue for newspapers has held steady over the past few years, as many publishers are pursuing a ―subscription-first model‖ by growing the number of subscribers rather than focusing on advertising revenue. However, gains in circulation revenue have not been nearly 1-210 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

enough to make up for losses in advertising revenue—a pattern that holds true even at the large newspapers and major chains. nn. Attracting and retaining readers—The decline in readership of newspapers can be attributed to the fast-paced, time-poor lifestyle of the modern, dual-income household and popularity of TV and Internet viewing options. Of particular concern to publishers is the decline in newspaper readership among important market segments such as women and young adults. UUU. Online Delivery and Multiple Platforms—As discussed, the digital transformation of media has hit the newspaper industry particularly hard and resulted in newspaper publishers broadening their portfolios well beyond the traditional print editions. Nearly every major newspaper now has a website, and most make their papers available online and through apps for mobile devices. The digital newspaper audience has increased to just over 200 million per month, with half of the newspaper digital audience composed of those using mobile devices (smartphones and tablets) to access newspaper content. The newspaper industry is also focusing on increasing revenue generated by their digital editions from both advertising and subscription fees. Digital advertising accounted for nearly 40 percent of newspaper ad revenues in 2022, but it does not compensate for the decline in money received for print advertising. Most newspaper publishers are transforming themselves into media companies with products that include print and online newspapers, apps for those who read newspapers on mobile devices, and websites that include multiple products and services. Professor Notes:

Teaching Suggestions This chapter is designed to provide the student with a general understanding of the two major types of print media: magazines and newspapers. As with television and radio, it is important for students to understand the general characteristics of magazines and newspapers including the different types or classifications of each medium, their specific advantages and limitations as advertising media, how readership is measured, how rates are determined, and how advertising space is purchased. The instructor should call students‘ attention to the wide variety of magazines available and their ability to reach nearly every consumer interest, lifestyle, and activity as well as most businesses. You might ask your students if there is any segment of the consumer or business market that does not have one or more magazines targeted towards it. One interesting point of discussion is whether there are too many magazines on the market and whether it is possible for the highly specialized publications to survive. A very interesting website that you may want to visit for some interesting information on magazines is that of the Association of Magazine media (formerly known as the Magazine Publishers of America [MPA]). Their site can be found at www.magazine.org. With regard to newspapers, it is important to cover the challenges facing the industry which has seen its total advertising revenue decline dramatically over the past several years. Circulation and readership of traditional newspapers continues to decline in most major markets and publishers are now making their papers available online to retain readers and ad revenue. Newspapers are likely to continue to be an important advertising medium for local advertisers and attention might be given to how national advertisers can be encouraged to allocate more of their budgets to newspapers. Attention should also be given to the problem of declining newspaper readership, particularly among young people. You might ask students how many of them read a newspaper on a daily basis and what particular sections they read. It is likely that many of them do not read a newspaper regularly. The implications for advertisers can be discussed. The Newspaper Media Alliance also has an excellent website that contains a great deal of information that can be helpful in discussing trends and developments affecting newspapers, both in general and as an advertising medium. The site can be found at www.newsmediaalliance.org.

Answers to Discussion Questions 85. Discuss the challenges facing the newspaper and magazine industries. How are these challenges affecting their role as advertising media? (LO 12-1, 12-4, 12-7) Both magazines and newspapers are facing significant challenges from digital media, which is impacting the number of people who read the traditional print version of each medium and is also attracting an increasingly larger amount of marketers‘ advertising budgets each year. Many magazines and newspapers are struggling to get consumers to pay for their online editions and continue to look for ways to monetize them. Although they can sell banners, videos, and other forms of online advertising to marketers, the ad rates they can charge cannot match those in print and generate enough revenue to make up for the losses they are incurring from the decline in the sale of print ads. The role of magazines and newspapers in the advertiser‘s media plan differs from that of the broadcast media because they allow the presentation of detailed information that can be processed at the reader‘s own pace. For this reason, newspapers and magazines are often referred to as highinvolvement media. The wide variety makes magazines an appealing medium to a vast number of advertisers. More companies advertise in magazines than in any other medium. Strengths of magazines include their selectivity, excellent reproduction quality, creative flexibility, permanence, prestige, readers‘ high 1-212 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

receptivity and involvement, and services they offer to advertisers. But the past few years have been very difficult for the magazine industry as advertising revenue has been declining for nearly a decade. The costs of paper and ink continue to rise, and the industry has had to weather several significant increases in postal rates, which have had a major impact on their cost. Magazines are also facing strong competition for consumers‘ attention from television, streaming services, the Internet, and social media. Newspapers, the second major form of print media after magazines, are increasingly being read online through digital formats. In 2022, an estimated $11.2 billion was spent on newspaper advertising, including print and digital, which was about 4 percent of the total advertising expenditures in the United States. But newspapers have a number of characteristics that make them popular among both local and national advertisers, including their extensive penetration of local markets, flexibility, geographic selectivity, reader involvement, and special services. However, their limitations include their reproduction problems, short life span, lack of selectivity, and clutter. There are a number of issues newspapers must address to maintain their strong position as a dominant local advertising medium and to gain more national advertising: competition from digital and other advertising media, maintenance and management of circulation, and declining readership. They are also concerned about where future readers will come from, as many young people now turn to streaming services, the Internet, and social media for information. 86. Discuss the role of magazines as part of an advertiser‘s media strategy. What are the advantages and limitations of magazines? (LO 12-1, 12-2) Traditional print magazines play an important role as advertising media in an integrated marketing communications program. They allow the presentation of detailed information that can be processed at the receiver‘s own pace whereas TV and radio are externally paced media, which means the receiver cannot control the rate at which the information is processed. Magazines are more suitable than broadcast media for delivering detailed ads with a great deal of information or visuals that the reader needs time to study or examine. However, magazines are not as effective as television for reaching mass audiences and they do not offer advertisers the same creative options that are available through TV commercials. There are numerous advantages of magazines as advertising media. These include their selectivity or ability to reach specific target audiences; reproduction quality; creative flexibility in terms of the type, size, and placement of advertising material; permanence or long-life span; the prestige associated with advertising in some publications; consumer receptivity to and involvement with magazine advertising; and the special services offered by some publications. Limitations of magazines include the high costs for advertising in some publications, the limited reach and frequency of magazines, the long lead-time required to place an ad, and the high clutter level in many magazines, which makes it difficult for an ad to be noticed and read. 87. Find an example of a business or health care magazine and analyze the market that reads this publication. Discuss the types of companies that might advertise in this magazine. (LO 12-1, 12-2) One example of a healthcare magazine is Dynamic Chiropractor. This magazine has a print and digital version. The site describes that the target audience or the readers of the publication are ―welleducated, influential buyers in their professions and households. Our brands and our services provide them with the information they need to make important purchasing decisions.‖ The site also addresses their advertisers saying that they, ―...deliver access to the content-driven environment necessary to reach and engage their most sought-after audiences, helping them drive sales growth for their companies.‖ It is likely that certain medication brands would advertise in the publication as well as

producers and distributors of certain medical equipment. Additionally, journals might advertise in the magazine to solicit publication submissions from readers. Student examples will vary. 88. If you were purchasing magazine advertising space for marketers of fitness products such as workout clothing or athletic shoes, what factors would you consider? Would your media plan be limited to health and fitness magazines or would you run ads in other types of publications? Explain. (LO 12-3, 12-5) In purchasing magazine space to advertise workout gear, the media planner would obviously want to know what publications are best suited for reaching the target market and their advertising space rates. Consideration should also be given to the amount of advertising for gear that appears in these publications and the problem of getting the company‘s ad noticed among all the competing ads. Some marketers limit their advertising to publications that focus specifically on the fitness market. But they might also advertise in magazines that reach people somewhat interested in learning about health and fitness, and sometimes, people who choose this apparel as a fashion statement. Consideration also must be given to fitness-minded people who may be viable prospects, but do not read any of these fitness publications. To broaden its reach, the company might want to look at other magazines that reach fitness-minded people such as general sports publications (e.g., Sports Illustrated or ESPN The Magazine), travel magazines, business magazines, or other publications that reach this age and lifestyle group. A problem marketers face in advertising in these general publications is that of wasted coverage as many of the readers may not be interested in fitness. Thus, advertising in general sports, business, or travel magazines may not be as cost-effective as the more narrowly targeted fitness publications. 89. What are the different factors advertisers must consider in purchasing advertising space in magazines and newspapers? (LO 12-3, 12-6) For magazines, advertisers must consider the cost of the type of ad they want to place and where they want to place it. Another important consideration for advertisers considering magazines is their circulation or the number of individuals who receive a publication through subscription or purchase. They are also concerned with readership and the total audience of the magazine. They would need to know how many people are reading and characteristics of those audience members. Advertisers in newspapers should also consider circulation numbers and the characteristics of their readers. Additionally, they should consider the geographic reach of the newspaper, as the purchase process and the rates paid for newspaper space differ for general and local advertisers. 90. The Association for Magazine Media promotes the value of advertising in traditional print magazines by citing research showing that print advertising is superior to online ads with regard to its ability to deliver a reading experience that supports comprehension of and connection with an advertiser‘s message. Discuss some of the reasons why print ads may be superior to online ads. (LO 12-4) Many print ads use strong visual images, catchy headlines, or some of the creative techniques discussed earlier to grab the interest of magazine readers. The reproduction quality of most magazines is far superior to that offered by the other major print medium of newspapers, particularly when color is needed. The use of color has become a virtual necessity in most product categories, and more than two-thirds of all magazine ads now use color. The excellent reproduction quality of magazines provides the opportunity for innovative creative work by agencies. Advertisers generally prefer color ads because they have greater visual impact and are superior for attracting and holding attention. Roper Starch Worldwide analyzed the effect of various factors on the readership of magazine ads. The ―noted‖ scores (the percentage of readers who remember seeing the ad in a publication they read) are anywhere from 6 to 59 percent higher for a four-color full-page ad than for a black-and-white ad, depending on the product category. ―Read-most‖ scores (the percentage who say they read more than half of the copy of an ad) are also higher for four-color versus black-and-white ads, by about 25 1-214 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

percent on average. Other studies have examined the impact of size and color and found that a fourcolor spread (two facing pages) outperforms a one-page color ad by 30 percent and a black-and-white spread by 35 percent in terms of ad recall. Ads requiring special mechanical production such as bleed pages or inserts may also cost extra. 91. Discuss why so many magazines are ceasing publication of their print editions and publishing digital editions only. Do you think magazines can survive by publishing digital editions only? (LO 12-1, 124) Magazines are facing many of the same challenges as newspapers. Advertising revenue for print magazines, including both consumer and trade publications, declined from $17 billion in 2013 to $12.7 billion in 2022 and this decline is likely to continue. Like newspapers, magazines have been experiencing declines in readership, lower paid subscription numbers, and fewer single copy sales, as consumers increasingly switch to free or more affordable substitutes such as online publications. For many years, digital editions of magazines were regarded as a side dish to the main course of a print edition, or as an optional add-on to a subscription. Today, however, more publications are choosing to shutter their print editions in favor of digital editions only. The exodus from print gained momentum in 2018 when the three major magazine publishers—Hearst, Conde Nast, and Meredith Corp.—ceased publishing the print versions of some popular magazines, making them available only online. The shift to digital-only has continued over the past three years as in 2022 when Dotdash Meredith announced that it would cut monthly print editions for six titles including Eating Well, Entertainment Weekly, Health, InStyle, Parents, and People en Espanol. There are a number of reasons magazine publishers are moving to a digital-first or -only strategy. Closing print editions helps cut costs and copes with the loss of advertising revenue that most magazines are facing as marketers shift more of their media budgets from traditional to digital media. Another reason for the shift is that many magazines are facing competition from digital platforms that are continually updated and provide timely coverage of various topics, issues, and events as well as ―breaking news.‖ Furthermore, some publishers are going online because digital editions can help them better understand their readers, and then use this to provide targeted content that meets their needs and interests. Despite efforts to promote the value of traditional print magazines, the shift to digital editions is very likely to continue and to increase. 92. Why have national newspapers such as The New York Times and The Wall Street Journal been successful at increasing their subscribers despite the decline in newspaper readership? Discuss some of the reasons marketers advertise in these papers. (LO 12-1, 12-5) Newspapers in the United States with national circulation include USA Today, The Wall Street Journal, and The New York Times. All three are daily publications and have editorial content with a nationwide appeal. The Wall Street Journal has 650,000 subscribers to its print edition and another 3 million to its digital edition. The print and digital editions of the WSJ are an excellent way to reach businesspeople and its very affluent readership base. The fastest growing national newspaper is The New York Times, which reached more than 10 million subscribers across its print and digital editions in 2022 and has a goal of reaching 15 million over the next five years. The New York Times attracts a very upscale and engaged audience, which makes it popular among advertisers. The print edition of the newspaper is still widely read.

National newspapers appeal primarily to large national advertisers and to regional advertisers that use specific geographic editions of these publications. For example, The Wall Street Journal has three geographic editions covering 21 regions in which ads can be placed. 93. Discuss how the factors involved in the decline in newspaper readership in the U.S. have impacted news coverage in many local markets. What are the implications of the closing of many local newspapers for advertising in addition to good journalism? (LO 12-5, 12-7) The newspaper industry has been in steady decline due to readership and advertising revenue shifting to digital media. This affects not only the companies that publish newspapers but also the local communities that depend on newspapers and their core offering of news and information. Newspapers closing leaves many areas with no local paper. As more newspapers close down, the number of ―news deserts‖ grows and many parts of the country no longer have a local paper. The University of North Carolina‘s Hussman School of Journalism defines news deserts as communities in which the inhabitants have no local newspaper or are facing notably diminished access to the news and information that are necessary in a grassroots democracy. It is estimated that some 70 million Americans live in a county with either no local news organization or only one. Most areas without a source of local news tend to be poorer, older, and less educated than those covered well. Another manifestation of the problem is the emergence of ―ghost newspapers,‖ a term used by journalism professor Penelope Muse Abernathy to describe newspapers that still exist and publish, but do so as shadows of what they once were, with little original or in-depth reporting. As news and advertising has moved from the printed page to the webpage, tech giants such as Google and Facebook have reaped the benefits, scooping up ad revenue while squeezing the news outlets that create the content on which those online platforms rely. According to the News Media Alliance, an association that represents about 2,000 outlets, as much as 70 percent of digital ad revenue goes to Google and Facebook and their respective parent companies, Alphabet and Meta. This means that even local ad revenue no longer stays in the local community. 94. What are some of the advantages online magazines and newspapers offer for advertisers? Find the online media kit of a magazine or newspaper and analyze how the publisher is promoting the digital edition to prospective advertisers. (LO 12-4, 12-7) Many magazines and newspapers are keeping pace with the digital revolution by making their publications available online. They are doing so as consumers‘ media consumption patterns show they are spending more time online than with traditional media. Younger consumers in particular spend a great deal of time surfing the Internet and are very comfortable reading magazines and newspapers online rather than in traditional print form. Some of these online readers are crossover users who read both the print and online versions, which expands the overall audience for the magazine or newspaper. However, in many cases, the online readers are choosing to read the publication online as they can get the same information as well as additional stories of interest to them. Magazine publishers in particular have to decide if they want the online version of their publication to mirror what is in print to build the overall brand or make the online version different. Many publishers are viewing the online version of their magazines and newspaper as an opportunity to attract more advertising as they can provide marketers with a variety of advertising options including video and banner ads, sponsorships, and other interactive based tools. Magazine and newspaper publishers recognize more and more consumers prefer to consume media online and thus they are going to have to adapt their publications to the online environment if they are to survive.

Additional Discussion Questions (Not in text) 95. Discuss how advertisers deal with the clutter problem in both magazines and newspapers. Explain why advertisers of products such as cosmetics or women‘s clothing would choose to advertise in a publication such as Vogue or Elle, which devote most of their pages to advertising rather than articles. (LO 12-1, LO 12-2) Clutter is a serious problem in both magazines and newspapers as the ratio of advertising to editorial content is very high in both. The main way for advertisers to deal with the clutter problem is through creative advertising and space buys. Ads with strong visual images, catchy headlines and copy, or very creative approaches such as ―pop-ups,‖ gatefolds, or special inserts are ways of breaking through the clutter. Creative space buys such as ―island ads‖ or consecutive page space buys may also help ads be noticed. Of course, it is also important to remember the basic advertising principle of developing an ad that offers a benefit or promise to the readers and invites them to explore it further. The clutter level that results from the high number of advertising pages in magazines such as Vogue or Elle is clearly a problem for advertisers. However, they must weigh the clutter problem against the fact that women are very likely to be receptive to ads for cosmetics or clothes in these publications. In fact, one might argue that one of the reasons women buy fashion magazines such as Vogue or Elle is to see the ads. For example, clothing ads provide some insight into new styles and fashions and will be of great interest to many of the magazine readers. Advertisers will tolerate the high number of ads in these publications because they create a very favorable environment that includes high-quality photography and artwork as well as articles that are of interest to women. 96. Choose a specific target market that an advertiser might want to reach. Discuss how magazines and/or newspapers could be used to reach this particular market segment in a cost-effective manner. (LO 121) First, note that selectivity is an inherent advantage of advertising in many magazines. Most magazines target special-interest groups and allow advertisers to target segments of the population that are of interest to them. In addition to selectivity based on interests or topic, magazines can also provide demographic and geographic selectivity. This is done through editorial content as well as through special demographic and geographic editions offered by many publications. Many magazines are also offering greater selectivity through processes such as selective binding and ink jet imaging. Readers can be targeted by zip code, metropolitan area, region, or demographics. Students should be asked to choose a product or service targeted at a specific market and discuss how magazines are an effective way to reach this group. They might find an online media kit for a magazine, which usually provides very detailed information on how the magazine can reach specific target audiences and users of various products and services. Newspapers offer the advantage of offering advertisers geographic selectivity since they can reach areas or cities of specific interest to them. However, newspapers are not a selective medium in terms of demographics or lifestyle characteristics. One way advertisers can increase selectivity of newspapers is by advertising in certain sections of the paper such as the sports, food, entertainment, or business section. Within a local market area advertising in specific geographic or zone editions of a paper can enhance selectivity. Many newspapers in large metropolitan areas offer zone editions so local retailers can reach readers in their trading area. Again, students might be encouraged to contact a local newspaper (even the college paper) and request information about advertising in the publication as well as information on advertising rates. They should analyze how effective the newspaper is at reaching a target market for a specific product or service

97. Discuss how circulation figures are used in evaluating magazines and newspapers as part of a media plan and setting advertising rates. (LO 12-3) Circulation figures represent the number of individuals that receive a publication, through either subscription or store/newsstand purchase. Total audience or readership refers to the total number of individuals who read a magazine or newspaper and is determined by taking the readers per copy and multiplying this figure by the circulation of the average issue. Magazines and newspapers use circulation figures and readership estimates to set their advertising rates. The greater the number of readers the publication can deliver, the more than can charge for advertising space. Media buyers often prefer to use circulation figures of a publication in making their purchases since they are more verifiable. Total audience or readership figures rely on estimates of pass-along readership, which occurs when the publication is read by individuals other than the primary subscriber or in places out of the home such as waiting rooms, airplanes, etc. Media buyers generally attach greater value to the primary in-home reader versus the out-of-home or pass-on reader as the former generally spends more time with the publication, picks it up more often and is thus more likely to be attentive and responsive to advertising. 98. Discuss how the role of newspapers as an advertising medium would differ for national versus local advertisers. Do you feel that the rate differential newspapers charge national versus local advertisers is justified? (LO 12-3) Newspapers have become primarily a local advertising medium as nearly 50 percent of newspaper revenue comes from local advertising. However, several billion dollars are spent in newspapers each year by national advertisers. Much of this money is spent in national newspapers such as USA Today, The Wall Street Journal, and The New York Times. However, national advertisers advertise in local newspapers, particularly the larger metropolitan publications that reach the top 50 or 100 markets. Automobile companies, movie studios, and national retailing chains are heavy users of newspaper advertising as consumers rely on newspapers to get timely information about these product/service categories. Many national advertisers are using newspapers more since advancements have made it easier and less expensive to use four-color for newspaper ads. To attract more business from national advertisers, newspapers must sell them on the advantages of advertising in newspapers. They have to point out the various advantages of advertising in newspapers such as extensive penetration, geographic selectivity and reader involvement and acceptance. They also need to coordinate promotional programs between national advertisers and local retailers to encourage them to use newspapers more. Newspapers must convince them of the value of advertising in their publications and work to improve relations with national advertisers. Newspapers need to become more flexible to attract national advertisers. Some ideas may include guaranteeing specific positions in newspapers in multiple markets, offering creative space options such as ―island ads‖ amidst stock tables, and making color more readily available and less expensive. Local advertisers account for the vast majority of newspaper advertising as the medium is used heavily by retailers in a variety of product and service categories. Local retailers know that consumers rely heavily on newspapers for information regarding sales, special promotions, and to determine availability of products and services. The value of newspapers as a source of information is a major reason they are used so heavily by local advertisers. Students should be encouraged to find some ads used by a national advertiser such as an automobile company as well as some used by local advertisers and compare them with regard to factors such as the type of message used, the information provided and the use of price or other promotional incentives. The rate differential most newspapers have for national versus local advertising is a very controversial issue. Those supporting the differential argue that it is justified because the way newspaper ad space is purchased by national advertisers often requires the paper to pay commissions to both sales reps and agencies. They also argue that national advertisers are less dependable than local advertisers and that demand for national 1-218 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

advertising is inelastic and thus will not increase if rates are lowered. National advertisers do not view these arguments as valid justification for the rate differential. They argue that the costs of handling their advertising business are not greater than that of local advertisers since their ads are prepared by agencies and they are less likely to request special services such as the design and preparation of their ads. They also note that many national advertisers do use newspapers on a regular basis. 99. What is meant by native advertising? Do you think it is appropriate for advertisers to run native ads that appear to be editorial content rather than sponsored advertising? Why or why not? (LO 12-4) Native advertising has been defined in various ways but generally refers to a form of paid media where the ad takes on the look and feel of the surrounding content and follows the natural form and function of the user experience in which it is placed. Advertorials in magazines and newspapers are a form of native advertising and have been around for many years. However, native advertising has become a major issue in recent years with the growing popularity of digital media as many marketers are using ad formats in which they integrate their message seamlessly into the editorial content of a web site or an online publication. Thus, their ad takes on the look and feel of the surrounding content and its visual design, which makes it look less like an ad and more like editorial content. Concerns have been expressed over the use of native ads as critics argue that they are threatening one of the most important assets of a magazine, which is its relationship with readers. The church-andstate divide of editorial versus advertising has always been important and the American Society of Magazine Editors (ASME) has maintained guidelines upholding that separation. ASME guidelines state that ad pages should not be related to editorial material in a manner that implies endorsement and that advertiser-provided content should be clearly labeled as advertising. Readers of a web site or online magazine are likely to attribute more credibility to information that they view as editorial content rather than advertising. However, the ASME really has little power to enforce its guidelines and there is pressure on the magazines to find ways to increase revenue. However, the print media must be careful not to go too far with this practice as it may undermine the integrity of the publications, which could in turn lead to even fewer readers as well as advertisers. 100. Find a copy of a national newspaper such as USA Today or your local newspaper and analyze the types of companies that are advertising in it and how they vary by section. Why do you think these companies are advertising in this newspaper? (LO 12-5) Students should locate a national newspaper such as USA Today or The Wall Street Journal as well as the local newspaper in your area and analyze the types of companies advertising in each publication. Obviously, national newspapers are going to contain ads primarily for large national advertisers who want to reach consumers across the country or in a particular region as national newspapers will offer regional editions in which companies can advertise. A publication such as The Wall Street Journal will have many ads targeting individuals of high socio-economic status such as ads for automobiles and luxury brands such as watches. There will also be a large number of business-to-business ads, particularly for financial services and technology products and services. Local newspapers will primarily contain ads from local merchants such as automotive dealers, retailers, merchants, and service providers. Depending on the size of the market the local newspaper serves, there may be ads run by national advertisers, particularly if the newspaper serves one of the top 50 or 100 markets in the country. 101. What are some of the reasons there has been such a dramatic decline in the readership of newspapers? What might newspaper publishers do to address this problem? (LO 12-5, 12-7) Declining readership is also a serious problem for newspapers, particularly among certain groups such as young people and women. There are several reasons for the decline in circulation and

readership including lifestyle changes and new technologies available. Newspapers have been impacted by the Internet, as the content they provide has been unbundled with the explosion of news and information sources available online through various websites, as well as aggregation sites. There also has been a tremendous increase in the amount of news programming available on television through sources such as CNN, CNBC, MSNBC, and many other cable networks. Many local stations are now offering 24-hour broadcasts of their news on local cable channels. There is also thorough coverage of sports on television with programs such as ESPN‘s SportsCenter, a one-hour sports news show aired numerous times throughout the day. Many young people are simply more likely to get their news online or through broadcast media rather than newspapers. Moreover, if they do not see their parents reading a newspaper regularly, it is less likely they will become regular readers. The obvious problem of the decline in readership is that newspapers must lower their advertising rates if they attract fewer readers. Young people and women are very important target audiences to advertisers since they are heavy users of many products and services. If newspapers cannot reach these audiences on a regular basis, advertisers will turn to other media vehicles that can. There is no easy answer to the question of what newspaper publisher can do to address the problem of declining readership. The Newspaper Association of America, which is now part of the News Media Alliance, has developed a number of marketing campaigns in recent years that have targeted young people to encourage them to get into the habit of reading a newspaper. The newspaper industry will continue to develop digital versions of their papers which a way to attract more readers. The industry‘s efforts might focus on retaining the subscribers and readers they currently have and showing the value of these readers to advertisers.

CHAPTER 13 SUPPORT MEDIA Chapter Overview In addition to the broadcast and print media discussed in the two previous chapters, marketers have a variety of alternative media from which to choose. In fact, the number of support media continues to increase almost daily, with advertisements appearing almost everywhere. In addition to the familiar outdoor ads and transit ads, a number of new media have recently appeared. Parking meters, trash cans, restroom walls, parking garages, sidewalks, and shopping carts are just a few of the many places now carrying ads. These media, often referred to as support media, are assuming an increasing role in the media mix. In this chapter, we distinguish between traditional and nontraditional support media—the former having been around a lot longer than the new media now appearing. The purpose of this chapter is to familiarize the student with some of these media, and to discuss the advantages and disadvantages of each.

Learning Objectives 37.

Describe the role of support media in an IMC program.

38.

Identify traditional and nontraditional support media in the development of an IMC program.

39.

Compare the advantages and disadvantages of support media.

40.

Describe how audiences for support media are measured.

41.

Describe how to measure the effectiveness of support media.

Chapter and Lecture Outline I.

THE SCOPE OF THE SUPPORT MEDIA INDUSTRY

Support media are referred to by several titles, among them alternative media, below-the-line media, nonmeasured media, and nontraditional media. Many advertisers, as well as the top 100 advertising agencies, have increased their use of both traditional and nontraditional support media, and as new alternatives are developed, this use will continue to grow. Professor Notes:

II.

TRADITIONAL SUPPORT MEDIA

A variety of out of home (OOH) advertising media are available to the marketer. Outdoor billboards and signs, street furniture, place-based media, and transit ads are just a few of the alternatives that can be used. VVV. Out of Home Advertising (OOH)—Out of home (OOH) advertising media encompass many advertising formats found out of the home. Figure 13-1 shows many of these ad formats. While one of the oldest advertising mediums, outdoor advertising has come under attack by environmentalists, city governments, and the public as a whole. The net result has been a decline in the number of billboards across the nation. At the same time, the outdoor advertising industry continues to grow and be successful as the amount of dollars billed in this medium has increased continuously since 1982. OOH advertising has continued to grow in revenues to $8.6 billion in 2022. Much of the reason for this success can be attributed to the ability of the industry to become more innovative through technology. In addition, an increasing focus on keeping the advertising message in front of the consumer has contributed to the increased adoption of this medium. As digital outdoor options increase, advertisers are finding this medium even more attractive. 87. Digital out of home (DOOH)—Digital out of home (DOOH) media is one of the fastestgrowing out of home industries and takes two forms: o

Video advertising networks, which include digital video screens that appear in offices, stores, theaters, inside transit networks, and entertainment venues such as health clubs, sporting arenas, bars, and restaurants

Digital billboards, or screens that transmit in LED (light-emitting diode) or LCD (liquid crystal display) technologies. Digital billboards include large boards found at sports and entertainment venues, retail locations (like malls), in transit locations (terminals, etc.), and at roadsides or large traffic locations.

The global DOOH signage segment is expected to reach $21.6 billion by 2027 due to its ability to be creative, attract attention, and engage the consumer WWW. Place-Based Out of Home Media—As noted, the outdoor advertising industry has been able to remain successful through the development of new outdoor media, as well as innovations in existing ones. Digital outdoor is one of the fastest growing areas in all outdoor advertising.

Aerial advertising—Airplanes pulling banners, skywriting (in letters as high as 1,200 feet), and blimps all constitute another form of outdoor advertising available to the marketer. Generally these media are not expensive in absolute terms and can be useful for reaching specific target markets. XXX. In-Store Media—Advertisers use in-store media to promote their products in supermarkets and other stores with atypical media like in-store ads, aisle displays, store leaflets, shopping cart signage, and in-store TV. These point of purchase materials include video displays on shopping carts, kiosks that provide recipes and coupons at counters and cash registers, LED boards, and ads that broadcast over in-house screens. Many advertisers are spending more of their dollars where decisions are made now that they can reach consumers at the point of purchase, providing additional product information while reducing their overall marketing efforts. YYY. Miscellaneous Out of Home Media—Figure 13-4 lists a number of additional OOH media available. ZZZ.

Transit Advertising—Another form of out-of-home advertising is transit advertising. While similar to outdoor in the sense that signs and electronic billboards are often employed, transit differs in that these ads are oriented around transportation. Buses, taxis, commuter trains, trolleys, airplanes, and subways are some of the transit forms employed. Types of transit advertising—Three types of transit advertising are most commonly employed:  Inside cards are found on the insides of buses, taxis, or commuter trains.  Outside posters are those found on the backs and tops of taxis, and/or on the backs, sides and fronts of buses, trains, and trolley cars.  Station, platform, and terminal posters are found in bus and train stations, airport terminals, and on train platforms. Advantages and disadvantages of OOH advertising. 

Advantages include: 

Wide coverage of local markets—With proper placement, a broad base of exposure is possible in local markets.



Frequency—Because purchase cycles are typically for 30-day periods, consumers are usually exposed a number of times, resulting in high levels of frequency.



Geographical flexibility—OOH can be placed along highways, near stores, or on mobile billboards, almost anywhere that laws permit.



Creativity—OOH can be placed along highways, near stores, or on mobile billboards, almost anywhere that laws permit.



Ability to create awareness—OOH can lead to a high level of awareness.



Efficiency—OOH usually has a very competitive CPM when compared to other media.



Effectiveness—In a study reported by BBDO advertising, 35 percent of consumers surveyed said they had called a phone number they saw on an OOH ad.



Production capabilities—Digital technologies allow for rapid turnaround time and messages that can be changed in minutes.



Timeliness—Many outdoor ads appear in or near shopping areas or on or in the vehicles taking customers there, thus resulting in timely exposures.

Disadvantages include: 

Waste coverage—It is not likely that everyone driving past a billboard is part of the target market.



Limited message capabilities—Exposure time is short and messages are limited to a few words.



Wearout—Because of the high frequency of exposures, OOH may lead to a quick wearout.



Cost—Because of decreasing signage availability and the higher cost associated with inflatables, outdoor advertising costs have risen.



Measurement problems—One of the more difficult problems of OOH advertising lies in the accuracy of measuring reach, frequency, and other effects.



Image problems—OOH advertising has suffered some image problems as well as some disregard among consumers.

Advantages and disadvantages of transit advertising. 



Advantages include: 

Exposure—Long length of exposure (such as a subway ride) to an ad is one major advantage of indoor transit forms.



Frequency—Because our daily routines are standard, those who ride buses, subways, and the like are exposed to the ads repeatedly.



Cost—The CPM for transit advertising is low on a relative cost basis.

Disadvantages include: 

Reach—While an advantage of transit advertising is the ability to provide exposure to a large number of people, this audience may have certain lifestyles and/ or behavioral characteristics that are not true of the target market as a whole.



Mood of the audience—Sitting or standing on a crowded subway may not be conducive to reading advertising, let alone experiencing the mood the advertiser would like to create. Hurrying through an airport may create anxieties that limit the effectiveness of the ads placed there.

AAAA. Measurement in Out of Home Media—In 2019 the OAAA announced a new audience measurement system that had been in development for the previous five years. OOH Ratings is considered to be an improvement over the traditional measure of opportunity to see, with a ―likely to see‖ metric that can also provide demographic and ethnographic data. The new data included a combination of eye tracking, circulation, and travel survey data all combined into one rating by a

coalition of research companies. A number of other sources of audience measurement are provided in the text. Professor Notes:

III.

PROMOTIONAL PRODUCTS MARKETING

The Promotional Products Association International defines promotional products marketing as: ―The advertising or promotional medium or method that uses promotional products such as ad specialties, premiums, business gifts, awards, prizes, or commemoratives‖ Promotional products marketing is the more up-to-date name for what used to be called specialty advertising: ―A medium of advertising, sales promotion, and motivational communication employing imprinted, useful, or decorative products called advertising specialties, a subset of promotional products. Unlike premiums, with which they are sometimes confused (called advertising specialties), these articles are always distributed free—recipients don’t have to earn the specialty by making a purchase or contribution.‖ There are thousands of advertising specialties such as ball-point pens, matchbook covers, mugs, or expensive gift items have been used to account for over $23.3 billion per year in expenditures in this medium (see Figure 13-5). Advantages and Disadvantages of Promotional Products Marketing—Because of the wide variety of forms that this form of advertising might assume this medium offers advertisers a variety of advantages. Advantages include: 23) Selectivity. 24) Flexibility. 25) Frequency. 26) Cost. 27) Goodwill. 28) High recall. 29) Supplementing other media. Disadvantages include: 30) Image. 31) Saturation. 1-224 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

32) Lead time. 33) Reach. Measurement in Promotional Products Marketing—Owing to the nature of the industry, specialty advertising has no established ongoing audience measurement system. The Promotional Products Association International (PPAI) is the trade organization of the industry. While no formal audience measurement organizations or effectiveness measures currently exist, this organization continues to originate and support research in these areas. Some of the findings of these studies are presented in the chapter. Professor Notes:

IV.

OTHER TRADITIONAL SUPPORT MEDIA

Almost every day, a new advertising medium seems to emerge. Ads are appearing on restroom walls, in elevators, on movies and videotapes, and seemingly everywhere a message can be fit. (The instructor might stimulate a lively discussion at this point by asking students where they have seen ads recently. All of those present for this discussion will be surprised!) Some of the more common and more pervasive ones are discussed here. Advertising in Movie Theaters—One widely-used advertising medium is ads at the movies. While in the past the practice has come under fire from movie makers and consumers, they are being used more and more for the advertising of new movies as well as products and/or services. Movie theater ad sales were expected to reach $444 million in 2022. Advantages of movie theater advertising: 

Exposure—Ticket sales are still substantial.



Emotional attachment—Studies have shown that movie-ad viewers are more engaged than those watching TV spots.



Cost—The cost is relatively low for costs per exposure.



Attention—Movie watchers pay attention to the ads shown in theaters.



Clutter—Most theaters limit the number of ads shown.



Proximity—Since many theaters are located in or adjacent to shopping malls, potential customers are ―right next door.‖



Segmentation—A key advantage of movie advertising is the ability to target specific demographic segments.



Quality—The high-quality production including sight and sound allow more creative and attention getting ads.



Integration—Those who download movies online are actually more likely to attend a movie than is the typical adult.

Disadvantages of movie theater advertising: 

Irritation—A major disadvantage; many people do not wish to see advertising in these media.



Cost—CPMs tend to be higher than in other media.

Professor Notes:

NONTRADITIONAL SUPPORT MEDIA

As advertisers attempt to find different ways to reach consumers when and where consumers want to be reached, they are turning to a variety of new media. In this section of the chapter we discuss some of these new media. Branded Entertainment—This form of advertising blends marketing and entertainment through television, film, music talent, and technology. Branded entertainment takes on a variety of forms including: Product placements—Whether one considers product placements an advertising form or a form of promotion, no one can argue the fact that this means of getting exposure to a product is on the increase. Product placements are not a new phenomenon; placements are known to have existed as early as the 1930s and were commonly employed via soap operas in the 1950s. (Again, an interesting discussion can be stimulated by asking students to name products that have appeared in movies or on TV.) Industry analysts expect this trend to continue as placements move from traditional media to alternative media, providing additional communication outlets, and as people continue to attempt to avoid ads and marketers continue to look for more ways to get their products in front of you without actually advertising. Product integration—Product placements are integrated throughout the program, and in some instances are a key part of the script Advertainment—The creation of video or music content in an attempt to entertain viewers while advertising their products. Another form of advertainment is advergames, which are online games designed to promote products through electronic games. Content sponsorship—Advertisers sponsor specific programs, receiving placements, integrations and/or promotions in return for content sponsorships. Ad-supported video on demand (VOD)—VODs are specialized content programs offered online and by some cable TV networks that are developed by advertisers and provided to the cable operators for free. Others—Various other forms of branded media also are increasing in use. Advantages of branded entertainment: 

Exposure.



Frequency.



Support for other media.



Source association.



Cost.



Recall.



Bypassing regulations.



Acceptance.



Targeting.

Disadvantages of branded entertainment: 

High absolute cost.



Time of exposure.



Limited appeal.



Lack of control.



Public reaction.



Competition.



Negative placements.



Clutter.

Measurement in branded entertainment—While there is no accepted standard of measurements in branded entertainment, a number of companies are now offering measurement services, such as: ● Nielsen Media Research. ● Brandchannel Product Placement Watch. ● Comscore. ● Ben Group. Guerilla Marketing—Often referred to as stealth, street, buzz, ambush or viral marketing, this form of promotion attempts to have the product or brand exposed through a variety of no or lower cost methods that attempt to capitalize on free exposures, benefit from competitors‘ promotional efforts, etc. While these stunts have the potential to go viral, they are often very expensive to produce and are risky. Miscellaneous Other Media—While the list is too extensive to include all here, some media increasing in usage include branded phone calls, parking lot ads, gas station pump ads, and place-based media. Advantages and disadvantages of miscellaneous alternative media.



Advantages include: 

Awareness and attention.



Cost-efficiencies.



Targeting.

Disadvantages include: 

Irritation.



Wearout.

Professor Notes:

Teaching Suggestions As the instructor is no doubt aware, there is a lot of information that can be (and needs to be) conveyed regarding support media. When students think about advertising, they usually think about broadcast and print media. In fact, there is a great deal of money spent to advertise in these alternative support media— both traditional and nontraditional. More and more advertisers are shifting their monies previously spent on traditional media like TV and newspapers, to the various forms of support media and the Internet. Some of these media will also readily come to mind—for example, outdoor—while others are less likely to do so. Coverage of the characteristics of some of the media presented in this chapter can lead to interesting discussions. As indicated, discussions of product placements and integrations, advertising in movie theaters, and new places where ads are appearing generally get students involved, and may lead to heated discussions. Students may be encouraged to engage in a debate over the merits and/or ethics of some of these advertising forms. Our lectures generally follow the outline set forth in the text. We discuss the characteristics of the various media, the advantages and disadvantages, and some of the sources of information that are available. We then tie these materials back to the media strategy chapter and the communications models chapter to demonstrate how and when such media might be employed. It is also possible to integrate films, videos, and guest speakers into this coverage. The Local Search Association, the PPAI, and many outdoor advertising agencies offer guest speaker programs and/or other programming that can be effectively used. Finally, outside sources such as Ad Age and Adweek write extensively about these media, and are a great place to acquire information. The YPPA and PPAI also offer print media directed to the trade and professors who teach these topics in their classes to keep them up to date.

Answers to Discussion Questions 

Product placements have continued to increase in use despite the fact that there are some who contend that they are ineffective. Cite reasons as to why these placements may or may not be effective. Provide examples to support your position. (LO 13-2) While product placements are really nothing new, their recent increase in use is significant. Some companies like Apple, Nike, and BMW have extensively increased their placements, and likely will continue to do so. Others have just entered the game, and are finding placements an inexpensive way to get product exposure. Product placements offer the client a number of positive aspects. The exposure is not obtrusive, it is usually inexpensive, and the product and or brand can benefit from source association. To this point, the placements are not considered as intrusive as commercials, and thus have not met with too much negative feedback. In addition, as more consumers are ―cutting the cord‖ and eschewing traditional programming in favor of streaming services (65 percent of paid video subscribers had three or more subscriptions in 2021), the opportunities for advertisers to get their products in front of consumers are on the decline. The fact that many segments are getting more difficult to reach (for example, teens) through traditional media, has also led to the increased adoption of placements—particularly in the movies. For now, product placements will continue to be a darling of many companies. Advances in technology through artificial intelligence and machine learning are enhancing the efficacy of product placements. At the same time, increasing irritation, clutter resulting from too many placements, and blatant placements may lead to consumer backlash and decrease the attractiveness of this form of marketing. 1-229 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

A more involved form of product placements actually leads to the placement being integrated throughout the program content and/or script. In product integration the product is woven throughout the program or becomes the program itself. Like product placements, product integrations are on the increase as the networks continue to search for new program content, and the proliferation of cable media channels affords marketers with many integration opportunities. For example, on an episode of Modern Family, much of the show was devoted to the family‘s bumbling of the father‘s request for an Apple iPad for his birthday and their frantic efforts to find one. 

As companies increase their efforts to track consumers‘ movements while shopping in a store, many consumers are concerned about these actions being an invasion of privacy. Explain why these consumers may feel this way. Should these tracking behaviors be curtailed? (LO 13-3) While it may bother some of us, most people have become oblivious to being watched. One has to wonder just how far it will all go. In 2021 it was estimated that there were more that 85 million surveillance cameras deployed in the United States. Unfortunately, not all stores notify customers they are being watched, leading to increased concerns about privacy. Some authorities also contend that data collection can lead to discriminatory practices toward consumers in different ways.

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Studies have shown that transit advertising—despite its sometimes being unattractive—continues to be an effective medium. Explain why this form of advertising is effective. (LO 13-5) As noted in the text, there are a variety of types of transit advertising including (1) inside cards (ads inside of busses, subways, etc.); (2) outside posters (those that appear on the sides of busses, trains, trolleys, etc., and on the tops of taxis; and (3) station, platform, and terminal posters (those appearing in the terminals of trains, subways, etc.). The advantages of transit advertising include many of those associated with out of home advertising in general. In addition, transit offers the advantages of long length of exposure and frequency of exposure. About 34 million people ride mass transit every day, and over 9.9 billion rides are taken each year, providing a substantial number of potential viewers.

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What are promotional products? Cite examples of how they are used by marketers. Explain whether or not they are effective. (LO 13-2) Promotional products include ad specialties, premiums, business gifts, awards, prizes, or commemoratives.‖ These products are effective for advertisers, with advantages including: 

Selectivity. Because specialty advertising items are generally distributed directly to target customers, the medium offers a high degree of selectivity. The communication is distributed to the desired recipient, reducing waste coverage.

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Flexibility. This medium offers a high degree of flexibility. A message as simple as a logo or as long as is necessary can be distributed through a number of means. Both small and large companies can employ this medium for a variety of objectives limited only by their own creativity.

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Frequency. Most forms of specialty advertising are designed for retention. Key chains, calendars, and pens remain with the potential customer for a long time, providing repeat exposures to the advertising message at no additional cost.

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Cost. Some specialty items are rather expensive (for example, leather goods), but most are affordable to almost any size organization. While they are costly on a CPM basis when compared with other media, the high number of repeat exposures drives down the relative cost per exposure of this advertising medium.

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Goodwill. Promotional products are perhaps the only medium that generates goodwill in the receiver. Because people like to receive gifts and many of the products are functional (key chains, calendars, etc.), consumers are grateful to receive them. The products also lead to a favorable impression of the advertiser.

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High recall. Specialties lead to high recall of both the advertisers‘ name and message.

The chapter identifies a number of ―miscellaneous support media.‖ Describe a number of other such media that you have seen. Who sponsored these ads? Explain whether you think they were effective. (LO 13-2) Some of the faster-growing and more widely used options include branded phone calls, parking lot ads, and gas station pump ads. Other examples of support media: Coca-Cola installed 1,000 feet of light boxes in the Atlanta subway to show motion picture ads for Dasani; Muzak, a provider of background music, teamed with Tyme ATMs to broadcast ads at bank ATM sites; ads now appear on luggage conveyors at some airports, on MetroCards, on hubcaps, in elevators, on bowling balls, bike wheels, in people‘s homes, and on fruit. The advantages of these type of ads are awareness and attention, cost-efficiencies, and effective targeting. But unless the advertiser is careful, these ads can easily cause consumer irritation, resulting in an overall negative impact. As the number of these efforts increase, there is an increased potential for wearout as well.

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Due to the variety of support media types, it is very difficult to provide a measure of effectiveness of these media as a whole. Discuss some of the various measures used to attempt to measure the effectiveness of various types of support media. Are these measures useful to marketers? (LO 13-5) Out of Home (OOH) Advertising: Previously, the Outdoor Advertising Association of America (OAAA) and advertisers used an ―opportunity to see‖ to measure the reach and effectiveness of OOH advertising. This essentially included an educated estimate of how many persons walked or drove by a particular outdoor outlet and had the opportunity to see it. In 2019, the OAAA announced a new measurement system that provided more concrete measurement analytics including demographic and ethnographic information about consumers of out of home media. This new system also included the use of eye tracking measures, circulation data, and travel survey data to inform advertisers about the effectiveness of various OOH media. Other effectiveness measurement tools for outdoor advertising include Competitive Media Reports information on outdoor media expenditures of major advertisers; MRI-Simmons providing information on audience demographics and exposure; and the American Public Transportation Association providing information on riders and transit usage, among others. Promotional Products Marketing: While specialty advertising such as promotional products marketing has no established audience measurement system, the Promotional Products Association International is the major trade organization in this field. This organization helps marketers to develop and use specialty advertising forms and provides statistical and educational information to advertisers on the use and efficacy of promotional products marketing. Nontraditional Support Media (Branded Entertainment, Guerilla Marketing, Miscellaneous Support Media): No universally accepted standard currently exists for measuring the impact of advertising using nontraditional support media. However, several organizations have begun to offer effectiveness and impact information to advertisers when using nontraditional support media. These organizations include Nielsen‘s Media Research, which provides information on product placements on network television; Brandchannel Product Placement Watch, which provides information on the

happenings in the branded entertainment industry; and Comscore, which provides branded entertainment measurement and product integration valuation services. While work is certainly still needed in the development of effectiveness measures for various support media, all of the information obtained from the services described above would be beneficial for advertisers. Whether demographic information on consumers, information on the effectiveness of branded entertainment, or tracking information on transit riders, advertisers can use the data provided by these companies to inform their media planning, buying, and evaluation efforts. 

This chapter discussed a number of new ways that marketers are trying to reach consumers. While some consider these media to be innovative, others are concerned that they may be an intrusion on consumers‘ privacy. What do you think? Should these methods be considered unethical? (LO 13-1) While tech companies and packaged good sellers believe that these new ways of reaching consumers, particularly at their point of purchase, will lead to a better shopping experience for consumers, others are not certain of this new technology‘s benefits to consumers. Some are concerned that the use of technology such as camera-based ad placements at the point of purchase might lead to discriminatory practices. Another concern of consumers is that they are not notified when technology such as this is being utilized and some view this as a problematic lack of transparency that carries with it very serious privacy concerns. These cameras could absolutely lead to discriminatory practices and may restrict consumer‘s freedom of choice in their product decision-making process. If a particular brand is all that keeps getting promoted, they will likely consider this brand and not others that they would normally consider. While this is good for advertisers, it does limit consumer‘s freedom of choice.

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The proliferation of places where ads now appear seems endless. From manhole covers to people‘s bodies, it seems like there is nowhere you can go without seeing an ad. Discuss some of the unusual places you have seen ads recently. Do you think this trend is likely to continue? Explain why or why not. (LO 13-3) Unless the advertiser is careful, advertising placed in the wrong medium may have a negative impact, resulting in irritation, negative attitudes toward the advertiser, or even opportunities for the competitor. When Microsoft logos were painted on sidewalks, the city and consumers were not impressed, and Microsoft was fined. One of its competitors gained significant public relations benefits when the company announced it would be happy to remove the paintings. Likewise, many of these campaigns are novel and unique and are attracting consumer interest. As the number of efforts increases, however, there is the potential to lose the uniqueness associated with them.

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Advances in technology have allowed for the innovations that were discussed in this chapter. From billboards that track you on the highway to your digital home assistant, which may be tracking your conversations, it seems that our privacy is being infringed upon more and more. While some consumers do not care, others are outraged at what they consider to be an intrusion. Explain why this may be the case and give arguments on both sides. (LO 13-4) In 2021 it was estimated that there were more that 85 million surveillance cameras deployed in the United States. While it may bother some of us, most people have become oblivious to being watched. Ronny Max identifies 19 ways that retailers are now tracking your store movements including quantifying behaviors by motion (where customers go and how long they stay there); eye tracking and eye tilting, facial demographics, etc.; body movements; and emotional sentiments. Besides being mounted on coolers or other areas in the store, tracking beacons can be mounted on shopping carts and baskets without the shopper knowing they are there. Companies like Mood Media, GeoCTRL and Cooler Screens offer their own tracking tools to retailers.

While the tech companies and the packaged goods sellers argue that the cameras and screens lead to a better shopping experience, not everyone is so sure. Supposedly, the data collected is anonymous, but many argue that we shouldn‘t be collecting the emotional data of anyone. Consumers themselves seem to have mixed reactions. Most appear not to notice them, and at least one customer has said he wasn‘t concerned because there are ―cameras everywhere.‖ Others have expressed dislike about the fact they are being used if and when they do find out. Apparently not all stores notify customers they are being watched. 

When commercials first appeared in movie theaters, many movie goers were outraged. Now one expects to see numerous commercials before the movie starts, with seemingly little pushback. Do you think commercials before the movie should be allowed? Why or why not? (LO 13-1) The pros or advantages of movie theater advertising outweigh the negatives or drawbacks. Moviegoers are a captive audience and if the ads are specific to the audience of the movie being shown, they are really a good way to learn about products that consumers might be interested in. If they are done right and targeted to the movie and the audience seeing that movie, they should be allowed. Additionally, if the advertisements don‘t add to the time before the movie, they are not harmful or a real irritant. However, consumers have become accustomed (because of streaming services) to the idea that if they are paying for something, it should not include advertising which could be a major reason for consumers‘ irritation with cinema advertising.

Additional Discussion Questions (Not in text) 

Advertising in video games is becoming more popular. Discuss some of the reasons this medium is attractive. Do you see any downside to advertising through video games? (LO 13-3) Once again, it all comes down to the target market. The size of the videogame target market continues to increase. Likewise, the video gamers‘ lifestyles make the advertising of certain products a natural for this medium. Finally, the gamers obviously have money, or they wouldn‘t be buying games. In addition to the advertising, product placements in video games is on the increase. Like movies and TV, advertisers claim that the placements add a touch of a more natural environment. The placements actually enhance the atmosphere, they say. The potential downside is the same as product placements and/or movie ads. Some gamers may not like the fact that ads appear, and this backlash may be negative for the marketer. Over a period of time, these ads and placements—like product placements in movies or on TV—will become so routine as to lose all effectiveness.

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Content sponsorship has been on the increase in a variety of mediums. Give examples of sponsorships in different media and explain why their use is increasing. (LO 13-3) Content sponsorship, in which advertisers sponsor specific content or even create it, for example, on the Internet or in magazines, has been on the increase due in large part to the advertisers‘ fascination with engagement as a measure of effectiveness. Many advertisers believe that by getting consumers engaged they are moving them one step closer to purchase. The logic is that if someone is reading specific content, then they must be interested in it. For example, if I am reading about new cameras, then I must be interested in them. So advertisers figure that by placing an ad for their camera, or even creating an advertorial, they are more likely to reach the target audience they want to reach. Why else would one be reading about cameras?

Where this becomes a problem is when the advertiser does not make clear that the content is being influenced by—or even provided by—them. This is when potential deception may occur. There are many agencies now examining the use of content sponsorships and there will soon be guidelines as to when an advertiser crosses the legal limits. 

Digital advertising media seem to be more and more effective, but at the same time, more and more controversial. Explain why both of these situations have arisen. (LO 13-2) This question will be based only on the digital media discussed in the chapter (Chapter 15 will discuss additional digital media.) Digital outdoor like boards, shelters, etc. are one form of digital media. In addition, digital media in office buildings, stores and other locations have also become much more common. Because they can be more eye catching, and interesting than traditional media, digital outdoor media have become more popular among advertisers. The numerous advantages associated with these media include visibility, the ability to change messages quickly, and the ability of utilizing GPS to strategically locate ads offers advertisers options not previously available. When done well, these media can be much more effective than their traditional counterparts. At the same time, digital media have pitfalls. Many people are not enamored with the glitz and glare of the lighted digital displays—particularly when in non-urban settings. Imagine driving on a road with no lights, outside of the city, and all of a sudden, a brightly lit neon sign appears. Such an event could well be perceived as offensive. Privacy is another issue. The Las Vegas outdoor kiosk that can read your profile while you stand in front of it and recommend products or places to go; the outdoor billboard that recognizes your demographic as you go by and calls out to you; or other types of similar media are considered by many to infringe on one‘s privacy, and thus may be less effective than desired. Many people are just tired of the intrusiveness of ads. Digital ads are appearing in so many more places—subways, transit stops, buses, sports venues, elevators—the list goes on. The result is an increase in clutter that is increased through digital capabilities.

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Why has the use of guerrilla marketing been on the increase? Take a position as to whether or not this form of marketing has become controversial, and explain whether or not this criticism is warranted. (LO 13-2) Guerilla marketers have attempted everything from giving out free hats at sporting events to gain free exposure to paying tolls at the Lincoln Tunnel to painting sidewalks with ads. While many of these may be harmless (they can pay my toll anytime!) others have led to defaced property, potential for injury, and other negative possibilities. In the chapter on publicity, we discuss one such effort gone awry which led to the closing down of traffic in Boston for hours, and hundreds of thousands of dollars in emergency equipment deployment. While all ended well, it could have been worse. The involved company had to pay a million-dollar compensation fine. The Dead Man Down example in the chapter provides another good example. Frightening people, or catching them off guard is not only inconsiderate, it can be rude and dangerous. While many guerrilla tactics may be cute and possibly beneficial to the consumer, others may be unfair to the advertisers, products or even audiences they are trying to reach and/or take advantage of.

While guerilla tactics may be harmless in some instances, in others they are—at the very least— unethical and potentially illegal. Marketers seem to be continuing to push the limits as to when we cross over that line. The net result is likely to be laws passed limiting such practices. The reason underlying some of these tactics seems to be the overanxious quest for publicity. Many marketing stunts are designed specifically to get in the news at free to minimal costs. In addition, some marketers believe that any publicity is good publicity (not true) and will push the envelope to get in the news and in front of potential consumers. Their overzealous acts will eventually make it more difficult for everyone to engage in guerilla marketing.

IMC Exercise Have students find examples of branded entertainments, including product placement and product integrations used by marketers. They should explain the objectives they believe are being sought through the use of these techniques, who they are targeting, and whether they feel these techniques will be effective.

CHAPTER 14 DIRECT MARKETING Chapter Overview One of the most rapidly growing areas in marketing is direct marketing. A variety of direct response media are used to convey the communications message. In this chapter we examine the role of direct marketing in the promotional mix. We discuss the objectives sought in direct marketing programs (noting that these may often differ from the communications objectives discussed earlier). We also discuss direct marketing strategies, direct selling, and evaluation of the direct marketing program. We conclude the direct marketing discussion with a discussion of its advantages and disadvantages. In Chapter 15 we discuss two additional direct marketing media, the Internet and interactive media. Since both of these include more than direct response, they warrant a separate chapter.

Learning Objectives 42.

Define direct marketing.

43.

Discuss the role of direct marketing in an IMC program.

44.

Identify strategies and tactics in the use of direct marketing.

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Compare the advantages and disadvantages of direct marketing.

Chapter and Lecture Outline I.

DIRECT MARKETING

BBBB. Defining Direct Marketing—Direct marketing involves a system of marketing by which organizations communicate directly with target customers to generate a response or transaction with the goal of getting consumers to respond through making an inquiry, a purchase, or even a vote. As such, it employs many aspects of marketing, including marketing research, segmentation, advertising, evaluation, etc. A distinction is made between direct marketing and direct marketing media. The former includes the total set of marketing activities involved in obtaining a direct response. Direct-response media are the tools by which direct marketers implement the communications process. CCCC. The Growth of Direct Marketing—Direct marketing has grown tremendously in the past few years as a result of a number of contributing factors: o

Consumer credit cards—Estimates of the number of credit cards used by consumers in the U.S. range as high as 106 billion. This makes it feasible for consumers to purchase both lowand high-ticket items through direct-response channels and assures sellers that they will be paid

The changing structure of American society and the market—One of the major factors contributing to the success of direct marketing is that so many Americans are now ―moneyrich and time-poor,‖ which has increased the attractiveness of direct purchases.

Technological advances—The rapid technological advancement of the electronic media and the Internet has made it easier for consumers to shop and for marketers to be successful in reaching the desired target markets. This became even more attractive during the COVID-19 pandemic.

Miscellaneous factors—Changing values and lifestyles, more sophisticated marketing techniques, more options, and the industry‘s improved image have all contributed to the suture success of direct marketing.

DDDD. The Role of Direct Marketing in the IMC Program—Direct marketing activities support and are supported by other elements of the promotional mix. 1. Combining direct marketing with advertising—Direct marketing is in itself a form of advertising. Whether through mail, print, digital, or TV, the direct-response offer is an ad. Sometimes the ad supports the direct selling effort as when IKEA, Nordstrom, and Bloomingdale‘s run image ads to support store and catalog sales. 2. Combining direct marketing with public relations—Private companies may use telemarketing activities to solicit funds for charities or cosponsor charities that use these and other direct response techniques to solicit funds. 3. Combining direct marketing with personal selling—Nonprofit organizations often use telemarketing to solicit funds. Companies use telemarketing to screen and qualify potential prospects and generate leads. 4. Combining direct marketing with sales promotions—For example, many local merchants send out mailers announcing sales and promotional offers.

5. Combining direct marketing with support media—Adding a promotional product to a direct mailer has proven to increase response rates. Promotional products like refrigerator magnets, bookmarkers, and other items that can be easily inserted into the mailer are commonly used. To successfully implement direct-marketing programs, companies must make a number of decisions. As in other marketing programs, they must determine (1) what the program‘s objectives will be, (2) which markets to target (through the use of a list or marketing database), (3) what direct-marketing strategies will be employed, and (4) how to evaluate the effectiveness of the program. EEEE. Direct-Marketing Objectives—Direct marketers most often seek a direct response. This response need not necessarily be a behavioral response, as direct marketing is now used for other purposes: to build an image, maintain customer satisfaction, and inform and/or educate customers in an attempt to lead to future actions. FFFF. Direct Marketing Strategies and Media—Direct marketers generally pursue either a (1) one-step approach or a (2) two-step approach in developing media strategies. In the one-step approach, the medium is used to directly obtain an order (for example, direct response television ads where the goal is to generate an immediate sale when the ad is shown). In the two-step approach, more than one medium may be used, with the first effort designed to screen or qualify buyers and the second designed to generate the response. A number of direct response media are available to the marketer including: Direct mail—Also often called ―junk mail.‖ More advertising dollars continue to be spent in direct mail than in almost any other advertising medium—an estimated $43.3 billion in 2022. Keys to the success of direct mail are the mailing list and the ability to segment markets. This medium has been seriously threatened by the Internet. The lower cost of e-mail and the convenience of the Internet have raised concerns among traditional direct-mail marketers. 6. Catalogs—The number of catalogs mailed out and the number of catalog shoppers has decreased each year down from 18.5 billion in 2006 to an estimated 10 to 12 billion in 2022. Today‘s catalogs are much more targeted and specialized to meet consumers‘ needs. The text lists some interesting examples of articles available through catalogs. 7. E-mail—Direct mail on the Internet (e-mail) is essentially an electronic version of regular mail. Like regular mail it is highly targeted, relies heavily on lists, and attempts to reach consumers with specific needs through targeted messages. The use of e-mail marketing by both business-to-business and business-to-consumer marketers continues to grow: both the low cost and the higher effectiveness than traditional direct mail appeal to marketers. The electronic equivalent of junk mail, these messages are referred to as spam. 8. Broadcast media—Two broadcast media are available to direct marketers: TV and radio. The majority of direct marketing broadcast advertising now occurs on TV, which receives the bulk of our attention in the text. Direct marketing in broadcast includes direct-response advertising (the product or service is offered, and a sales response is solicited, through either the one- or two-step approach) and support advertising (designed to support other forms of advertising). Direct-response TV takes the form of TV spots, infomercials, connected TV, and home shopping shows (teleshopping). 9. TV spots—Referred to in the direct-marketing industry as short-form programs, these spots include direct-response commercials commonly seen on television for products such as drugs and toiletries, audio and video supplies, household products, and more.

10. Infomercials—The lower cost of commercials on cable and satellite channels has led advertisers to a new and very effective form of advertising. An infomercial is a long commercial designed to fit into a 30-minute or 1-hour time slot and last from 12 seconds to 2 minutes. 11. Connected TV—Connected TV (CTV) advertising combines the ease of online advertising and reach of TV. Ads can be sent to audiences while they are streaming video content on their TVs before or during traditional commercial breaks. 12. Home shopping—The Home shopping Network, QVC, and Shop HQ are among the leaders in sales. QVC has also purchased Zulily—a leading e-commerce site that targets millennial moms. The success of home shopping networks has led to a proliferation of shopping channels, including the Gem Shopping Network, America‘s Auction Network, and the Liquidation Channel, to name just a few. 13. Print media—Magazines and newspapers are difficult media to use for direct marketing because of clutter and the relative expense. In addition, the benefit of an immediate response is not as apparent. 14. Telemarketing—While business-to-business companies continue to employ this strategy with some success, in recent years the telemarketing industry has suffered from a decline due to a number of factors. Problems associated with telemarketing include its potential for fraud and deception and its potential for annoyance. These developments have led to the development of a Do Not Call list for both landline and cell phones and the resulting decline in sales in the consumer market. Professor Notes:

II.

DIRECT SELLING

Direct selling involves the direct, personal presentation, demonstration and sales of products and services to consumers in their homes. The text discusses three forms of direct selling, including: 34) Repetitive person-to-person selling—Amway/Mary Kay. 35) Nonrepetitive person-to-person selling—Cutco. 36) Party plans—Tupperware/PartyLite Gifts. A demographic profile of the direct salesperson is provided in the chapter. Professor Notes:

III.

In addition to some effectiveness measures employed by other marketers, direct marketers also employ a measure based on cost per order (CPO). Using CPO the marketer knows almost instantly whether or not the advertisement is working. Another commonly employed measure of effectiveness is Customer Lifetime Value (CLTV). CLTV is a simple formula that is used to assist marketers in determining the dollar value associated with a long-term relationship with a customer, thus evaluating his or her worth. Many companies use an RFM analysis (recency, frequency, monetary), a marketing technique used to determine quantitatively which customers are the most profitable by examining how recently a customer has purchased (recency), how often they purchase (frequency), and how much the customer spends (monetary). Advantages and Disadvantages of Direct Marketing Advantages include: Selective reach—Direct marketing lets the advertiser reach a large number of people and reduces or eliminates waste coverage. Segmentation capabilities—Marketers can rent or purchase lists of recent product purchasers, car buyers, bank-card holders, and so on. These lists may allow segmentation on the basis of geographic area, occupation, demographics, and job title, among others. Frequency—Depending on which medium is used, building frequency may be possible. Testing—Direct marketing allows for a strong ability to test the effectiveness of the overall program as well as specific elements. Timing—Direct-response advertising can be very timely. Personalization—Direct media can offer the most personalized messages. Costs—While costs may be higher in direct advertising than other media, direct methods may be more profitable. Measures of effectiveness—No other medium can measure the effectiveness of its efforts as well as direct response. Feedback is often immediate and almost always accurate. Trustworthiness—U.S. consumers indicate that direct mail and catalogs were the type of advertising they were most comfortable receiving. Disadvantages include: Image factors—Reputation as junk mail or low-budget productions of TV ads. Accuracy— The accuracy of lists used to target potential customers is very low. Content support—In direct-response advertising, mood creation is limited to the surrounding program and/or editorial content. Rising costs—The rising costs of postal rates and print costs and low cost of e-mail serve as a disadvantage of this platform. Do Not Call lists—Do Not Call lists now exist for both landline and cell phones. A ―Do Not Contact‖ list in which consumers can choose not to receive junk mail is now available. Professor Notes:

Teaching Suggestions As noted, direct marketing is a rapidly growing field. Students typically think of this area in terms of direct mail, and sometimes the (800) and (888) number ads that appear on television. It is a helpful and interesting exercise to start the class with a discussion as to what direct responses students are familiar with, and to point out the fact that some very large firms are engaging in this form of marketing (not just the George Foreman Grill, Snuggies, and the Magic Bullet). Students are no doubt familiar with online buying (Amazon, etc.) and home shopping channels, but are probably not as informed about the size and growth of these industries. Direct-response TV still accounts for billions of dollars of sales revenue.

Answers to Discussion Questions 88. During the pandemic, direct marketing transactions increased dramatically. Explain why this happened. Since the pandemic has lessened and people are now able to leave their homes, some companies have seen transactions decrease substantially while others have been able to maintain the levels (or close) to those attained at the peak of the pandemic. Give examples of each of these types of companies and explain why they are different. (LO 14-2) An additional element of the direct-marketing program is direct selling, the direct, personal presentation, demonstration, and sales of products and services to consumers in their homes. Amway, Avon, Cutco, Mary Kay, and Tupperware are some of the best-known direct-selling companies in the United States and have now extended these programs overseas. Tupperware (1949) and Amway (1959) have been employing direct selling for over 60 years. While some thought the pandemic might be a death knell for direct sellers, Tupperware not only survived but significantly increased its sales by 72 percent, the most in the last two decades, through ―digital Tupperware parties.‖ Likewise, the ease and speed of shopping on the Internet, for example on Amazon.com, and having the purchase delivered to one‘s door is an attractive option that became even more so during the COVID-19 pandemic. 89. Explain some of the factors that have made direct marketing attractive to many consumers. Then explain some that may make it less attractive. What do you think most motivates consumers to be attracted to direct marketing? (LO 14-4) There are a number of reasons why direct marketing has been successful. Reasons for the rising success of direct marketing can be attributed to a number of factors: 

The changing marketing environment. The increased use of credit cards, lack of time, and acceptance of mail-order products by consumers have all increased the effectiveness of the direct marketing medium.

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Cost efficiencies. The continued high cost of mass media, and the lack of availability of time and space in some of these media have forced advertisers to consider alternative ways of advertising. Likewise, the increasing costs of personal selling directly favor the use of telemarketing and direct mail.

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Target marketing. As marketers more narrowly define their markets, direct marketing media offer a more effective way of reaching them through the reduction of waste circulation.

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Database technologies. More effective database marketing techniques also promote more specific targeting. Companies are now able to know more about their customers (and potential customers) by building more effective databases.

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Advances in technology. Direct marketing no longer means just catalogs and direct mail. Home shopping channels, the Internet, and other innovations have allowed for more successful direct marketing efforts. Even the success of cable television has aided the direct marketer, who now has a more specific target audience at which to target direct marketing efforts. Advances in technology have also increased the value of the databases, as names can be added and purged, and information can be updated much more quickly.

The major problem associated with direct marketing may be its image. Putting aside its other advantages, image problems continue to plague the industry, making it difficult to shed the ―junk mail‖ role. These problems stem from all direct media. In direct mail, one‘s mailbox is full of unwanted catalogs, ads, and solicitations. The very mention of telemarketers evokes negative images, and around election time are still incredibly intrusive and annoying. Infomercials, despite their advances in sophistication, are still offering ―psychics,‖ ―amazing discoveries,‖ and other offerings that many perceive as being questionable if not deceptive. The industry still suffers fallout from, and the potential for fraud. While the vast majority of direct marketers are not guilty of such actions, it is the few that reflect negatively on the image of the many. Each news story of fraud and/or deceit associated with direct marketing hurts the overall image. 90. A common place for infomercials on television are in non-peak hours—that is late at night, early morning, and other times when viewing is down. Explain why this is so and why infomercials are more common here than in prime time. (LO 14-3) Infomercials are effective for the advertiser as the media cost is minimal. The infomercial is usually shown late at night, early in the morning, or other hard to sell time slots. As a result, the rates are very low, and the breakeven can be easily met. 91. Some believe that digital catalogs will eventually mean the end for print versions. Others disagree, providing evidence that print catalogs are here to stay. Explain the arguments presented by both sides. (LO 14-3) Although some predicted that catalogs would cease to exist with more use of the Internet and the number of catalogs mailed continues to decrease, traditional catalogs are still an effective way to reach consumers. The emotional appeal of the traditional catalog exceeds that of online catalogs and ultimately is one of the best ways to drive consumers online. The convenience of using printed catalogs everywhere and anywhere cannot be matched by digital, thus ensuring their future success. Many companies use catalogs in conjunction with their more traditional sales and promotional strategies. For example, companies like Pottery Barn, Bloomingdale's, Nordstrom, and Patagonia sell directly through catalogs but also use them to inform consumers of product offerings available in the stores. Some companies rely solely on catalog sales. Others that started out exclusively as catalog companies have branched into retail outlets, among them Road Runner Sports, Eddie Bauer, Banana Republic, and Illuminations. The products being offered through this medium have reached new heights as well.

92. Direct mail—often referred to as junk mail—is often disliked by consumers. At the same time, the use of this medium continues and shows no indication of going away in the near future. Cite some of the reasons direct mail continues to thrive and remain effective. (LO14-4) More advertising dollars continue to be spent in direct mail than in almost any other advertising medium—an estimated $43.3 billion in 2022. One study showed that 77 percent of respondents said they sorted through their mail immediately upon receiving it, while 48 percent indicated that they saved the mail for future reference—both percentages indicating the potential effectiveness of the medium. Keys to the success of direct mail are the mailing lists, which constitute the database from which names are generated, and the ability to segment markets and, of course, the offer. It is now possible to buy mailing lists, e-mail lists, and sales leads. Lists for business-tobusiness purposes are also available. Lists have become more current and more selective, eliminating waste coverage. 93. Discuss the different methods direct marketers use to measure the effectiveness of their programs. Are there other methods that might be considered? Explain. (LO 14-3) Measuring the effectiveness of direct-marketing efforts is not difficult as they often generate a direct response. One method direct marketers use to measure the effectiveness of their efforts is assessing the cost per order, which involves taking the cost of the ad and determining how many calls/orders they would need to solicit in order for the ad to be considered effective. Another way marketers measure the effectiveness of their efforts is Customer Lifetime Value (CLTV). CLTV is a simple formula that is used to assist marketers in determining the dollar value associated with a long-term relationship with a customer, thus evaluating their worth. Assessing CLTV helps companies learn to focus their attention on the most profitable customers while spending less marketing efforts on those with a low CLTV score. Another method for measuring effectiveness is RFM (Recency, Frequency, Monetary) analysis. This is a marketing technique used to determine quantitatively which customers are the most profitable by examining how recently a customer has purchased (recency), how often they purchase (frequency), and how much the customer spends (monetary). General response counts such as measuring how many postcards are mailed back from consumers or measuring how many consumers attend an event to which direct marketing efforts have attempted to solicit attendance could be some other ways to measure the effectiveness of direct marketing efforts, particularly on a more local level. 94. Explain what is meant by Customer Lifetime Value. How do marketers apply this formula to determine the effectiveness of their direct marketing programs? (LO 14-4) CLTV is a formula used by direct marketers to determine the dollar value associated with a longterm relationship with a customer, thus evaluating their net worth. Direct marketers will use this formula in an attempt to determine whether or not a customer should be acquired, and how much attention they should receive. By estimating the potential return they will receive from a customer, direct marketers can determine how much attention they should dedicate to the customer, what kinds of deals they should offer, etc. Obviously, the more potential sales and profits they see, the more attention the customer will get. 95. What are some advantages and disadvantages to direct marketing? There are some pundits that believe that direct marketing is in the decline stage of its product life cycle, while others believe that it will continue to be a successful means for marketing products. Discuss both of these positions. (LO 14-2) Advantages of direct marketing include its selective reach as it allows the advertiser to reach a large number of people and reduces or eliminates waste coverage; its segmentation capabilities that allow marketers to reach people based on their geographic location, occupation, and 1-242 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

demographics; and its allowance for simple effectiveness testing. Some other advantages include its ability to build frequency, its timeliness, its ability for personalization, its profitability despite its high costs, and the measures of effectiveness for direct marketing efforts. Some disadvantages include its negative image as junk, the inaccuracy of lists used to target audiences, the inability for the content in the promotions to create certain moods in consumers, the rising costs of postage and mailers and catalogs, and the existence of Do Not Call lists. Direct marketing will likely continue to increase due to self-policing of the industry and involvement by large, sophisticated companies, which have led to significant improvements in the industry. 96. When many people think of direct marketing they think of junk mail, infomercials, telemarketers, and catalogs that they don’t want to receive. Given that so many people hold this attitude toward direct marketing, why does it continue to be so effective? (LO 14-4). There are a few reasons for the continued growth of direct marketing despite its negative image. The increase of consumer credit cards makes it feasible for consumers to purchase both low- and high-ticket items through direct-response channels and assures sellers that they will be paid. Additionally, the changing structure of American society and the market contributes to the success of direct marketing. Many Americans are ―money-rich and time-poor,‖ which has increased the popularity of direct purchases. Technological advances have also made it easier for consumers to shop and for marketers to be successful in reaching the desired target markets. Finally, other miscellaneous factors such as changing values and lifestyles, more sophisticated marketing techniques, more options, and the industry‘s improved image have helped direct marketing maintain its effectiveness. 97. What is an infomercial? What are some of the reasons that infomercials have been so successful? Which types of products and services do you think are likely to be candidates for successful infomercials? (LO 14-3) Infomercials—often referred to as long-form commercials—typically range from 30 to 60 minutes, and are often made to appear as television programs. Infomercials have continued to increase in popularity since their inception in the 1980s to now include a wide variety of products and services. Once despised by retailers, the infomercial has become a partner in the selling effort. While the infomercial once was used by non-Fortune 500 companies, now companies like Coca-Cola, Braun, Disney, Nissan, Bentley, Apple, and Microsoft are just a few of the many big companies employing this form of communication. Products and services which appeal to the typical infomercial shopper (a married female, mean age of 45, Caucasian, working full time with a household income of $55,000+ per year) would be most successful. This could include products like clothing, household items or exercise equipment. Infomercials are effective for the advertiser as the media cost is minimal. The infomercial is usually shown late at night, early in the morning, or other hard to sell time slots. As a result, the rates are very low, and the breakeven can be easily met.

Additional Discussion Questions (not in text) 98. Describe the various forms of direct-response advertising. Discuss some of the reasons for the success of direct-response advertising. (LO 14-3) The text discusses the various direct response media: 1-243 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

Direct mail—everything from postcards to mailers for supermarkets detailing weekly sale items Catalogs—traditional print and online varieties Broadcast—direct response TV spots, infomercials, home shopping channels and radio ads Print—direct response ads in magazines, newspapers, etc. Telemarketing—direct response solicitations through the telephone Online—direct response ads on the Internet, interactive and wireless There are a number of reasons for the growth and success of direct response media, including: Consumer credit cards—The use of consumer credit cards continues to increase, reaching all-time highs. The ease of use of these cards increases the ability to conduct direct marketing activities. So long as this use remains high, and there are no indications that it will change, direct marketing will continue to thrive. Syndicates—Companies that specialize in direct marketing activities also continue to increase, particularly with the advent of the Internet. As these syndicates become more effective, direct marketing will reap the rewards. The changing structure of American society—Consumers are better off than perhaps any time in history. At the same time, they continue to be ―time poor.‖ The combination of these factors is very positive for the continued growth of direct marketing. Technological advances—the Internet is an excellent example of how technology benefits direct marketing. Direct marketers are delighted that the Internet has come along, as it provides a new and very effective medium for direct marketing activities. Interactive TV will do the same. Miscellaneous factors—all of the miscellaneous factors discussed in the chapter continue to hold true in regard to their impact on direct marketing. No less important is the image of direct marketing itself. Unfortunately, the industry still has image problems, and the Internet has contributed to these problems through fraud and deception. 99. Direct marketers are some of the most successful when it comes to measuring the effectiveness of their programs. Give reasons why this may be true. (LO 14-4) Because most direct marketing seeks a behavioral response, it is easier for direct marketers to determine if their messages are working or not. Simply put, direct marketers figure out what it costs for the product, add in the commercial message cost and media, and then put it in the marketplace. If the sale orders exceed the costs, the campaign has been successful. Many direct marketers test all aspects of their programs. They will track the response from different stations, different time slots, and different spokespersons. They will also track the response to different offers to see which works best. Adjustments to the programs are constantly made to ensure optimal results. 100. What is the difference between direct marketing and direct selling? Describe the various forms of direct selling and some of the characteristics of the industry that make it unique. (LO 14-3) Direct selling might best be considered as a form (or subset) of direct marketing. Both deal directly with the customer, seeking a response. However, direct marketing assumes a broader variety of media rather than just sales. (Keep in mind, direct salespeople may still use promotions,

leave behinds, etc.) Direct marketing includes direct mail, telemarketing, direct response print, etc. Direct selling deals specifically with the selling effort. There are three forms of direct selling including: 37) Repetitive person-to-person selling—The salesperson visits the buyer‘s home, job site or other location to sell frequently purchased products or services (for example, Amway). 38) Non-repetitive person-to-person selling—The salesperson visits the buyer‘s home, job site or other location to sell infrequently purchased products or services (for example, World Book Encyclopedia). 39) Party plans—The salesperson offers products or services to groups of people through home or office parties and demonstrations (for example, Tupperware). The chapter reveals that the direct selling sales force is quite unique. Over 75 percent of the sales force are females, most are independent contractors and for most of them it is not a full-time job. Over one half of the direct selling sales force spends less than 10 hours a week at their job— treating it as an opportunity to earn extra money or obtain the product at a discount for themselves. 101. What are the characteristics of the infomercial watcher? In viewing this profile, does it surprise you? Explain why or why not. (LO 14-1) The demographics of the infomercial shopper reflect a married female, mean age of 45, Caucasian, working full time with a household income of $55,000+ per year. This advertising medium is indeed effective with a broad demographic base, not significantly different from the infomercial nonshopper in age, education, income, or gender. This really should not come as much of a surprise. While it may be true that people who buy from infomercials watch TV more, the fact is that they are not necessarily couch potatoes or shut-ins. Many people who work find themselves ―money rich and time poor,‖ and the infomercial is a means of learning about products and purchasing without having to go to the store. Secondly, many products advertised through this medium may not be available in stores, while still satisfying a need or want of the buyer. Finally, with the profile of the infomercial advertiser changing, the infomercial has become a good medium for providing information to prospective buyers in the comfort of their living rooms. 102. A study by the Harvard Business School has shown that e-mail marketing is much more effective than traditional direct mail in that it provides a much greater return on investment (ROI) Explain some of the reasons this would be. (LO 14-4) While the cost of direct mail is not that expensive, the cost of sending an e-mail is ridiculously low. While both of these methods have very low response rates, the fact that e-mail messages cost so little makes it more profitable. Secondly, the younger generation clearly disregards direct mail pieces. The message goes directly from the mailbox to the trash, never to be seen. While click-throughs on emails are only slightly better, they are essentially better than nothing.

IMC Exercise Infomercials can be extremely effective or extremely obnoxious. Have students identify a number of infomercials that they feel fit in either category. Show the infomercials in class, then discuss why students feel the way they do.

CHAPTER 15 THE INTERNET: DIGITAL AND SOCIAL MEDIA Chapter Overview Perhaps the most intriguing of all media—at least to students—are the Internet and digital media— particularly social media. Since the inception of the World Wide Web, the Internet has created quite a stir in marketing. Likewise, in the advertising and promotions area, the Internet has been hyped as the ―be all and end all‖ for communications, the end of traditional media as a means of communications and even as a replacement for all brick-and-mortar stores. While there has been astronomical growth in advertising on the Internet, the predictions of the demise of traditional stores, etc. has not come to pass. We see the Internet as an extremely valuable tool for marketers and an important part of the IMC program. There are advantages and disadvantages of the Internet just as there are for other media, and the astute marketer will know when to employ this medium. The chapter starts off with an insight as to why the Internet has been adopted so quickly. The objectives for using the Internet in an IMC program are then discussed. The chapter explores Web 1.0 and Web 2.0 strategies and the role of the Internet in the IMC program. (Web 3.0 is expected to be introduced soon.) Web strategies such as search, various advertising forms, and behavioral targeting are defined. A discussion of Web 2.0 including a section on who uses social media and why and how marketers use media such as Facebook, Twitter, and YouTube and their value to the IMC program are considered, as are other popular tools including Instagram, Pinterest, etc. Current methods of measuring effectiveness are discussed (we say current, because by the time you read this, they may be gone!). Advantages and disadvantages of the Internet and sources of information follow.

Learning Objectives 1.

Describe the role of the Internet and digital and social media in an IMC program.

Discuss the use of media platforms in the IMC process.

Explain how to evaluate the effectiveness of communications through the Internet and digital and social media.

Compare the advantages and disadvantages of the Internet and digital and social media.

Discuss the social and ethical issues associated with the Internet and digital and social media.

Chapter and Lecture Outline I.

THE GROWTH OF THE INTERNET

GGGG. Why the Rapid Adoption of the Internet?—The growth and relevance of the Internet begins the chapter. In addition, insight into the rapid adoption of the Internet is presented. HHHH. Web Objectives—Objectives sought in using the Internet include communications and sales objectives, as well as the development and maintenance of the website. The Internet is a communications medium, allowing companies to create awareness, provide information, and influence attitudes, as well as pursue other communications objectives. Figure 15-3 shows the many ways that marketers now use the Internet to reach out to consumers. The Internet and digital and social media can be used in an attempt to attain a number of communications objectives. These include: Create awareness—Advertising on the Web can be useful in creating awareness of an organization as well as its specific product and service offerings. Generate interest—The goal of many online efforts is to create interest that will bring visitors back to learn more about the products—and, of course, to sell stuff. Disseminate information—One of the primary objectives for using the Web is to provide in-depth information about a company‘s products and services. Create an image—Many websites are designed to reflect the image a company wants to portray. Create a strong brand—The Internet as part of an integrated marketing communications program can be a useful tool for branding. Stimulate trial—Many marketers have found the Internet to be an effective medium for stimulating trial of their products or services. Create buzz—The viral nature of social networking and other sites makes them attractive to marketers intending to spread the word and use word of mouth. Gain consideration—Many marketers believe that the Internet is an effective medium for achieving communications objectives such as consideration and/or evaluation. IIII.

E-Commerce—The transaction of sales over the Internet has been given the designation of ecommerce. E-commerce was discussed in Chapter 14.

II.

THE INTERNET AND INTEGRATED MARKETING COMMUNICATIONS

The role of the Internet in the IMC program is discussed. The Internet both supports and is supported by an IMC program. A distinction between Web 1.0 and Web 2.0 is discussed. Advertising on the Internet—A variety of forms of advertising on the Internet are available, including: Banner ads—Banner ads are the most common form of Internet advertising, although it is difficult to get an accurate estimate of the number of times people see a banner or display ad each month.

Sponsorships—Both regular sponsorships (a company pays to sponsor a section of a site) and content sponsorships (sponsor provides dollars in return for name association and participates in providing the content itself) are available. Pop-ups/pop-unders—Small message boxes that appear on a screen. Pop-ups are usually larger than banner ads but smaller than a full screen. Pop-unders are ads that appear underneath the web page and become visible only when the user leaves the site. Interstitials—Full-page ads that appear on the screen while content is downloading. Searches—The various types of searches are discussed in this section including organic search results, nonorganic (paid) search results, pay-per-click, and search engine optimization (SEO). Behavioral targeting—Based on advertisers‘ targeting consumers by tracking their website surfing behaviors, such as which websites they have visited and/or searches they have made. Recently, advertisers have increased their use of retargeting, which involves a user visiting a website either on his or her desktop or mobile phone and leaving without purchasing the product. Subsequently, a specifically targeted ad will display on participating subsequent websites the user visits. Contextual ads—Contextual advertising includes ads placed to take advantage of the surrounding content of the site. Native advertising is a form of paid media where the ad experience follows the natural form and function of the user experience in which it is placed. Rich media—A broad range of interactive digital media that exhibit dynamic motion and employing features such as video, audio, and animation. The various types of rich media are discussed including online commercials, video on demand (VOD), and webisodes. Additional forms of rich media include interactive banners ads, expandable ads, rich media ads placed in video games, instant messaging, podcasts, and video ads within blogs. JJJJ.

IMC Using Social and Other Media: Web 2.0—The birth of Web 2.0 has led to the development of many new media. Strategies that take advantage of the interactive capabilities are discussed (see Figure 15.5). Social media refer to sites that allow the user to share information with others within their network. The most popular of these are social networking sites, which are platforms for networks or social relations among people who share interests, activities, backgrounds, or reallife connections. Who uses social media and why—Over 4.7 billion people worldwide are on social media. A number of motivations for using social media have been identified (sharing ideas, activities, and events with others; community involvement, etc.). One series of studies discussed detected three primary consumer motivations: to gain (1) information, (2) entertainment, and (3) remuneration. Although the networks are appealing to a range of demographics, they are particularly appealing to those between the ages of 18 and 29, and some are more appealing to women. VI. How marketers use social media—A plethora of marketers include social media in their marketing plans. The primary reasons for using social media are to (1) drive traffic to one‘s site, (2) communicate with customers, and (3) gain brand exposure. The most important benefit these marketers believe they derive from the use of social media is increased exposure. Because consumers use different social media for different reasons, marketers find different media more effective for achieving specific objectives. 1-248 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

VII.

The most popular social media. 

Facebook—The largest of all social networks, with over 2.1 billion subscribers worldwide. Facebook was the most widely used social media platform in 2022.While the site has been somewhat controversial over the years as a result of frequently changing its privacy agreements and other privacy-related issues, businesses have found Facebook to be a valuable communications medium. Based on advertising revenues, marketers consider Facebook to be the most important social platform for advertising.

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TikTok—TikTok is a social media app that allows you to record, edit, and share short looping 15- or 60-second videos with music, as well as sound and visual effects. Its rapid growth immediately caught the attention of marketers. TikTok offers marketers a number of advantages including (1) a highly sought demographic audience; (2) the longer time spent on the app (particularly among Gen Z users); (3) ads cost less than on other social media platforms; and (4) its attractiveness to influencer marketing. However, the platform‘s ties to the Chinese state raises concerns with privacy issues, including the protection of user data.

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Twitter—Twitter is an online social network microblogging network that enables users to send and receive text-based messages (tweets) up to 280 characters in length. Twitter has about 436 million active users worldwide. Many marketers have found Twitter to be a useful tool for communicating with customers and potential customers. The platform experienced various negative publicity in 2022, but still gained users and ad revenues.

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Instagram—Instagram is one of the fastest-growing social networks, particularly among younger audiences and is considered to be highly engaging. Instagram Stories has become a very attractive component to both members and marketers and has accounted for much of Instagram‘s success. Instagram has proven to be an effective site for microinfluencers due to their closer personal networks and perceived authenticity and loyalty. Marketers in numerous industries worldwide have found Instagram useful for a variety of communications activities. Instagram's visual content allows companies to post pictures and video news, events, new product introductions, and other company- or brand-related activities to increase exposure, showcase products in a creative way, establish visual brand identity, and more.

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Snapchat—From its beginnings as an app with disappearing pictures, Snapchat now has private messaging and public content as well as live events such as sports and music. Once an attractive medium to advertisers, many have departed and have yet to return. But by mid-2019 Snapchat was showing some signs of resurgence after further design changes.

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Pinterest—Pinterest is a pinboard-style photo-sharing website that allows users to create and manage theme-based image collections such as events, interests, and hobbies. Pinterest offers the opportunity for marketers to see pinners‘ product preferences, plans, and aspirations. Many marketers targeting women have found Pinterest to be an effective medium. There were over 433 million Pinterest users in 2022.

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LinkedIn—With over 810 million members worldwide, this site is used by professionals to network. On the site, businesses have used banner ads in an attempt to reach this professional audience to promote their products and services.

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YouTube—YouTube is a content aggregator, hosting content for information and entertainment and, while a social network, is not a traditional one like Facebook or 1-249

Snapchat. Users can upload and share their own videos, as well as those placed by others (including companies). YouTube is so effective for marketers because of the ability to use the site as an advertising medium or as a search platform. One study found that most millennials prefer YouTube to traditional television. 

Other Social Sites—There are many other social media sites that are useful to marketers. These are used by marketers for marketing research, public relations, promotions, and a variety of other strategies.

VIII. Podcasting—Podcasting is a medium that uses the Internet to distribute audio or video files for downloading onto desktops as well as iPods, iPads, tablets, and other portable devices, though smartphones are the most commonly used. Listeners of podcasts tend to be more affluent and thus attractive to marketers. IX. Blogs—A blog is a Web-based publication consisting primarily of periodic articles, normally presented in reverse chronological order. Some marketers are excited about the potential of blogs to reach large or targeted audiences at a small cost. Besides banner ads, companies can buy pay per click ads and/or become an affiliate. Additionally, personal bloggers often write about brands that they love or hate and have a considerable influence on consumers. X. Other 2.0 media forms. 

Virtual/augmented reality—Thousands of augmented reality apps are now being used by marketers and consumers. Companies such as Nike, Wendy‘s, Samsung, McDonald‘s, and Coca-Cola have used VR for marketing purposes.

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QR codes—A large percentage of print ads now carry the bar codes, but they have not been as utilized by consumers as much as anticipated. A large percentage of print ads now carry the bar codes and the growth in use in many sectors of our society has taken off.

KKKK. Sales Promotion on the Internet—Companies have found the Internet to be a very effective medium for disseminating sales promotions. Sweepstakes, contests, and other forms of sales promotions are commonly used on the Internet. In addition, a number of companies are now offering online coupons. LLLL. Personal Selling on the Internet—The Internet has a number of ways of being combined with personal selling. Many business to business companies are using the net to prospect for new customers, qualify potential customers, and provide product information. Others have used it effectively to assist the salesforce by removing many of the more mundane tasks such as reordering, etc. Digital and social media have become primary sources of information for millions of customers in the consumer and business-to-business markets. MMMM. Public Relations on the Internet—As discussed in this chapter and chapter 17, the Internet has become a very valuable tool for disseminating public relations information and achieving PR objectives. Some examples of the effective use of PR on the Internet are provided. NNNN. Direct Marketing on the Internet—Early on, many considered the Internet to be a direct marketing medium. The broader perspective notes that a number of direct media are employed with and for the Internet.

III.

MOBILE

As dramatic an impact that the Internet had on companies‘ IMC programs, it almost pales in comparison to the changes brought about by mobile. Spawned by the rapid adoption of smartphones and tablets, mobile is now receiving strong attention from marketers, and ad revenues continue to climb, primarily through applications (apps). The appeal of mobile stems in part from the fact that younger consumers media usage habits have changed. The Role of Mobile in the IMC Process—In this section, numerous examples of successful mobile marketing tactics are provided. Disadvantages of Mobile—Some disadvantages include:

IV.

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Creative challenges—Small screens often limit what advertisers can do creatively.

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Time—Advertisers have less time to get consumers‘ attention on mobile.

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Sharing—People don‘t want to share what they see on their mobile devices.

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Irritation and Privacy Issues—Consumers are irritated with the number of ads being sent to smartphones. It is now possible to get ad blockers for mobile devices, and marketers have already perceived this as a threat.

SOCIAL MEDIA MANAGEMENT PROGRAMS

There are a number of companies that provide social media management tools. Companies like Hootsuite, Hubspot, SocialPilot, and others provide management services for small, medium, and large companies, including media management, content development, publishing, monitoring the environment, and more. Typically, these companies will provide a dashboard to assist clients in the management of services to integrations with the major social networks

INTERNET METRICS

Companies measuring the effectiveness of digital and social media employ a variety of methods, most of which are done electronically. A number of companies provide Internet measures as part of a package; that is, they provide audience measurement information (demographics, psychographics, etc.) as ―upfront‖ information as well as some of the effectiveness measures. Audience Measures and Measures of Effectiveness—This section provides some of the relevant metrics for social media applications. Internet-specific measures—One of the perceived advantages of the Internet is a company‘s ability to measure commercial effectiveness, due in part to its ability to measure activity in real time. Facebook and Google are two popular brands for analytic tools. Facebook Analytics ―allows users to understand and optimize your complete customer journey across mobile, web, bots, offline, and more. . . ‖; Google Analytics ―is a web analytics service offered by Google that tracks and reports website traffic, currently as a platform inside the Google Marketing Platform brand.‖ In addition to these analytics, advertisers can determine effectiveness through a variety of measures. a. Traditional measures—Companies also employ traditional marketing and communications measures, such as:

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Recall and retention—More traditional in nature, these measures have been used to pretest online commercials.

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Surveys—Conducted through traditional methods as well as online, these surveys track attitudes toward the site, responses to e-mails, etc.

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Sales—The primary measure employed for e-commerce sites.

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Tracking—Another traditional measure, tracking is employed to gather information regarding brand awareness, recall, message association, and purchase intent.

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ROI—Measuring return on investment of online sales.

A number of sources of digital measurement data are discussed in the chapter, such as Advertising Digital Identification (Ad-Id). Attempts to measure the effectiveness of social media are noted in Figure 15-13. VI. ADVANTAGES AND DISADVANTAGES OF THE INTERNET AND DIGITAL AND SOCIALMEDIA Advantages of the Internet and digital and social media include: 40) Target marketing—The ability to target very specific groups of individuals with a minimum of waste coverage. 41) Message tailoring—As a result of precise targeting, messages can be designed to appeal to the specific needs and wants of the target audience, much of which comes from behavior tracking. 42) Interactive capabilities—Because these media are interactive, they provide strong potential for increasing customer involvement, engagement, and satisfaction and almost immediate feedback for buyers and sellers. 43) Information access—Users can find a plethora of information about almost any topic of their choosing. 44) Sales potential—The Internet has of course generated astronomical sales numbers and is expected to continue to do so. 45) Creativity—Creatively designed sites have many major advantages for companies. 46) Exposure—The Internet enables smaller companies to gain exposure that would have been impossible in the past. 47) Speed—For those requesting information on a company, its products, and/or its service offerings, the Internet is the quickest means of acquiring and providing this information. 48) Complement to IMC—The Internet and digital and social media complement and are complemented by other IMC media. As such, they serve as vital links in the integrative process. 49) Timeliness—Provides businesses with the ability to communicate quickly. Disadvantages of the Internet and digital and social media include:

50) Measurement problems—One of the greatest disadvantages of the Internet and new media is the lack of reliability of the research numbers generated. 51) Clutter—As the number of ads proliferates, the likelihood of one‘s ad being noticed drops accordingly. Some ads may not get noticed. 52) Potential for deception—Data collection without consumer‘s knowledge and attempting to reach vulnerable populations are concerns on the Internet. 53) Privacy—One of the many issues of concern for Internet users is that of privacy. Perhaps of most concern is the collection of personal data, which are subsequently provided to marketers, sometimes without the users‘ knowledge. 54) Irritation—Consumers are irritated with clutter, e-mail spam, pop-ups, and pop-unders. Professor’s Notes:

Teaching Suggestions This chapter may be one of the most interesting in the text for students. At the same time, it may be one of the more difficult for instructors to teach. Much of the difficulty will come from the fact that the Internet 2.0 world is changing so rapidly, that by the time something is committed to print, it has changed. Many of the companies we discuss in this chapter may no longer be in existence by the time the text comes out. Others will have merged or changed their names. Even more will be added. Another factor that makes the chapter difficult to teach is the high level of knowledge and interest of the students. Many of them will know more about the working of the Internet than we do. We recommend getting the students involved in the discussion from the beginning. Showing examples of effective websites—as defined by the communications and sales objectives—is a good starting point. Then a discussion of some of the uses of both old and new Internet media could follow—particularly the use of social networks, content sharing sites and mobile. Of particular value is to discuss the role of the Internet in the IMC program. Students will quickly see the value of this medium as a complement to the IMC program rather than a stand-alone medium. The large number of companies providing information and/or measuring effectiveness offer excellent examples to bring to the classroom.

Answers to Discussion Questions 103. The lead-in to this chapter discusses the decision by Facebook to transform the company into one more focused on the ―phygital‖ environment. Discuss what this means for Facebook. Do you think the move will be successful? Explain your answer. (LO 15-1) According to Facebook‘s CEO Mark Zuckerberg, the Meta rebranding more closely reflects the future of the Internet, or what many now refer to as the metaverse. As the Internet continues to evolve, Zuckerberg and others see many changes taking place in version 3.0, through an increased integration of digital and real-life experiences including virtual reality (VR), augmented reality (AR), 3D modeling, and gaming (NFTs). Marketers refer to this new version as phygital marketing—the merging of digital and real-life experiences. Approximately a year after the name change, nearly one-third of the U.S. population had never heard of the metaverse. Among 13- to 34-year-olds about one-quarter said they were fans of the metaverse, while the remainder said they had either never heard of it or disliked it. Many people who have heard of it are confused as to what it actually is or will be, and many are just not sold on the concept. About a year and $15 billion later, Facebook has little to show for this rebranding. Meta‘s value dropped 57 percent, and it had only 200,000 monthly active users on its platform called Horizon World. Much of the problem lies in the slow adoption of Meta‘s VR headsets due to high costs for the quality. Inflation hasn‘t helped either. Nevertheless, Meta is convinced that the future lies in the metaverse. 104. One of the major success stories in recent years has been the growth of TikTok. Explain why the platform has been so successful. Describe the audience for TikTok and why this group has become so enamored with the site. (LO 15-2) The astounding growth of the app (1 billion downloads in its first year) immediately caught the attention of marketers, and its growth continues to attract viewers and advertisers alike. In addition to its incredible growth TikTok offers marketers a number of advantages including (1) a highly sought demographic audience (2) the longer time spent on the app (particularly among

Gen Z users); (3) ads cost less than on other social media platforms; and (4) its attractiveness to influencer marketing, among others. As of December 2021, TikTok became the number 1 mobile app ranked by downloads, surpassing Instagram and Snapchat significantly. While YouTube still had more monthly users, forecasts predict that the platform will surpass YouTube in a few years if current growth continues. TikTok‘s greatest increase has come from Gen Z who now spend more than three hours a day there—surpassing Facebook and Instagram. 105. Criticisms of social media are numerous leading some to refer to these social platforms as dangerous. Explain some of the reasons critics refer to social media as ―out of control‖ and needs to be under more government control. Take a position suggesting more or less control and support this position. (LO 15-5) The Center for Media Education has referred to the Web as ―a web of deceit‖ in regard to advertisers‘ attempts to target children with subtle advertising messages. The center, among others, has asked the government to regulate the Internet. In addition, data collection without consumers‘ knowledge and permission, hacking, and credit card theft are among the problems confronting Internet users. Bloggers, marketing influencers who endorse brands without revealing that they are being compensated to do so, and native ads can also be misleading. The problem with native ads may be particularly true on smartphones, where proper labeling of the ads as sponsored may be difficult to see. Another issue of concern is privacy, especially the collection of personal data, provided to marketers sometimes without the users‘ knowledge. Although there has been some progress made by advocacy groups on behalf of consumers, cookies are instrumental in companies‘ retargeting efforts. They are promoted by marketers as a key tool used to improve the user experience, and they will continue collecting data that allows for more effective target marketing. Advertisers have shown reluctance to decrease targeting efforts without enforced controls. 106. Recently there has been a significant shifting of media expenditures from traditional to digital media. Some believe this is not necessarily a smart move, but rather ―jumping on the bandwagon.‖ Discuss what you believe and explain your position. (LO 15-4) One of the perceived advantages of the Internet is a company‘s ability to measure commercial effectiveness, due in part to its ability to measure activity in real time. Google and Facebook both offer analytical tools that allow you to monitor your performance. Other advantages include target marketing, message tailoring, interactive capabilities, sales potential, exposure, and timeliness. But as the number of ads proliferates, the likelihood of one‘s ad being noticed drops accordingly. The result is that some ads may not get noticed, and some consumers become irritated by the clutter. Studies show that banner ads have lost effectiveness for this very reason, and that interstitials are irritating as well. Many ads show consistently declining click-through rates. There is also a lack of reliability of research numbers generated. Forecasts and other statistics offered by research providers will demonstrate a great deal of variance—leading to a serious lack of validity and reliability. And as the use of retargeting increases, consumers are expressing more and more irritation with the frequency of ads. These irritating aspects can deter visitors from coming to or returning to the sites, and result in negative attitudes toward the advertiser. It is prudent to use a thoughtful combination of both traditional and digital media in the marketing mix.

107. Describe the evolution of the Internet from Web 1.0 to 2.0 to soon 3.0. What are the major differences between these versions? What are the implications of these changes for marketers? (LO 15-2) Web 1.0 consists mainly of static sites resulting in a one-way flow of communication. Web 2.0 has led to dramatic changes in the World Wide Web, primarily as a result of decentralization of communications and interactivity, with information provided by users as contributors of content such as user-generated ads content and so on. Web 1.0 puts the power of communication in the hands of the company or brand while Web 2.0 allows for consumer input and conversations. Advertisers use promotions on traditional websites where consumers cannot provide any input or engage with the content. The development of Web 3.0 has increased marketers‘ interest and emphasis on blending physical and digital environments. Aided by the pandemic having kept people at home, AR and VR have seen rapid growth over the years. The use of AR is on a steady increase, with more and more companies exploring its capabilities. The next iteration of the web is, once again, expected to result in a major paradigm shift, with numerous changes expected including increases in decentralization, artificial intelligence, and machine learning and other changes. 108. In this chapter we discussed how Muntinga examined motivations for using social media using the acronym COBRAs. Explain what these motivations are and discuss their meanings. Provide examples of each. (LO 15-1) Muntinga‘s studies examined consumer‘s motivations for using social media. Specifically, the studies assessed why consumers 1) consume, 2) contribute to, and/or 3) create brand-related content. The results showed that consumer‘s three primary motivations included 1) gaining information, 2) entertainment, and 3) remuneration. Consumers use social media to gain information prepurchase, gaining information about brands, and new ideas. An example of this is how many young men and women use social media such as Instagram to shop for popular brands and products and seek to find information from friends, celebrities, and influencers on the most popular brands. Consumers use social media for entertainment such as enjoyment, relaxation, and passing time. An example of this would be how many consumers use the Facebook messenger app to relax and communicate and connect with friends and family. Remuneration involves the potential to get something in return such as rewards, money, or job-related benefits. An example of this would be consumers using LinkedIn to connect with potential employers in their field. 109. The appeal of Facebook is universal. However, in recent years growth in new members has leveled off. Give some of the reasons for this apparent maturing of the market. Where is new growth coming from? Where will future growth come from? (LO 15-2) As with the introduction of any new technology or product, adoption is always quick but eventually levels off. This is what is happening to Facebook as they have begun struggling to reach and attract 18 to 24 and 25- to 34-year-olds. One contributor to the decline in the use of social media such as Facebook is a concern about consumer privacy issues, misuse of consumer data, and misinformation. Additionally, consumers have expressed concerns about the number of ads they see on social media and the inauthentic brand engagement they experience on social media. To combat this, some have suggested marketers focus on more effective ad spending, create better and more engaging content, use chatbots to simulate human conversation, provide content that contains images and video, and use more subscription services where consumers pay for social content. Others suggest that brands focus on microinfluencers, work to regain consumer trust in social media, and leverage community building on social platforms. These are likely opportunities for future growth for Facebook and other social media platforms.

110. With all of its appeal, there are many who feel that social media are having negative consequences for society. Explain some of the reasons that people feel this way, citing examples. Take a position as to whether you believe their concerns have or do not have merit. (LO 15-4) One of consumer‘s major issues with social media relates to privacy concerns. Consumers are concerned about collection of personal data (which are then provided to marketers) and this is often done without the user‘s knowledge. Facebook has faced numerous privacy issues in the past and has had to react by developing a new privacy setting that allows consumers to have more control over how their information is tracked, utilized, and shared. Another reason consumers are concerned about the potential for social media to have negative impacts is because of the potential for deception. Some feel that the Internet, and social media specifically, attempts to target children and other vulnerable audiences. Additionally, consumer concerns about hacking and credit card theft through social media or other online platforms has consumers concerned. These concerns are certainly merited. More and more companies, such as Facebook, have begun to be called out for their misuse of consumer data/information. Facebook‘s response to these privacy concerns shows that more and more companies are going to need to begin addressing these consumer concerns or risk losing more users. 111. Explain some of the ways digital marketers attempt to measure the effectiveness of their programs. Discuss both digital and traditional measures and when each might be more appropriate to use. (LO 15-3) Marketers use both Internet-specific measures and traditional measures to determine the effectiveness of their programs. For Internet-specific measures, many companies look to Facebook Analytics and Google Analytics. Both of these programs offer a variety of valuable insights into how the product or brand is performing. A number of other measures are provided in Figure 15-10. These types of measures would be useful to track the success of an integrated campaign. More traditional measures utilized include recall and retention, surveys, sales, tracking, and ROI. Recall and retention would be useful with a single ad, surveys would be useful in determining how people use a site, sales are beneficial for e-commerce merchants, tracking is useful for measuring brand awareness, ad recall, message association, and purchase intent; and ROI is also helpful for e-commerce merchants. 112. Discuss some of the advantages and disadvantages of digital media. Give examples of each. (LO 15-4) Advantages include the ability to identify very specific target markets, the ability to create very tailored messages, the interactivity available, the vast amount of information available, the sales potential, the creativity online spaces allow for, exposure for brands that might not otherwise be found, the speed with which information can be produced and distributed, its complementarity to other IMC efforts, and the timeliness with which brands can communicate with consumers. Disadvantages include measurement problems in assessing the efficacy of online efforts, the clutter of the Internet, the potential for deception in online spaces, privacy concerns, and irritation on the part of consumers about things such as clutter and e-mail spam. Student examples will vary.

Additional Discussion Questions (not in text) 113. Explain how the Internet has changed the practice of public relations. Pick a website as an example of this change. (LO 15-2)

Traditional tools for public relations include press conferences, exclusives, press releases, etc. In addition, other media are employed in times of crises, for example, disasters, product recalls, etc. While these activities still are employed, given the Internet, they have taken on more or less importance, or have changed in respect to formatting. For example, think about a product recall. In the past, the announcement might be made on television, an 800 number would be set up, and frequent updates might be provided to the print and broadcast media. Now the same thing might happen, but real time updates would occur online, information would be posted in regard to what to do, and updates would be posted as they happen. All of the same tools, but with a higher level of frequency and more timeliness. In addition to the above example, websites are quite effective for publishing information about philanthropic efforts, events, and just general news about the company or organization that might never get seen or only appear in a company‘s annual report or newsletters. One visit to a site demonstrates the value of this capability. For example, visit the Ford website (https://www.ford.com). Once there, one can find information about Ford‘s corporate governance, events, projects, philanthropy, etc. For public relations people, the Internet has become a major tool to go along with the traditional public relations mix. 114. The chapter discusses a variety of new Internet advertising forms including podcasting and blogs. Explain what each of these are. What are some of the potential advantages and disadvantages associated with the use of each? (LO 15-2) The chapter provides a number of new advertising forms that have are now common on the Internet. Without listing all of these here, it is possible to discuss their advantages and disadvantages, as they are pretty consistent across all. Given their novelty, there will no doubt be more to add to these lists over time. The primary advantage to these forms probably lies in the fact that they are consumer driven— i.e., that they can be accessed by the receiver wherever and whenever they want. One can access a podcast that appeared earlier in the day, yesterday, or at some other time when and where they want to hear it. Likewise, access to a blog and the information provided therein is also up to the receiver. The new forms are also useful in reaching younger consumers, many of whom are less tuned in to traditional media forms. The penetration of iPods among younger age groups makes the information provided through podcasts available to this market segment at any time. All of these forms also provide information and insights that may not be available through traditional media. For example, blogs may carry information not known to some media or provide very different perspectives on a subject. At the same time, there are some problems associated with these media. One is the issue of credibility. There seems to be some underlying assumption that if the information appears on a blog it is credible. Yet, blogs are often not monitored, and to date, not regulated. Thus the information that appears there may not always be correct or unbiased. Some companies—like McDonalds—have been accused of creating blogs for purely advertising purposes, without identifying the fact that they are the sponsors. Many other companies create blogs talking about the great aspects of their products, when, in fact, they are nothing more than advertising messages. There is also concern about the monitoring of blogs for research purposes by large companies. While blogs are supposedly free speech, companies can learn a lot about what people think about 1-258 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

them and their products, plant writers on the blogs, and denigrate the competition. To date, these new advertising forms have shown great promise. The number of people participating in the use of Podcasts, blogs, etc. is still relatively small, but surely on the increase. 115. Many marketers and policy makers believe the Internet and social media may constitute a ―web of deceit‖. Explain what they mean by this comment. Provide examples as to why they have this feeling. (LO 15-4) Ever since its inception, the web has been considered to be the ―wild, wild west‖, referring to the fact that it had and wanted few rules, guidelines and law, and that virtually anything goes. In the initial days of the Internet, traditional metrics, practices and tactics were often ignored, as the digital generation believed that they had created their own new world. That changed reasonably quickly as companies used to traditional media strategies literally forced the use of more traditional practices. Nevertheless, the Internet of today is fraught with practices that traditional media could never get away with. Of major concern is that of privacy, and the use of personal data, often without the consumer knowing it. The use of behavioral targeting and retargeting are two practices that are not only irritating, but potentially deceptive. Digital marketers are also now heavily involved with native ads, essentially advertorials under a different name. While advertorials must be identified as ads in print media, so far there are no such guidelines on the web. So the unsuspecting reader may be led to believe that the ads are actual content. The interactivity of Web 2.0 has made the Internet a dangerous place. Given that virtually anyone can post information—truthful or not, dangerous or not, private or not—reputations have been ruined, companies have been falsely maligned, and much negative publicity has been generated. 116. The new media discussed in this chapter have some distinct advantages over traditional media, but also have some disadvantages. Discuss some of the advantages and disadvantages of traditional and new media. (LO 15-4) While the Internet certainly has its advantages over other media, it also has some disadvantage relatively speaking. Consider, for example TV. At this point, there is perhaps no better medium for reaching audiences and creating interest than television. Recent research has shown that as many as 38 percent of purchasers from Internet sites began their search as a result of seeing the product through a TV commercial. Other studies show that the majority of visits to a brand‘s website are driven by exposure to a traditional medium. Whether it be through an ad, a product placement, or other means of exposure, these media have a distinct advantage over the Internet for this objective. Additional research has shown that a high percentage of users of search on the internet start the search with a brand name rather than a generic product category. Given the weaker capabilities of the Internet to build strong brands, again, an advantage goes to traditional. Other media, like outdoor which is more likely to gain exposure, magazines which target people with very specific interest and are easier to read, and catalogs all have some advantages not associated with the Internet. Of course, personal selling has its own distinct advantages. Dyadic communications, immediate feedback, ability to alter the message are all capabilities that the Internet does not offer as well.

Where digital media may have its greatest impact is lower in the funnel. For example, nothing comes close to the speed and timeliness of dissemination of information as the Internet and particularly social media. Marketers can update information almost instantly. In addition, social media often leads to dissemination for free (good or bad), allowing for exposure to potentially millions at little or no cost. 117. Discuss the role of social media in an IMC program. What can these media contribute in regard to helping marketers achieve communications objectives? (LO 15-2) The primary offering of social media to marketers is exposure. When positive, this can be of great benefit to the marketer. The passing on of information is essentially digital word of mouth, which can lead to many positive benefits. Of course, negative ―going viral‖ can also result in bad publicity to the marketer, which can destroy a product or brand. If it is deserved, this is a direct benefit to the consumer, but not necessarily the marketer. Social media is now in the process of changing. While most were initially free, almost all are now selling advertising time and space. The bad news is the media are changing themselves. The good news for marketers is that they are likely reaching segments that share similar values, lifestyles, etc. Consider Facebook for example. One could argue that my ―friends‖ are very likely to be similar to me, and may be interested in the same things. In addition, social media have information on consumers that marketers may not have, but find useful. Facebook has become another VALS or MRI+ in many ways by offering information regarding demographics and lifestyles that might aid marketers in segmentation. If in the lower stages of the consumer funnel, the marketer can find social media particularly effective in communicating information to consumers, offering specials and/or promotions, etc. 118. Policy makers are concerned that some bloggers may not be disclosing the fact that they are being compensated for product or brand endorsements. Explain why they may be concerned about this and how it may lead to negative impacts on the consumer. (LO 15-5) In 2022, there were an estimated 600 million active blogs on the Internet. Obviously, they are reaching a number of people in a myriad of areas of interest. Political blogs, advertising blogs, auto repair blogs and just about anything you can think of is now available on a blog. While this information may be very helpful and relied upon by consumers, it can also be deceptive and misleading. Take mommy bloggers, for example. Many of these bloggers are discussing products and services of interest to consumers, ranging from diapers to automobiles. In some instances these bloggers are provided free products, vacations or even direct pay from companies to speak positively about their brands. One might argue that this compensation leads to bias for or against brands. If the fact that these favors are not disclosed, the unwary consumer may be misled into placing more credibility into the blogs than is warranted. Haul videos are of the same ilk. Teenage girls going on shopping sprees sponsored by Abercrombie or other retailers and then showing and promoting the items purchased without disclosure of sponsorship must be considered misleading. The teens who watch these videos may not recognize that payments are being made, and trust the blogger as just another peer. To this date, there are few restrictions on blogging and haul videos. Now you know why it is often called the ―web of deceit‖. 119. Discuss why mobile has become an attractive medium for advertisers. Provide examples of how companies have used mobile. (LO 15-2)

One of the fastest growing of the new digital media is mobile—though estimates are that we are still years behind some foreign companies. The rapid growth of smartphones with an array of apps is a boon to all types of advertisers. Perhaps most important is the fact that consumers mobile devices are always with them, allowing for full time exposure. An attractive aspect of mobile is its target marketing capabilities. Advertisers can tell by the apps used what the owner‘s interests are, and target them directly. (For example, travel apps and sports apps. Lead to the use of travel and sports related products.) A consumer looking for a store or a type of restaurant can receive directions to the closest location, and even get a coupon sent for use when they get there. The development of new sites in which users tell others where they are, receive ―inside‖ information on menu items, earn points for purchases and a variety of other features have created yet another medium for advertisers to reach consumers and attempt to create sales and loyalty. 120. There are indications that the popularity of blogs may have already reached the maturity stage. Take a position as to whether this is true or not, providing examples to support your opinion. (LO 15-1) In 2022, there were an estimated 600 million active blogs on the Internet. Fashion, food, sewing, and travel are the most popular. These blogs range from providing information about news, politics, and products, amid a myriad of other topics. There are beer blogs, cupcake blogs, car blogs—just about anything that you can imagine someone having an interest in. Blogs have value to marketers in that they can target the blog readers through the websites. For example, do it yourself mechanics are likely to read auto repair blogs. Makers of cupcake jewelry would reach potential consumers through cupcake blogs, etc. Blogs also provide useful information about products and services that might be hard to find elsewhere, and, if the marketer has a good product or service to offer, they may gain exposure at a minimal cost. Companies have also used blogs for marketing research purposes, watching what subscribers say about their own and competitive products. Like other Internet media, blogs are viral. There is some indication that the value of blogs may be diminishing, however. Reports in the media about deceptive and/or unethical practices has eroded the public‘s trust in the blogosphere. The bloggers have not helped themselves, by contributing or even sponsoring these practices. While blogs are estimated to reach hundreds of millions of people (the exact numbers cannot be determined), each year the number of active blogs decreases. It does appear that blog readers are abandoning the sites, and the bloggers themselves are writing less. 121. A trend among advertisers is to make more use of consumer generated commercials to be placed on YouTube and similar sites. Discuss some of the advantages and disadvantages of employing this strategy. (LO 15-4) YouTube has a lot of reach and an attractive audience for consumer product companies—which is just one of the reasons why consumer generated videos are a potentially popular tool for marketers. Add to that the fact that the cost of these videos is almost non-existent, and another advantage is offered. Marketers have become quite enamored with having consumers create videos for them. They run contests and sweepstakes to developers, offering to place their ads in such extremely popular places as the Super Bowl. Sometimes (but rarely) the videos are completely the work of the consumer, though on more occasions they are enhanced and/or edited. Nevertheless, they generate interest both on the part of the developer and the viewing audience. In addition, they

often generate free and valued publicity when the media reports on them. Some companies now offer competitions in colleges and universities for video development. One of the drawbacks of these videos is that they are not always professionally developed, and the quality is less than what might be achieved by an agency or boutique. Many fail to attract attention or interest by viewers. In addition, like blogs, consumers are seeing through these ―original‖ videos, recognizing that they are not always what they are made out to be. 122. Some marketers have argued that the strength of the Internet in an IMC program is at the mid stage of the consumer funnel (knowledge, consideration, etc.) Discuss whether you agree or disagree with this position, and support your position with examples. (LO 15-1) As more research on the Internet surfaces, it seems to indicate that the Internet is a viable communications tool in an IMC program, but is not the be all and end all some expected. As Internet popularity continues to grow as an advertising medium, so too does evidence of its limited capabilities. Much of the growth of the net as an advertising medium is in search, with the impact of banner ads and other advertising forms still minimal. Some studies now reveal that traditional media like TV and magazines (as well as direct mail and product placements) are the source for visits to the web. Products and brands are seen in these media, and the consumer then visits the Internet for information and evaluation. The exposure on TV, for example, is unrivaled with other media, and has strong effectiveness at the early stages of the consumer funnel. It is also true that the Internet is unrivaled as a source of information. If there is something a consumer wishes to know about a product or service, s/he can find it faster, easier and in more currency than in any other medium. Likewise, other consumers‘ experiences with the product, satisfaction, or dissatisfaction, and price comparisons are much easier to access. In summary, the Internet is a valuable marketing tool—particularly with the advent of social media. However, at this time, it appears to be of most value to marketers in the middle or bottom of the consumer funnel.

IMC Exercise If they are willing, have students discuss their social media usage. Have them report on which media they now receive ads on, what type of ads they are, and what they think of this practice.

CHAPTER 16 SALES PROMOTION Chapter Overview In this chapter, we turn our attention to sales promotion and its role in a company‘s integrated marketing communications program. We examine how marketers use both consumer- and trade-oriented promotions to influence the purchase behavior of consumers as well as wholesalers and retailers. The chapter begins with a discussion of the scope and role of sales promotion and a discussion of the reasons for its increasing importance. Attention is also given to sales promotion objectives including a discussion of consumer franchise-building versus nonfranchise-building promotions and specific promotional objectives. Much of the chapter is devoted to an examination of the various consumer- and trade-oriented 1-262 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

sales promotion techniques used by marketers and considerations involved in their use. The chapter concludes with a discussion of how sales promotion and advertising can be integrated with other elements of the promotional mix as well as problems involving marketers‘ overreliance and even abuse of sale promotion.

Learning Objectives 1.

Describe the role of sales promotion in the IMC program.

Identify the objectives of sales promotion programs.

Explain how marketers use various types of consumer- and trade-oriented sales promotion tools.

Explain how to coordinate sales promotion with advertising.

Discuss potential problems in the use of sales promotion tools.

Chapter and Lecture Outline I.

INTRODUCTION

For many years, advertising constituted a major part of the promotional budget of most consumer product companies. Over the past decade, however, many marketers have come to the realization that advertising alone often is not enough to stimulate demand for their products and are increasingly turning to sales promotion methods targeted at both consumers and the trade. Many companies are developing fully integrated marketing programs that include consumer and trade promotions that are coordinated with advertising, publicity/public relations, and Internet marketing programs as well as sales force efforts. It is important to note these trends and emphasize to students the important role sales promotion plays in the marketing of most consumer products. The opening vignette discusses the highly successful use of customer loyalty programs in the fast food industry.

II.

THE SCOPE AND ROLE OF SALES PROMOTION

Sales promotion is defined as ―a direct inducement that offers an extra value or incentive for the product to the sales force, distributors, or the ultimate consumer with the primary objective of creating an immediate sale.‖ There are several important aspects of sales promotion to note: 55) Sales promotion involves some type of inducement that provides an extra incentive for consumers, wholesalers, and retailers to buy. 56) Sales promotion is essentially an acceleration tool, designed to speed up the selling process and maximize sales volume. 57) Sales promotion activities can be targeted to different parties in the marketing channel. Sales promotion can be broken into two major categories: 58) Consumer-oriented sales promotion includes promotions directed at the consumers who are final purchasers of goods and services. These include samples, coupons, refunds/rebates, contests, sweepstakes, and others. 59) Trade-oriented sales promotion includes promotional programs and activities designed to motivate distributors and retailers to stock and promote a manufacturer‘s products. These include dealer contests and incentives, trade allowances, point-of-purchase displays, sales training programs, trade shows, and others. The various activities included under each sales promotional category are shown in Figure 16-1 of the text. This chapter focuses on both consumer- and trade-oriented promotions. Professor Notes:

III.

THE IMPORTANCE OF SALES PROMOTION

Sales promotion continues to play an important role in the integrated marketing communications program of many companies. In 2022, spending on various forms of sales promotion exceeded $200 billion.

Consumer packaged-goods (CPG) firms continue to be the core users of sales promotion programs and tools. Estimates are that marketers spend more than half of their promotional budgets on sales promotion, with the remainder being allocated to media advertising. OOOO. Reasons for the Increase in Sales Promotion—The increases in the percentage of the IMC budget allocated to sales promotion over the years concerned many marketers who still viewed media advertising as the primary tool for brand building and saw sales promotion programs as little more than gimmicks that contributed little to brand equity. There are a number of reasons for the increases in spending on sales promotion. A major reason for the increase in spending on sales promotion is that the promotion industry has matured over the past several decades. Increased sophistication and a more strategic role and focus have elevated the discipline and its role in the IMC program of many companies. Other reasons for increases in sales promotion spending include: 15. The growing power of retailers—In recent years, several developments have helped to transfer power from the manufacturers to the retailers. With the advent of optical checkout scanners and sophisticated in-store computer systems, retailers gained access to data concerning how quickly products turn over, which sales promotions are working, and which products make money. Retailers use this information to analyze sales of manufacturers‘ products and then demand discounts and other promotional support from manufacturers of lagging brands. Consolidation of the grocery store industry has also resulted in larger and more powerful retailers who can use their purchasing power to demand more trade promotion deals. We discuss how Walmart has become such a powerful retailer and the challenges this creates for marketers who must often develop account specific promotions for the retailing giant. 16. Declining brand loyalty—Consumers have become less brand loyal and are purchasing more based on price, value, and convenience. They are also looking for more deals and will buy whatever brand is on sale or for which they can use a coupon. 17. Increased promotional sensitivity—The percentage of purchases made in conjunction with some sort of promotional offer has increased sharply over the past decade. A recent IRI Market Pulse Survey found that 85 percent of consumers are buying packaged-goods brands that are on sale over their preferred brands. An obvious reason for consumers‘ increased sensitivity to sales promotion offers is that they save money. Marketers issue nearly 170 billion coupons each year that can be used by price-conscious consumers to save money. They also use rebates, buy-one-get-one-free offers, special sales events, price-off deals, and other discounts to attract price-sensitive consumers. 18. Brand proliferation—Research shows that about 75 percent of consumer packaged goods and retail products fail in their first year—in large part because of ingrained consumer shopping habits. Marketers are relying more on samples, coupons, rebates, premiums, and other innovative promotional tools to achieve trial usage of their new brands and encourage repeat purchases. Supermarkets carry an average of 30,000 SKUs compared to 13,000 in the early ‘80s. Technology is already in place to enable marketers to communicate individually with target consumers and transform mass promotional tools into ways of doing one-to-one marketing. 19. Short-term focus—The increase in sales promotion is motivated by marketing plans and reward systems geared to short-term performance and the immediate generation of sales volume. Marketing and brand managers use sales promotions routinely, not only to introduce new products or defend against the competition, but also to meet quarterly or yearly sales and

market share goals. Many managers view consumer and trade promotions as the most dependable way to generate short-term sales, particularly when they are price-related. 20. Increased accountability—Many companies are demanding to know what they are getting for their promotional expenditures. Many companies feel that sales promotion programs are more economically accountable than advertising since they often generate a quick and easily measured jump in sales. Marketers also feel pressure from the trade as powerful retailers demand sales performance from their brands. 21. Competition—With the markets for many products growing mature and stagnant, it is increasingly difficult to boost sales through advertising, many marketers are turning to sales promotion to gain or maintain a competitive advantage. A major development in recent years is the use of account-specific marketing (also referred to as comarketing) whereby a marketer collaborates with customizes promotions for individual retailers. Exhibit 16-6 provides an example of an account specific promotion used by WD-40. 22. The growth of digital marketing—Many marketers now use the various forms of digital marketing to implement sales promotion programs as well as measure their effectiveness. Promotional offers such as coupons and discounts as well as entry forms for contests and sweepstakes appear on marketers‘ websites and social media pages. Discounts and promotional offers are important reasons why people follow brands on social media sites.. In fact, 48 percent of consumers say they connect to brands‘ social accounts because they are interested in buying a brand‘s products, and 44 percent said they connected because there was an incentive (e.g., sweepstakes, discount, or gift card). PPPP. Concerns about the Increased Role of Sales Promotion—It is important to note that the increased use of sales promotion is coming at the expense of media advertising. This has led to concern that the increased use of sales promotion is having a negative effect on brand equity. As was noted in Chapter 2, brand equity refers to a type of intangible asset of added value or ―goodwill‖ those results from the favorable image or differentiation that a brand has achieved. Another term used synonymously with brand equity is consumer franchise. There are many examples of situations where marketers have hurt the brand equity of their products by placing more emphasis on consumer and trade promotions than advertising. QQQQ. Consumer Franchise-Building versus Nonfranchise-Building Promotions—It is important to make the distinction between consumer-franchise building sales promotions and non-franchise building efforts. Consumer franchise-building (CFB) promotions are designed to communicate distinctive brand attributes and contribute to the development and reinforcement of brand image and identity. Nonfranchise-building (non-FB) promotions are designed to accelerate the purchase decision process and generate immediate increases in sales. They do very little, if any, to contribute to the brand identity and image. The chapter discusses concerns over marketers becoming too dependent upon sales promotion and how this is undermining their brand building efforts. Professor Notes:

IV.

CONSUMER-ORIENTED SALES PROMOTION

Marketers have been using various types of sales promotion for more than a hundred years and have found a variety of ways to give consumers an extra incentive to purchase their products and services. Objectives for Consumer-Oriented Sales Promotion—As the use of sales promotion techniques continues to increase, companies must consider what they hope to accomplish through their promotions and set clearly defined objectives and measurable goals for their sales promotional programs. While the basic goal of most sales promotion activities is to induce purchase of a brand, there are a number of other objectives a marketer might have for both new and established brands. These include: Obtaining trial and repurchase—One of the most important uses of sales promotion techniques is to encourage consumers to try a new product or service. Increasing consumption of an established brand—Sales promotion can generate some new interest in an established brand to help increase sales or defend market share against competitors. Another strategy for increasing sales of an established brand is to use promotions that attract nonusers of the product category or users of a competing brand. Defending current customers—With more new brands entering the market every day and competitors attempting to take away their customers through aggressive advertising and sales promotion efforts, many companies are turning to sales promotion programs to hold present customers and defend their market share. Targeting a specific market segment—Many marketers are finding that sales promotion tools such as contests and sweepstakes, events, coupons, and samplings are very effective ways to reach specific geographic, demographic, psychographic, and ethnic markets. Enhancing integrated marketing communications and building brand equity—Companies are asking their advertising and promotion agencies to think strategically and develop promotional programs that can do more than simply generate short-term sales. They want promotions that require consumers to become more involved with their brands and offer a way of presenting the brand essence in an engaging way. Professor Notes:

CONSUMER-ORIENTED SALES PROMOTION TECHNIQUES

The various consumer-oriented sales promotion techniques used by marketers should be discussed along with their advantages and limitations and the role they play in meeting various promotional objectives. Sampling—Sampling involves a variety of procedures whereby consumers are given some quantity of a product for no charge to induce trial. Sampling is often used as a way of introducing a new brand to the market although it is also used for established products. Manufacturers of packaged-goods products such as food, health care items, cosmetics, and toiletries are heavy users of sampling since their products meet the three criteria for an effective sampling program: o

The products are of relatively low unit value, so samples do not cost too much.

The products are divisible, which means they can be broken into small sample sizes that are adequate for demonstrating the brand‘s features and benefits to the user. 1-267

The purchase cycle is relatively short, so the consumer will consider an immediate purchase or will not forget about the brand before the next purchase occasion.

Benefits and limitations of sampling. Benefits: Samples are an excellent way of inducing trial. Sampling allows consumers to experience a product directly and gain an appreciation for its benefits and characteristics. Limitations: While samples are an effective way to induce trial, the brand must have some unique or superior benefits for a sampling program to be worthwhile. The costs of sampling programs can be very high. The benefits of a brand may be difficult to gauge from a sample. 23. Sampling methods—Decisions must be made concerning the method by which the sample will be distributed. The sampling method is important not only in terms of costs, but also in terms of influencing the type of consumer who receives the sample. Some of the more widely used sampling methods include: 1. Door-to-door sampling—The product is delivered directly to a residence. 2. Sampling through the mail—Common for small, lightweight, nonperishable products. 3. In-store sampling—Particularly popular for food products. 4. On-package sampling—A sample of a product is attached to another item. 5. Event sampling—Quickly growing in popularity. Many marketers are using sampling programs that are part of integrated marketing programs that feature events, media tie-ins, and other activities that provide consumers with a total sense of a brand rather than just a few tastes of a food or beverage or a trial size of a packaged-goods product. 24. Other methods of sampling—There are other sampling methods available such as inserts in magazines and newspapers, requesting samples by phone, and the use of specialized sample distribution services. The Internet is yet another way companies are making it possible for consumers to sample their products. There are several online sampling services in existence today. RRRR. Couponing—Couponing is the oldest, yet most widely used and effective sales promotions tool. The number of coupons distributed to consumers in the United States has increased dramatically, going from 16 billion in 1968 to 332 billion in 2010 during the great recession, with 3.3 billion being redeemed. As the economy recovered, the number of coupons distributed declined to 258 billion in 2021, with redemption dropping to 865 million. The average face value of coupons redeemed for nonfood consumer packaged goods was $2.77 compared to $1.27 for food products. Advantages and limitations of coupons. Advantages:

Coupons make it possible to offer a price reduction to those consumers who are price sensitive without having to reduce the price for everyone. Coupons allow the offering of a price reduction without having to rely on retailers. Couponing can be an effective promotional device for generating trial of a new brand. Coupons can be used to encourage trial and increase consumption of established brands. Coupons may help coax users of a product to trade up to more expensive brands. Limitations: It can be difficult to estimate how many consumers will redeem a coupon and when they will do so. Response to a coupon is rarely immediate; it typically takes several months to redeem one. Coupons intended to attract new users of established brands are often redeemed by already loyal users. There tends to be low redemption rates of coupons. Couponing programs can be expensive. Problems of coupon misredemption and fraud exist. 25. Coupon distribution—Coupons can be distributed in a variety of ways including: 6. Media delivery in newspapers and magazines and as freestanding inserts (FSIs). 7. Through direct mail. 8. In or on packages. 9. In stores and at points-of-purchase. 10. Over the Internet through online promotion sites. 11. Through mobile marketing by sending coupons directly to smartphones and other mobile devices. 26. Couponing trends—Coupons continue to be the most effective sales promotion tool for influencing consumers purchase behavior, as evidenced by the nearly 1 billion that are redeemed each year by U.S. consumers. Some companies have tried to cut back on their use of coupons because of concerns over costs and effectiveness. Marketers also continue to search for new and more effective couponing techniques to get around the problem of ―coupon clutter.‖ In-store coupon distribution techniques are becoming more popular, with many companies attempting to more precisely target consumers when distributing their coupons. Several companies now offer online couponing services. Consumers can access coupons for their local area online through the Valpak.com website. Another form of online couponing that has become very popular over the past decade is through deals and discounts offered by companies such as Groupon and Living Social. The best-known company competing in this promotional space is Groupon, which was founded in 2008 in Chicago and has expanded throughout the world.

A rapidly growing method of distribution is mobile couponing whereby coupons are sent directly to mobile phones. Consumers seek out coupons from a number of different digital channels including retailer, manufacturer, and coupon websites as well as search engines, coupon-specific apps, e-mails from retailers and coupon companies, push notifications, and QR codes on digital signage or catalogs and through search engines. SSSS. Premiums—A premium is an offer of an extra item of merchandise or service either free or at a low price that is used as an incentive for purchase. The two basic types of premiums are: Free Premiums—Usually inexpensive gifts or items that are included in the product package, distributed with a purchase, or sent to consumers who make mail-in-requests along with proof of purchase. A very popular premium or incentive offer being used by marketers is airline miles which have become a type of promotional currency. Consumers are now choosing credit-card services, phone services, hotels, and many other products and services on the basis of mileage premiums for major frequent-flyer programs. Free premiums have also become popular in the restaurant industry, particularly among fast-food chains such as McDonald‘s and Burger King, which use premium offers in their kids‘ meals to attract children. 27. Self-liquidating premiums—Those that require the consumer to pay some or all of the cost of the premium plus handling and mailing costs. Self-liquidating premiums can be used to create interest in a brand as well as generate goodwill that enhances the image of a brand. Advantages of premiums: 

Premiums have high impulse value and can provide consumers with extra incentives to purchase a product.



Premiums are a way of extending the advertising message.



Premiums can be used to create interest in a brand as well as goodwill that may enhance the brand‘s image.



Premiums can be a way of generating trade interest and support.

Limitations of premiums: 

Premiums can have high costs.



There may be restrictions on the use of premiums.

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Redemption rates of mail in premiums are low.

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Consumers may not perceive the premium offer as a value.

TTTT. Contests and Sweepstakes—A contest is a promotion whereby consumers compete for prizes or money based on skills or ability and winners are determined by judging entries against some predetermined criteria. Contests often provide a purchase incentive by requiring proof of purchase to enter or to obtain an entry form from a dealer or advertisement. A sweepstakes is a promotion whereby winners are determined purely by chance and cannot require proof of purchase as a condition for entry. Another form of a sweepstakes is a game, which also has a chance element associated with winning. Problems with contests and sweepstakes.

12. A contest or sweepstakes promotion may overwhelm the ad or brand and may do little to contribute to the brand franchise or image. 13. The presence of professionals or hobbyists who submit large numbers of entries but have no interest in the product can detract from the effectiveness of contests and sweepstakes. There are many websites that inform consumers of all the contests and sweepstakes being held, the entry dates, entry requirements, and other information needed to enter. 14. Numerous legal problems and considerations affect the design and administration of contests and sweepstakes. UUUU. Refunds and Rebates—Refunds or rebates are offers to return some portion of the product purchase price after supplying some sort of proof of purchase. Consumers are generally responsive to refund or rebate offers, particularly as the size of the savings offer increases. Marketers are using rebates extensively, particularly in products categories such as consumer electronics. However, as discussed in the chapter, many consumers have become frustrated with rebates and many marketers, as well as retailers, are taking steps to deal with consumer dissatisfaction and problems created by them. Evaluating refunds and rebates. Advantages: Refunds and rebates can be effective sales promotional tools for creating new users and for encouraging brand switching, encouraging repeat purchase behaviors, or offering a temporary price reduction. Refunds and rebates are often perceived as offering immediate savings or value even though the money is not received until the offer is redeemed and many consumers never follow through on the offer. Refunds and rebates can allow a marketer to achieve a price reduction for much less than if a direct price deal were utilized. Limitations: Many consumers do not like the delay and effort required to redeem refund and rebate offers. The terms of some rebate offers are inconvenient or even unrealistic. Consumers may have a negative perception of brands that use rebates. Many retailers do not want to become involved with the administration of rebate programs. VVVV. Bonus Packs—Bonus packs offer the consumer an extra amount of a product at the regular price by providing larger containers or extra units. Exhibit 16-23 shows a bonus pack offer for Charmin toilet tissue. Bonus packs result in a lower cost per unit for the consumer and provide extra value as well as more product for the money. Advantages of bonus packs: They provide extra value to consumers without having to get involved with things such as coupons or rebate offers.

They can be an effective maneuver against a competitor‘s promotion or introduction of a new brand by loading consumers with the product and making them less susceptible to competitors‘ promotional efforts. Bonus packs often receive favorable responses from retailers. Limitations of bonus packs: They may require additional shelf space and do not provide extra profit margins for the retailer. They may appeal primarily to current users who may have purchased the brand anyway, or to promotion-sensitive consumers who will not become loyal to the brand. WWWW. Price-Off Deals—Price-off deals provide a reduction in the regular price of the brand, typically right on the package through specially marked price packs. Advantages of price-off promotions: They are controlled by the manufacturer, which enables them to ensure that the promotional discount reaches the consumer rather than being kept by the trade. Price-off deals usually present a readily apparent value to consumers, particularly when they have a reference price point for the brand and recognize the value of the discount. Price-offs can provide a strong influence when point-of-purchase comparisons are being made. They can encourage consumers to buy larger sizes. Limitations of price-off promotions: They can create pricing and inventory problems for consumers. They may appeal primarily to regular users rather than attracting nonusers. XXXX. Loyalty Programs—Loyalty programs (also referred to as continuity or frequency programs) are promotional programs that reward customers for continuing to purchase the same brand of a product or service over time. Loyalty programs have become commonplace in a number of product and service categories, particularly travel and hospitality, as well as among retailers. Many fast-food and quick-serve restaurants have developed loyalty programs that attract large numbers of members. Supermarkets were among the first retailers to develop card-based shopper loyalty programs and more than 7,000 of them now have loyalty programs that offer members discounts, a chance to accumulate points that can be redeemed for rewards, newsletters, and other special services. Loyalty programs are also used by a variety of other retailers. As frequency programs become more common, marketers will be challenged to find ways to use them as a means of differentiating their product, service, business, or retail store. Advantages of loyalty programs: Marketers view these programs as ways of encouraging consumers to use their products or services on a continual basis and as a way of developing customer loyalty. Many companies are realizing the importance of customer retention, and frequency programs help them build relationships with customers. Frequency programs provide marketers with the opportunity to develop databases containing valuable information on their customers and which can be used for direct marketing purposes. 1-272 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

Limitations of frequency programs: Finding ways to make them true loyalty programs rather than just frequent-buyer programs. Using frequency programs to effectively differentiate a product, service, business, or retail store, particularly when they are being used by competitors. Nearly 30 percent of loyalty program participants have left a program before redeeming a single reward because of the time and effort it takes. YYYY. Event Marketing—Event marketing is a form of promotion where a company or brand is linked to a specific event or themed activity developed for the purpose of creating experiences for consumers and promoting a product or service. Marketers often do event marketing by associating their product with a popular activity such as a sporting event, concert, fair, or festival. However, marketers also create their own events to use for promotional purposes. It is important to make a distinction between event marketing and event sponsorships, as the two are often used interchangeably yet refer to different activities. Event sponsorships are promotions whereby a company develops sponsorship relations with a particular event and provides financial support in return for the right to display a brand name, logo, or advertising message and be identified as a sponsor of the event. Event marketing often takes place as part of a company‘s sponsorship of activities such as concerts, the arts, social causes, and sporting events. Event marketing has become a very popular part of the integrated marketing communications programs of many companies as they view them as excellent promotional opportunities and a way to associate their brands with certain lifestyles, interests, and activities. Event sponsorship is discussed further in Chapter 17. Advantages of event marketing: Events can be used to create experiences for consumers and associate a company‘s brand with certain lifestyles and activities. Events can be used to distribute samples as well as information about a marketer‘s product or service or to allow consumers to experience the product. Events often provide marketers with access to large numbers of consumers at a relatively low cost and can be an effective part of a grass roots marketing program. ZZZZ. Summary of Consumer-Oriented Promotions and Marketer Objectives—The discussion of the various consumer-oriented promotion techniques shows that marketers use these tools to accomplish a variety of objectives. These techniques provide consumers with an extra incentive or reward for engaging in a certain form of behavior such as purchasing a brand. These incentives or rewards can be either immediate or delayed. Figure 16-4 in the text outlines which sales promotional tools can be used to accomplish various objectives of marketers (such as inducing trial, customer retention/loading, and supporting the IMC program and/or building brand equity) and whether the incentive is immediate or delayed. It should be noted that in Figure 16-4 some of the sales promotion techniques are listed more than once because they can be used to accomplish more than one objective. This chart is a useful way of summarizing the discussion of consumeroriented sales promotion tools. Professor Notes:

VI.

TRADE-ORIENTED SALES PROMOTION

Objectives of Trade-Oriented Sales Promotion—As with consumer-oriented promotions, sales promotion programs targeted to the trade should be based on well-defined objectives and a consideration of what the marketer wants to accomplish by using trade promotions. Objectives for trade-oriented promotions include: Obtain distribution for new products—Trade promotions are often used to encourage retailers to give shelf space to new products. Marketers also use other types of promotions to get them to push the brand. Merchandising allowances can get retailers to display a new product in hightraffic areas of stores, while incentive programs or contests can encourage wholesale or retail store personnel to push a new brand. Maintain trade support for established brands—Brands that are in the mature phase of their product life cycle are vulnerable to losing wholesale and/or retail distribution, particularly if they are not differentiated or face competition from new products. Trade deals induce wholesalers and retailers to continue to carry weaker products because the discounts increase their profit margins. Encourage retailers to display established brands—Marketers recognize that many purchase decisions are made in the store, and promotional displays are an excellent way of generating sales. An important goal is to obtain retail store displays of a product away from its regular shelf location. Build retail inventories—Manufacturers want to load retailers with their products. Wholesalers and retailers are more likely to push a product when they have high inventory levels rather than storing it in their warehouses or back rooms. Building channel members‘ inventories also ensures they will not run out of stock and thus miss sales opportunities. AAAAA. Types of Trade-Oriented Promotions—There are a variety of trade promotion tools that manufacturers can use as inducements for wholesalers and retailers. These include: Contests and incentives—Manufacturers use contests and special incentive programs to stimulate greater selling effort from resellers management or sales personnel. An important target of contests or special incentives is the sales personnel of the middlemen. In addition to using contests, programs targeted to sales personnel may include push money (pm) or spiffs. Trade allowances—Probably the most commonly used trade promotion is some form of trade allowance, which is a discount or deal offered to the retailer or wholesaler to encourage them to stock, promote, or display a manufacturer‘s products. There are several types of trade allowances including: 

Buying allowances—A deal or discount offered to resellers in the form of a price reduction on product ordered during a fixed time period. These discounts are often in the form of an off-invoice allowance, which means a certain per-case amount or percentage is deducted from the invoice.



Promotional allowances—Discounts provided to retailers for performing certain promotional or merchandising activities in support of a manufacturer‘s brand.



Slotting allowances—Rather than a discount, these are special fees that retailers charge manufacturers for agreeing to handle a new product and providing a slot or position in their store to accommodate the new product. Some retailers have even

been demanding failure fees if a new product does not hit a minimum sales level within a certain time. 28. Displays and point-of-purchase materials—Marketers use a variety of point-of-purchase materials including end-of-aisle displays, posters, banners, shelf cards, motion pieces, standup racks, and other material. Point-of-purchase displays are an important promotional tool because they can help a manufacturer obtain more effective in-store merchandising of their products. Products often sell better when they are on display as they are more likely to be noticed by consumers and displays also are often accompanied by price deals. Many manufacturers help retailers use shelf space more efficiently through planograms, which are configurations of products that occupy a shelf section in a store. Some manufacturers are developing computer-based programs that allow retailers to input information from their scanner data and determine the best shelf layouts by experimenting with product movement, space utilization, profit yields, and other factors. 29. Sales training programs—Another important form of manufacturer-sponsored promotional assistance is sales training programs for reseller sales personnel. Manufacturers provide sales training assistance to retail salespeople in a number of ways including having formal classes, having their sales reps work with resellers and providing sales manuals, brochures, videos, and other selling aids. 30. Trade shows—A trade show is a type of exhibition or forum where manufacturers display their products to current as well as prospective buyers. Trade shows provide a major opportunity to display and demonstrate products, interact with customers, identify new prospects, gather customer and competitive information, and even write new orders. The social aspects of trade shows are also important as many customers use them to entertain key customers and to develop and maintain relationships. Trade show attendance was severely impacted by the pandemic but is slowly recovering. 31. Cooperative advertising—Cooperative advertising, whereby the cost of advertising is shared by more than one party, is another important form of trade promotion. There are three types of cooperative advertising: 15. Horizontal cooperative advertising—Advertising sponsored in common by a group of retailers, companies, or other organizations providing products or services to a market. Automobile dealerships that are concentrated in a specific location in many large metropolitan areas often use this form of cooperative advertising. 16. Ingredient-sponsored cooperative advertising—Advertising supported by a raw materials or component manufacturer to help establish end products using the company‘s materials or ingredients. The popular ―Intel Inside‖ campaign is an example of this form of cooperative advertising. Intel provides cooperative advertising funds to personal computer manufacturers, which totals five percent of the total dollar amount of microprocessors they purchase from the company. 17. Vertical cooperative advertising—This is the most common type of co-op ad program used as part of a trade-oriented promotional program. Under a vertical co-op program, the manufacturer pays for a portion of the advertising a retailer runs to promote its product and its availability in the retailer‘s place of business. The limit or amount of co-op funds the manufacturer provides to the retailer is usually based on a percentage of dollar purchases made from the manufacturer. Professor Notes:

VII. COORDINATING SALES PROMOTION WITH ADVERTISING AND OTHER IMC TOOLS Sales promotion techniques usually work best when used in conjunction with advertising. Conversely, a consumer sales promotion program can enhance the effectiveness of an ad campaign. When properly planned and executed to work together, sales promotion can provide a synergistic effect that is much greater than the response that would be generated from either promotional mix element used alone. Proper integration of advertising and sales promotion requires the coordination of several decision areas including: Budget Allocation—This allocation depends on a number of factors: o

The promotional objectives of the campaign.

The market and competitive situation.

The brand‘s stage in its life cycle.

BBBBB. Coordination of Ad and Promotion Themes—To integrate the advertising and sales promotion programs successfully, the theme of consumer promotions should be tied in with the advertising and positioning themes wherever possible. The Frito-Lay ―Crunchtime‖ promotion in Exhibit 16-36 is a good example of this. CCCCC. Media Support and Timing—Media support for a sales promotion program is critical as promotions and should be coordinated with the media schedule used for the advertising campaign. Using a promotion without prior or concurrent advertising can limit its effectiveness and risk damaging the brand‘s image. Conversely, the effectiveness of media advertising can be enhanced by a coupon, a premium offer, or an opportunity to enter a sweepstakes or contest. Many companies are getting their sales promotion agencies more involved in the advertising and promotional planning process. Professor Notes:

VIII.

SALES PROMOTION ABUSE

The increasing use of sales promotion in the marketing program represents a change in IMC strategy regarding how companies market their products and services. However, many experts have questioned the logic of this increased emphasis on sales promotion. Concerns include the following: 60) Marketers becoming too dependent on using sales promotion to produce short-term or immediate increases in sales. 61) Investing in sales promotion at the expense of advertising and thus not building the long-term value of the brand franchise. 62) Brands losing their perceived value from the perspective of consumers when they are purchased because of a promotional offer.

In many situations, there is the potential for companies to fall into a sales promotion trap or spiral whereby all competitors are making extensive use of promotions. Figure 16-7 shows this dilemma and how the only way out of it is for both parties to cooperate by cutting back on promotions. Professor Notes:

Teaching Suggestions In this chapter, we examine the very important area of sales promotion including the promotional activities directed at consumers as well as trade. This is a very long chapter as it covers both consumerand trade-oriented sales promotion very thoroughly. We strongly suggest that this material be covered over a two-class period. The first lecture can provide an overview of the sales promotion area, and reasons for the shift in marketing dollars to sales promotion and consumer-oriented sales promotion. The second lecture can cover trade promotion, the coordination of sales promotion with advertising and other promotional mix elements, and the problems of sales promotion abuse. In covering sales promotion, you may want to refer students back to Chapter 4 and the discussion of behavioral learning theory. The discussion of shaping procedures is particularly relevant to the use of sales promotion. A discussion of the shaping process is particularly helpful in showing how sales promotion techniques can be valuable in leading a consumer from trial of a new brand to regular purchase through the use of samples and coupons. It is very important to discuss the increasing emphasis many companies are placing on sales promotions targeted to both consumers and trade and how it has come at the expense of media advertising. The instructor should point out the fact that sales promotion accounts for anywhere from 60 to 75 percent of the promotional budget of many consumer-product companies. It is also helpful to review some of the reasons for the increase in sales promotion and discuss whether this trend will continue. The instructor should review the various consumer- and trade-oriented sales promotion techniques along with their advantages and limitations. Students should be encouraged to evaluate these techniques as strategic and tactical promotional tools and to consider the reasons why marketers use them. We also feel that it is very important to discuss how sales promotion can and should be coordinated with the advertising program. Figure 16-6 shows how the role of sales promotional agencies is changing and provides insight into how many firms are attempting to coordinate their advertising and promotional efforts. It is important to clarify the differences between event marketing and event sponsorship, as the two are often confused. We discuss event marketing as a form of sales promotion, while event sponsorships are discussed in Chapter 17 as part of the public relations program. You might also want to review the information in Figure 16-4, which shows how sales promotion tools can be used to accomplish various marketing objectives and whether the extra consumer reward or incentive is immediate or delayed. Some attention should be given to the problem of sale promotion abuse and the number of companies that are becoming over-reliant on sales promotion for a short-term ―sales fix‖ rather than investing in the longterm image of the brand. Time should also be spent discussing the sales promotional trap shown in Figure 16-7. To keep abreast of development in the sales promotion area you might refer to sources such as the Brand Activation Association, which is now part of the Association of National Advertisers (A N A) and has a very informative website (www.ana.net/content/show/id/brand-activation-info). Also available on their website is a link to the current years Reggie Awards winners, which provide a detailed analysis of these award-winning promotions including a marketing overview, objectives, strategy and tactics, results achieved, and a summary. They also contain examples of many of the ads and other types of promotional materials used in the promotion, and thus are an excellent source of information.

Answers to Discussion Questions 123. Discuss the role of sales promotion as part of an Integrated Marketing Communications program. How does the role of sales promotion differ from that of media advertising? (LO 16-1, 16-2)

Sales promotion involves some type of inducement that provides an extra incentive to buy. This incentive is usually the key element in a promotional program. Most sales promotion offers attempt to add some value to the product or service. While advertising appeals to the mind and emotions to give the consumer a reason to buy, sales promotion appeals more to the pocketbook and provides an incentive for purchasing a brand. Sales promotion is also essentially an acceleration tool, designed to speed up the selling process and maximize sales volume. By providing an extra incentive, sales promotion techniques can motivate consumers to purchase a larger quantity of a brand or shorten the purchase cycle of the trade or consumers by encouraging them to take more immediate action. 124. Critics of sales promotion argue that retailers have become overly dependent on discounts and promotions. Discuss the reasons retailers have increased their reliance on discounts and promotions to drive store traffic and sales. How might they reduce their dependency on them? (LO 16-1, 16-5) A number of reasons have contributed to marketers‘ overreliance on discounts and promotions. High levels of student and auto loan debts, rapidly increasing housing prices, and income inequality have all contributed to consumers shopping differently and preferring brands that offer promotional deals. There has also been a consumer ―shift to thrift‖ where consumers are much more value- and priceconscious and are often not willing to pay a premium for brands in nearly any product category. Some marketing professionals have even said that the recession in the mid-2000s led to a permanent change in consumers‘ buying behaviors. Consumers no longer frequent malls and supercenters to spend excessively. When they do shop, consumers are now looking for a promotion, discount, or other way to save money. Some retailers have attempted to reduce their reliance on promotions and discounts by moving to everyday low pricing approaches. While some have been successful, others have seen closures or mergers to keep afloat. Marketers may attempt to very slowly move away from discounts and coupons, as the results of doing so quickly have been realized by retailers such as JCPenney. 125. Discuss the difference between consumer-oriented promotions and trade-oriented promotions and the role each plays in a marketers’ IMC program. What are the various objectives for each category of sales promotion? (LO 16-1, 16-2, 16-3) Consumer-oriented sales promotions are those targeted directly to consumers who are the ultimate buyers of products and services and are designed to provide them with an extra incentive to buy. Trade-oriented promotions target marketing channel members such as distributors and retailers and are designed to motivate them to stock, display, and promote a product. Both consumer- and tradeoriented promotions are an important part of a firm‘s IMC program. In a very competitive market, consumers must often be provided with an extra incentive such as a coupon, bonus pack, premium, or price reduction to encourage them to choose one brand over another. Consumer-oriented promotions, along with advertising, are a very important part of marketers‘ ―pull strategy,‖ which creates demand for their brands. With the increasing amount of advertising clutter and many purchase decisions being made in the store, marketers must do more than just advertise to gain and hold market share. Trade-oriented promotions are also very important, as marketers must give attention to getting the channel members to stock, display and promote their brands. Much of the power in channels of distribution has shifted to the retailer and competition as limited amounts of shelf space have intensified. Thus, marketers must focus attention and effort on ―pushing‖ their products through the channels of distribution. Trade-oriented promotions are an important part of this strategy. The text discusses objectives for both consumer and trade-oriented promotions and provides examples of specific sales promotion tools for achieving them.

126. Do you agree with those who argue that the use of sales promotion detracts from brand equity for many companies and/or brands? Evaluate the arguments on both sides of this issue. (LO 16-1, 16-5) There are some who claim that sales promotions detract from brand equity while others sing its praises. For those that believe it improves brand equity have been spending more on sales promotion as the promotion industry has matured over the past several decades. Increased sophistication and a more strategic role and focus have elevated the discipline and its role in the IMC program of many companies. There are also a number of other factors that have led to the increase in the importance of sales promotion and the shift in marketing dollars from media advertising to consumer and trade promotions. Among them are the growing power of retailers, declining brand loyalty, increased promotional sensitivity, brand proliferation, and fragmentation of the consumer market, short-term focus of many marketers, increased accountability, competition, and growth of digital and social media. However, there are some that argue that allocating more of the marketing budget to sales promotions may negatively affect brand equity. They say trade promotions in particular contribute to the erosion of brand equity as they encourage consumers to purchase primarily on the basis of price. Marketers need to evaluate consumer responses to their use of sales promotion. They could evaluate consumer perceptions of the brand prior to and after the implementation of a promotional program to determine how the promotion could have impacted brand equity. 127. Digital & Social Media Perspective 16-1 discusses the ―Whopper Detour‖ promotion used by Burger King to compete against McDonald’s. Analyze the strategy behind this promotion and the reasons it was so successful. Do you think Burger King could use a similar type of promotion again to attract business from other competitors in the fast-food industry? Why or why not? (LO 16-1, 16-3) Burger King‘s Whopper Detour promoted the sale of Burger King‘s famous Whopper sandwiches by allowing any customer who had the Burger King app and was within 600 feet of their biggest competitor, McDonald‘s, to order a typically $4 sandwich for just one penny. Consumers had to place their order in the Burger King app, which then directed them to their nearest Burger King. This strategy took a great deal of tech savvy for Burger King‘s agency to implement as they had to geofence almost every McDonald‘s in the country and ensure that the GPS technology would work successfully once the promotion was launched. Since there are fewer Burger King stores in the country than McDonald‘s, Burger King‘s strategy leveraged the vast number of McDonald‘s stores but directed customers away from McDonald‘s and toward Burger King. The campaign saw great success and showed that the brand was capable of powerful, big, creative ideas. While it may not have as significant of an impact, this is a promotion that Burger King could implement again with other competitors in the fast-food industry if their budget would allow it. Geofencing, especially on such a large scale, is quite expensive so the budget feasibility would be something the brand would need to consider if attempting to implement another promotion such as this in the future. 128. Why has the number of coupons distributed to consumers declined so much over the past decade? Discuss why consumer-packaged-goods companies are cutting back on the use of coupons as a sales promotion tool. (LO 16-3, 16-5) Coupon distribution and use for consumer goods in the United States reached a record 332 billion in 2010, with 3.3 billion being redeemed. However, as the economy recovered from the great recession, the number of coupons distributed declined to 258 billion in 2018, with 1.7 billion being redeemed. This decline has continued over the past several years as coupon distribution dropped to 171 billion in 2021 with redemption dropping to 865 million.

There are a number of problems with coupons. First, it can be difficult to estimate how many consumers will use a coupon and when. Response is rarely immediate; it typically takes several months to redeem one. Another problem is that it is difficult to prevent the coupons from being used by consumers who already use the brand. Rather than attracting new users, coupons can end up reducing the company‘s profit margins among consumers who would probably purchase the product anyway. Other problems with coupons include low redemption rates and high costs, as well as misredemption. Coupon fraud and misredemption cost manufacturers an estimated $500 million a year in the United States alone. Concerns over the cost and effectiveness of coupons have led some marketers to cut back on their use and/or change the way they use them. For example, marketers have reduced the duration period, with expiration dates of three months or less becoming more common. Marketers are also moving to greater use of multiple-item purchase requirements for coupons, particularly for grocery products where nearly 40 percent of the coupons use this tactic. Despite the growing sentiment among major marketers that coupons are inefficient and costly, very few companies are likely to abandon them entirely. 129. Many companies are shifting more of their promotional dollars to experiential marketing events. Discuss the role of experiential marketing as part of an IMC program and the reasons it is becoming increasingly important. (LO 16-1, 16-2, 16-3) Event marketing has become a very popular part of the integrated marketing communications programs of many companies as they view them as excellent promotional opportunities and a way to associate their brands with certain lifestyles, interests, and activities. Events can be an effective way to connect with consumers in an environment where they are comfortable with receiving a promotional message. Moreover, consumers often expect companies to be part of events and welcome their participation as they make the events more entertaining, interesting, and exciting. Marketers can use events to distribute samples as well as information about their products and services or to actually let consumers experience their brands. Events are also popular as they have become part of the growing emphasis marketers are placing on experiential marketing, which involves a live event or experience that provides consumers with the opportunity to see the product or service and experience it for themselves. The goal of experiential marketing is to connect brands with consumers in personally relevant and memorable ways. 130. A report by a rebate fulfillment service showed that the average redemption for a $50 rebate on a product that costs $200 is only 35 percent. Why do you think redemption rates for rebates are so low? How might a low redemption rate affect a marketer’s decision to use rebates as a promotional tool? (LO 16-3) Redemption rates for rebates are low for a number of reasons. The primary reason is that many consumers simply do not submit the rebate forms as they view the process as a hassle. Most rebates require consumers to submit UPC codes printed on the packaging along with receipts (sometimes originals) by a certain time period. Consumers may lose their receipts, toss out the package with the UPC code, or forget about the rebate. Some consumers simply decide they do not want to go through the process of filing for a rebate, even when the amount is large. In some situations, consumer rebate applications may be denied because the forms were not filled out properly or there are problems with the receipt or UPC code. Rather than continuing to pursue the rebate, they give up and do apply for it again. Finally, many rebate checks are never cashed as they may be lost or mistaken for junk mail and never opened. The low redemption rates for rebates is encouraging more marketers to use them as they recognize that they can get consumers to focus on the discounted price for a product, but pay the full price.

Since a high percentage of rebates are not redeemed, this is essentially free money for the marketers. Marketers recognize that many consumers never file for rebates and many rebate checks will not be cashed. Thus, a marketer who offers a $50 rebate for which the redemption rate is only 35 percent can achieve this price reduction for only $17.50 with the remaining $32.50 being extra profit. Marketers are now working with rebate fulfillment companies to estimate redemption rates and consider them in pricing their products and determining the amount of rebate offers. 131. The use of loyalty programs has been increasing in many industries including fast-food and quick-serve restaurants, retail, and travel/hospitality. Find an example of a loyalty program and analyze the way it is used as a promotional tool by the company. (LO 16-2, 16-3) Customer loyalty programs have been around for decades. They originated in the airline industry and then moved to other segments of the travel and hospitality industry including hotels, car rentals, and restaurants. In recent years they have also become popular among retailers, as well as other industries, as marketers look for ways to attract new customers and retain them. A customer loyalty program rewards customers and incentivizes them to repeat their purchases. One area where loyalty programs have become extremely important is the quick-service and fast-food segments of the restaurant industry where several of the major players have recently introduced loyalty programs. Industry leader McDonald‘s launched its MyMcDonald‘s Rewards in 2021 and the long-awaited program quickly became one of the most popular programs just a few months after its debut, with more than 20 million members. The data provided by customers in the program is used to learn more about customers and their preferences. McDonald‘s reports that it has led to higher frequency and increased customer satisfaction. 132. Discuss the various types of trade promotions used by marketers, giving attention to the objectives as well as the pros and cons of each. (LO 16-3, 16-4) Marketers use a variety of trade promotion tools to encourage channel members to carry and promote their products. These include contests and incentives, trade allowances, in-store and point-of-purchase displays, sales training programs, trade shows, and cooperative advertising programs. The use of the various types of trade promotions depends on the objectives of the marketer. These might include obtaining distribution for new products, maintaining distribution and trade support for established brands, encouraging retailers to display their brands at the retail level through in-store and point-ofpurchase displays, and building wholesaler and retailer inventories, which will encourage them to promote or push a brand to reduce inventory levels. The chapter discusses how the various trade promotion tools can be used to achieve these objectives. 133. What is a sales promotion trap? Find an example of an industry or market where a promotional battle is taking place. What are the options for marketers in deciding whether to participate in the promotional battle? (LO 16-5) A sales promotion trap or spiral occurs when competitors in an industry are making extensive use of sales promotions and an individual firm receives no differential advantage from doing so, but cannot stop because its competitive position will be affected. When firms are caught in a sales promotional trap, no one company gains from the use of promotions, but the sales of an individual firm may decline if it does not continue to offer the promotional incentive. The fast-food industry is a good example of an industry where promotional wars often occur. Nearly all fast-food chains now have dollar menus or 99 cent specials on items such as Whoppers (Burger King), Double Cheeseburgers or Chicken Sandwiches, (McDonald‘s), Jumbo Jacks (Jack in the Box), and tacos (Taco Bell). Since the fast-food chains have lowered their prices on these items, they have found it difficult to raise them back to normal levels. One of the competitors is always trying to use low priced specialty items as a draw for customers and as a way to increase market share. 1-282 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

Companies involved in a sales promotion trap have two basic options—cut back on promotions or maintain them. As shown in the matrix in Figure 16-7, if the company cuts back on promotions and other firms follow, the result should be higher profits for all. However, if the company cuts back on promotions and competitors maintain them, the company risks losing sales and market share to the other firms. If the company maintains promotions and other companies cut back, it may see a gain in sales or market share (assuming the market is promotionally sensitive). If all competitors maintain their promotions, market shares should stay constant, and profits may be negatively impacted by the costs all companies are incurring to offer the promotional incentive.

Additional Discussion Questions (not discussed in text) 134. Discuss how sales promotion can be used as an acceleration tool to speed up the selling and/or purchasing process and maximize a company’s sales volume. (LO 16-1) There are several ways sales promotion can be used as an acceleration tool to speed up the sales process and maximize sales volume. Consumer promotion tools such as premiums, bonus packs, and price-off deals provide an extra incentive that may motivate consumers to take more immediate action. Coupons usually have expiration dates that require consumers to use them during a specific time period, which is another way of accelerating the purchase process. Marketers often use techniques such as in-store sampling programs that may be accompanied by a discount coupon and thus encourage immediate purchase. Trade promotions can also accelerate the selling process with retailers. For example, retailers who take advantage of an off-invoice allowance often pass the savings on to consumers in the form of a price reduction, which encourages them to purchase the brand. Promotional allowances are given to retailers for performing certain promotional or merchandising activities such as providing special displays, running in-store promotional programs, or including the marketer‘s brand in an ad. These activities will help generate sales volume and encourage immediate purchases by consumers. 135. Discuss how samples and coupons can be used to generate trial of a new product or increase consumption of an established brand. (LO 16-3) Both samples and coupons are very effective for generating trial of a new brand of a product or service. Samples are obviously effective as the majority of consumers who receive one either use it immediately or save it to use sometime later. Samples of a new brand provide consumers a risk-free opportunity to use and experience the benefits and outcomes of the product. This can be very important when a product‘s features and benefits are difficult to describe through advertising. Coupons are also an effective way to generate trial of a new brand and are second only to sampling for this purpose. Coupons are effective because they lower the price of a product, thus reducing the consumers‘ perceived risk associated with trial of the product. Samples and coupons are often used together to encourage trial and repeat purchases as coupons are often included with samples delivered to consumers. The free sample provides consumers with an opportunity to try a brand with no obligation while a coupon encourages them to purchase the brand at a reduced cost, which provides even more opportunity to experience the benefits associated with it. Samples can also be a way to increase consumption of an established brand. Marketers are often interested in attracting nonusers or users of a competitive brand and getting them to try their products. This is often done if a significant modification and/or improvement is made to the brand such as improving its taste, performance, efficacy, and the like. Samples are an effective way of getting consumers to try a brand and compare it against the one they currently use. Coupons can also be a way to increase consumption of an established brand. They can be used to encourage nonusers to try a brand, encourage repeat purchase among current users, and get consumer to try an improved version 1-283 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

of a brand. They can also be an effective way to encourage consumers to trade up to more expensive brands. 136. What is a slotting allowance or fee? Evaluate the arguments for and against retailers charging slotting fees to manufacturers. (LO 16-3) A slotting allowance is a fee that must be paid to retailers to provide a ―slot‖ or position to accommodate a new product in their stores. Retailers argue slotting fees are justified because there are costs associated with taking on a new product such as redesigning store shelves, entering the product into their computers, finding warehouse space, and informing store employees of the new item. They also argue that they are assuming some risk in taking on a new product since a high percentage of new product introductions fail. Manufacturers argue that slotting fees are not justified, as it really does not cost manufacturers that much money to take on a new product. Critics argue that these fees are excessive and end up going to the bottom line of the retailers. They argue that these fees are another way retailers are extracting money from manufacturers and really are a form of bribery or blackmail that has to be paid to get a new brand on the retailer‘s shelves. 137. Discuss how mobile marketing is impacting marketers’ use of sales promotion. (LO 16-1, 162) Marketers have been bombarding consumers with promotional offers for years, with most of the coupons and promotional offers being made through traditional methods such as FSIs in Sunday newspapers, media advertising, and direct-mail packets sent directly to consumers‘ homes. However, with the growth on the Internet most companies are integrating their sales promotion efforts with their digital marketing efforts and using the Internet and social media to make various promotional offers available to consumers. Marketers promote contests and sweepstakes on their websites, as well as through their Facebook and Twitter pages, and consumers can enter them online. These companies promote their contests and sweepstakes offline through traditional media and encourage consumers to visit their websites or social media pages to learn more about these promotions and to enter. Many companies also include premium offers on their websites and consumers can order merchandise online. Some companies such as airlines, car rental companies, and hotel/motel chains run special offers that are only available online and provide consumers with extra incentives to make reservations or purchases through the Internet. Marketers also use sales promotion offers as a way to encourage consumers to like their company and/or brands on Facebook or follow them on Twitter. Studies have shown that a high percentage of consumers like a company or brand on Facebook or follow them on Twitter to receive discounts and promotions. Mobile coupons are likely to become an even more important part of marketers‘ digital marketing programs because they recognize that mobile now represents nearly 65 percent of all digital media time for people online, with mobile apps dominating that usage. Another reason marketers are increasing their use of mobile coupons is that they are an effective way to measure the effectiveness of mobile advertising. eMarketer cites studies showing that almost two-thirds of U.S. marketers view mobile coupons as the most effective method for attributing in-store purchase to mobile ads. 138. What are some of the problems marketers face in using contests and sweepstakes? Discuss steps they can take to avoid these problems. (LO 16-3) While the use of contests and sweepstakes continues to increase, there are some problems associated with these types of promotions. Many sweepstakes and/or contest promotions do little to contribute to consumer franchise building for a product or service and may even detract from it. The sweepstakes or contest often becomes the dominant focus rather than the brand, and little is accomplished other

than giving away substantial amounts of money and/or prizes. Many promotional experts question the effectiveness of contests and sweepstakes. Some companies have cut back or even stopped using them because of concern over their effectiveness and fears that consumers might become dependent on them. Another problem with contests and sweepstakes is the participation in them by hobbyists who submit entries but have no real interest in the product or service. Because most states make it illegal to require a purchase as a qualification for a sweepstakes entry, consumers can enter as many times as they wish. Entrants may enter a sweepstakes many times, depending on the nature of the prizes and the number of entries allowed. There are numerous websites on the Internet such as sweepsadvantage.com that inform consumers of all of the contests and sweepstakes being held, the entry dates, estimated probabilities of winning, how to enter, and solutions to any puzzles or other information that might be needed. The presence of the professional entrants not only defeats the purpose of the promotion but also may discourage entries from consumers who feel that their chances of winning are limited. Numerous legal considerations affect the design and administration of contests and sweepstakes. These promotions are regulated by several federal agencies, and each of the 50 states has its own rules. The regulation of contests and sweepstakes has helped clean up the abuses that plagued the industry for many years and has improved consumers‘ perceptions of these promotions. However, companies must still be careful in designing a contest or sweepstakes and awarding prizes.

CHAPTER 17 PUBLIC RELATIONS, PUBLICITY, AND CORPORATE ADVERTISING Chapter Overview Public relations (PR), publicity, and corporate advertising are ways by which information about the organization, its products, and/or its services may be communicated. Like the program elements discussed thus far, the marketer will attempt to use these tools to benefit the firm and its offerings. At the same time, these promotional mix elements are generally used in a different way in that they are not always designed to promote a specific product or service. Rather, they may be used to promote the organization as a whole, a cause or position advocated by the organization, or to create goodwill in the marketplace. In addition, at least one of these elements—publicity—is not always in the control of the marketer. Thus, while it may be possible to affect publicity in some situations, in many others the marketer may have to assume a reactive posture. This chapter discusses each of these program elements, and expands on the changing role of public relations.

Learning Objectives 46.

Describe the roles of public relations, publicity, and corporate advertising in the promotional mix.

47.

Compare the advantages, disadvantages, and effectiveness of public relations and publicity.

48.

Discuss the advantages, disadvantages, and effectiveness of corporate advertising.

49.

Compare the different forms of corporate advertising.

Chapter and Lecture Outline I.

PUBLIC RELATIONS

DDDDD. The Traditional Definition of PR—The chapter begins by differentiating between the traditional role of public relations and the new one. Public relations (PR) is defined as the management function which evaluates public attitudes, identifies the policies and procedures of an organization with the public interest, and executes a program of action (and communication) to earn public understanding and acceptance. The text also outlines the series of stages required in the practice of public relations including: 1) the determination and evaluation of public attitudes; 2) the identification of policies and procedures of an organization with a public interest; and 3) the development and execution of a communications program designed to bring about public understanding and acceptance. EEEEE. The New Role of PR—The new role assumes a much broader, and more marketingoriented, perspective. In the new orientation, the public relations department operates in close communication with the marketing department (rather than as separate entities) to develop programs and policies. FFFFF. Integrating PR into the Promotional Mix—The chapter takes the position that the activities of the public relations department must be coordinated with marketing, and integrated into the overall promotional mix. GGGGG. Marketing Public Relations (MPR) Functions—Public relations activities designed to support marketing objectives are called marketing public relations (MPR) functions. The text discusses the numerous ways that MPR adds value to the integrated marketing program: 

Building marketplace excitement before media advertising breaks—The announcement of a new product, for example, is an opportunity for the marketer to obtain publicity and to dramatize the product, thereby increasing the effectiveness of ads.

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Improving ROI—By reducing overall marketing costs, while at the same time delivering meaningful marketing outcomes, MPR helps improve ROI.

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Creating advertising news where there is no product news—Ads themselves can sometimes be the focus of publicity.

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Introducing a product with little or no advertising—A strategy that has been successfully implemented by a number of major brands.

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Providing a value-added customer service—Providing additional services to aid consumers in the purchase and consumption of a product.

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Building brand-to-customer bonds—Events and contests that help build a relationship with the brand.

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Influencing the influentials—Providing information to opinion leaders.

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Defending products at risk and giving consumers a reason to buy—By taking constructive actions to defend or promote a company‘s products, PR can actually give consumers a reason to buy the products.

A number of advantages and disadvantages of MPR are shown in Figure 17-2.

Professor Notes:

II.

THE PROCESS OF PUBLIC RELATIONS

The actual process of conducting public relations will require a number of tasks. These tasks will involve both traditional and new role activities. Determining and Evaluating Public Attitudes—The first step in the public relations process is to determine the public‘s existing attitudes toward the firm and/or its products or about specific issues. Four reasons are given to explain why this step is necessary: 

It provides input into the planning process. Once the firm has determined public attitudes, they become the starting point in the development of programs designed to maintain favorable positions or change unfavorable ones.



It serves as an ―early warning system.‖ In conducting research, firms are able to identify problems or potential problems and handle them before they become more serious issues.

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It secures support internally. If a problem exists and is identified early on, PR practitioners will be able to more easily garner internal support to fix the problem.

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It increases the effectiveness of the communication. The better it understands a problem, the better the firm can design communications to deal with it.

Establishing a PR Plan—Too many firms do not establish a formalized public relations plan. As a result, actions tend to be more reactive than proactive. A formal plan—coordinated with marketing— needs to be developed. Figure 17-3 outlines a number of questions to ask in the planning process and a proposed four-step planning process is identified including: (1) defining public relations problems, (2) planning and programming, (3) taking action and communicating and (4) evaluating the program. Developing and Executing the PR Program—A number of activities must be conducted once the plan has been established. a. Determining relevant target audiences—Target audiences may be categorized as internal or external. Internal audiences include: 

Employees of the firm.

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Stockholders and investors.

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Community members.

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Suppliers and customers.

External audiences are those people not closely connected with the organization and may include: 

The media.

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Educators.

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Civic and business organizations.

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Governments.

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Financial groups.

A number of examples for communicating with both internal and external audiences are provided in this section of the chapter. b. Implementing the PR program—Once the target audience has been established, and objectives established, a number of tools may be used for implementation or delivery including: 

The press release—A press release communicates with the press and public and can do certain things to improve the likelihood that the ―news‖ will be disseminated, such as ensuring that it reaches the right target audience, making it interesting, and making it easy to pass along.



Press conferences—Companies often call press conferences when they have significant news to announce, such as the introduction of a new product or advertising campaign.

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Exclusives—Exclusives involve offering one particular medium exclusive rights to the story if that medium reaches a substantial number of people in the target audience.

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Interviews—Personal interviews with spokespeople or top management.

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Community involvement—Community involvement may take many forms, including membership in local organizations like the Kiwanis or Jaycees and contributions to or participation in community events.

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The Internet—Many companies have used the Web to establish media relations and government, investor, and community relationships; to deal with crises; and even to conduct cause marketing. Companies have also used their websites to address issues, as well as to provide information about products and services, archive press releases, link to other articles and sites, and provide lists of activities and events.



Social networks and blogs—Many employed in PR consider themselves employed in a new form of PR referred to as digital public relations, which is an intersection between traditional public relations activities and new activities that incorporate digital marketing functions like SEO, social media, and influencer marketing.

Advantages and Disadvantages of Public Relations—The text lists a number of advantages and disadvantages associated with the use of public relations. Advantages include: 

Credibility—Because public relations communications are not perceived in the same light as advertising, they tend to have more credibility.



Cost—The cost of PR is very low, especially when possible effects of PR are considered.

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Avoidance of clutter—Because they are typically perceived as news items, public relations messages are not subject to the clutter of ads.

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Lead generation—Information about technological innovations, medical breakthroughs, and the like results almost immediately in a multitude of inquiries. These inquiries may give the firm some quality sales leads.

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Ability to reach specific groups—If the firm does not have the financial capabilities to engage in promotional expenditures, the best way to communicate to niche or specific groups is through public relations.

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Image building—Effective public relations helps develop a positive image for the organization.

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Capitalizing on earned media—Public relations practitioners believe they are very strong in achieving earned media through storytelling.

The key to effective public relations is to establish a good program, worthy of public interest, and to manage it properly. To determine if this program is working, the firm must measure the effectiveness of the PR effort. Measuring the Effectiveness of PR—As with the other promotional program elements, it is important to evaluate the effectiveness of the public relations efforts. In addition to determining the contribution of this program element to attaining communications objectives, the evaluation offers other advantages: 

It tells management what has been achieved through public relations activities.



It provides management with a way to measure public relations achievements quantitatively.

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It gives management a way to judge the quality of public relations achievements and activities.

According to the Public Relations Society of America, organizations that understand and subscribe to the benefits of public relations evaluation can effectively: ●

Validate the results of their efforts.

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Link the results to business outcomes that further the realization of organizational goals.

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Credibly merchandise the impact of the results to those who fund PR programs.

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Set smarter objectives, develop better strategies, and employ more compelling and engaging tactics.

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Make midcourse adjustments and corrections.

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Regularly adapt their measurement approaches based on changing objectives, new competitors, and emerging best practices.

Professor Notes:

III.

PUBLICITY

The text provides a definition of publicity and notes that the distinction between publicity and public relations is not always clear. Publicity refers to the generation of news about a person, product, or service that appears in broadcast digital or print media. The dissemination of publicity is a task that is the responsibility of the public relations department, as is the development of programs to deal with publicity originating from other sources. At the same time, public relations activities are under the control of the firm. The same cannot always be said for publicity. The Power of Publicity—The text provides information for discussion of how companies handle negative publicity. At one point, BP‘s stock dropped to less than one-half of what it was prior to the Gulf spill. Samsung's value declined by billions of dollars when it suffered negative publicity as a result of its exploding cell phone batteries. For example, publicity regarding a breakthrough in the durability of golf balls will go far to promote them if it is reported by Golf magazine. Car & Driver‘s award for car of the year reflects the magazine‘s perception of the quality of the auto selected. Given this power, the firm must have programs in place to capitalize on or control and minimize the effects of these messages. The Control and Dissemination of Publicity—While the marketer may not be able to control all publicity, it is possible to impact these communications in a number of ways. For example, press releases, or ―leaks‖ may be used to make sure that the information gets out. Publicity can also be managed or turned around to be used as an advantage. Publicity also works for marketers. Marketers like to have as much control as possible over the time and place where information is released. One way to do this is with the video news release (VNR), a publicity piece produced by publicists so that stations can air it as a news story. The videos almost never mention that they are produced by the subject organization, and most news stations don‘t mention it either. Some agencies now offer social media news releases (SNRs), which are essentially news releases directed at a different target audience. Advantages and Disadvantages of Publicity. Lack of control—In the viral world today, there is little control of what information is conveyed. Social networks, blogs, and so on have expanded the number of recipients of messages, while at the same time opening up the information stream to sources that are not confined by standards that may be imposed on traditional media. c. Timing—The timing of a press release is entirely up to the media. d. Accuracy—Issues with translation from press release to publicity piece often result in inaccurate information. Measuring the Effectiveness of Publicity Methods for measuring the effects of publicity are essentially the same as those discussed earlier under the broader topic of public relations. Professor Notes:

IV.

CORPORATE ADVERTISING

A firm‘s advertising is not always designed to promote a specific product or service. Corporate advertising is designed to promote the firm overall—either by enhancing its image, assuming a position on a social issue or cause, or seeking direct involvement from the market. As noted in the text, this form of advertising is often considered controversial and/or of dubious benefit to the firm. A number of reasons for the controversial perception of corporate advertising are provided in this section of the chapter. Objectives of Corporate Advertising—Two specific objectives for using corporate advertising have been provided: (1) creating a positive image for the firm and (2) communication of the organization‘s views on social, business, and environmental issues. In addition, three more specific applications are listed including: 

Boosting employee morale and smoothing labor relations.



Helping newly deregulated industries ease consumer uncertainty and answer investor questions.



Helping diversified companies establish an identity for the parent firm rather than relying solely on brand names.

Types of Corporate Advertising—Various types of corporate advertising are described. Image advertising—Advertising designed to promote the organization’s overall image may include: 

General image or positioning ads—Ads designed to create an image of the firm in mind.



Sponsorships—Firms often run corporate image advertising on TV programs or specials.



Recruiting—Image advertising designed to attract new employees.



Generating financial support—Some corporate advertising is designed to generate investments in the corporation.

e. Event sponsorships—Anything from apparel and equipment to concerts, stadiums, and college football bowl games are now commonly used for corporate sponsorship. Like any other relationship, however, risks must be assumed by both sides in such agreements. Figure 17-7 shows how traditional media are used to promote these sponsorships. f.

Advocacy advertising—This form of advertising is designed to promote the organization through the taking of a position on an issue rather than through the promotion of the firm directly. Another form of advocacy advertising, issue ads, are increasingly appearing in the media and an example is shown in Exhibit 17-19.

g. Cause-related advertising—An increasingly popular method of image building is causerelated marketing, in which companies link with charities or nonprofit organizations as contributing sponsors (see Exhibit 17-21). Advantages and Disadvantages of Corporate Advertising—As noted, corporate advertising is not considered to be of value by all advertisers. Those citing advantages of this form of advertising argue that it offers an excellent means for positioning the firm, that it takes advantage of the benefits derived from public relations and is a way of reaching target markets not reached through other forms of advertising. Critics charge that it is of questionable effectiveness, and that it may be ethically wrong.

Measuring the Effectiveness of Corporate Advertising—The effectiveness of corporate advertising may be measured through the employment of some of the methods discussed earlier in the chapter. In addition, attitude surveys, studies relating corporate advertising and stock prices, and focus group research may also be employed in this regard. Professor Notes:

Teaching Suggestions As in the previous chapter, this chapter can be supplemented and developed in more detail according to the needs of the instructor. A number of good public relations texts are available. In addition to lecturing on the three topics, it is possible to generate a great deal of class discussion. A multitude of public relations and corporate advertising examples can be found, and the discussion of the impact (and examples) of publicity can also stimulate a great deal of student interest. We have found that the issue of corporate advertising, particularly advocacy advertising, provides a great topic for debate. Students might be encouraged to take one position or another and discuss the issues, providing examples to support their arguments. Finally, some time should be spent on the discussion of the new role of public relations. While there has been more and more emphasis on this IMC program element, is it as powerful a tool as many contend? A good discussion of the Ries and Ries book The Fall of Advertising and the Rise of PR could follow.

Answers to Discussion Questions 102. Discuss the three levels of effectiveness described in the framework provided by Cision in Figure 17-4. Give an example of each of the three levels. (LO 17-2) Cision‘s framework involves a communication funnel consisting of three levels. The first is brand impact, which examines how one‘s brand is perceived in the marketplace. Brand impact consists of three categories including awareness, mindshare, and reputation. An example of assessing mindshare would be tracking trends in online mentions and share of voice such as through counting competitors‘ mentions compared to your own mentions. The second facet of Cision‘s communications funnel for digital public relations includes digital impact, which refers to the PR coverage driving traffic to the brand‘s website or other digital properties. In other words, what actions are the visitors taking? These actions include assessing website traffic, SEO impact, and social amplification. An example of website traffic would be tracking how many visits PR specifically drives to the website such as by measuring the percentage PR drives to the site versus overall site traffics and using these traffic measures to determine if a PR effort should be considered effective. The third facet of Cision‘s communications funnel for digital public relations is an assessment of the bottom line. This involves taking behavioral measures such as sales, donations, and business transactions to determine whether they were influenced by the PR effort. An example of this would be using analytics provided from systems such as HubSpot or Marketo to determine conversions, revenue, etc.

103. Discuss why publicity (positive or negative) can be so powerful. Cite examples of both positive and negative publicity‘s impact on brands, products, etc. (LO 17-1) Publicity has the unique ability to generate communication at a much more powerful rate than any other program elements. There are several reasons cited for publicity‘s powerful influence. Publicity is highly credible and not seen as being sponsored by a company and therefore consumers evaluate the information as more objective. Marketers, however, have not always realized the power of publicity. Additionally, publicity information may be perceived as endorsed by the medium in which it appears. Finally, another reason for publicity‘s power is its news value and the frequency of exposure it generates. BP‘s response to their oil spoil in the Gulf in 2010, Samsung‘s response when their phone batteries were exploding, and Papa John‘s CEO‘s actions after he was ousted for making a racial slur are all examples of negative publicity‘s impact on brands/products. Tree Top‘s response using publicity amid allegations that one of their chemicals used by their growers caused cancer, and Budweiser‘s response when they were accused of watering down their beer provide good examples of the positives stemming from the proper use of publicity. 104. Exhibit 17-19 shows an issue ad in opposition to JUUL, the vaping brand. It also shows JUUL‘s ad supporting a raise in the legal age necessary to purchase vapor products. Both ads were run at approximately the same time. Give your opinion as to the motivations behind the JUUL ad. (LO 17-4) The Campaign for Tobacco-Free Kids ran an advertisement in many newspapers calling out the JUUL brand for targeting kids with their products and flavor varieties. At the same time, JUUL themselves ran an advertisement saying that it was time to raise the legal age for purchasing tobacco products, including vapor. The advertisement appears to be defensive in nature or was perhaps an attempt to get ahead of the release of the Campaign for Tobacco-Free Kids campaign. These are both examples of advocacy advertising, which is concerned with propagating ideas and elucidating controversial social issues of public importance in a manner that supports the interests of the sponsor. JUUL could have been using this ad as part of their corporate social responsibility efforts to show that they really aren‘t trying to target children with their products, but rather are attempting to do quite the opposite and are advocating for the age to be raised. 105. Provide a number of examples of issue ads. Were these ads effective? Why or why not? (LO 174) Issue ads are similar to advocacy advertising except issue ads may have no affiliation with a corporate or trade sponsor but may be sponsored by an organization to bring attention to what they consider to be an important issue. One example of an issue ad was the Humane Society of the United States ad that they placed with the headline, ―Why Won‘t Trader Joe‘s Give an Inch.‖ This issue ad was extremely effective as Trader Joe‘s customers got involved and led the company to publicly announce that it would convert all of its brand eggs to cage free within three months. Another example of social issue ads could be ads against school shootings or drunk driving sponsored by parental groups in support of advocating for these particular issues. The JUUL example provided in the text is another example of issue advertising that was likely effective as the legal age to purchase tobacco and vaping products has now been raised to 21 instead of 18. 106. Companies that establish very positive reputations tend to maintain these reputations over time. What are some of the things that these companies do to maintain these positions? (LO 17-1) Image advertising seeks to promote the organization‘s overall image and aids in accomplishing important objectives such as creating goodwill both internally and externally, creating a position for the company, and generating human and financial resources. The methods used in effective 1-293 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

image advertising include general image or positioning ads that attempt to create an image of the firm in consumer‘s minds; sponsorships in which firms run corporate image advertising on TV programs or specials or sponsoring sporting events; recruiting talented employees; and generating financial support through the use of corporate advertising that is designed to generate investments in the corporation. 107. Companies can‘t always predict or even avoid factors that lead to negative publicity. At the same time, many companies have made mistakes that have caused them problems. Cite a few examples of companies that may have caused their own negative publicity problems and discuss how they might have taken actions to avoid them. (LO 17-2) In some instances, it is the firm‘s own blunder that allows information to leak out. Companies such as Papa John‘s, Samsung and BP could do nothing to stop the media from releasing negative information about them. When publicity becomes news, it is reported by the media, sometimes despite efforts by the firm. In these instances, the organization needs to react to the potential threat created by the news. Unfortunately, simply ignoring the problem will not make it go away. For example, as part of its ―Up for Whatever‖ campaign, Bud Light stamped some bottles with the tagline ―the perfect beer for removing ‗no‘ from your vocabulary for the night.‖ Unfortunately, photos of the bottles were immediately picked up and posted on Reddit and the Consumerist. The next day it was circulated on social media with users claiming that it promoted a rape culture. The buzz got so great that it resulted in a tweet from U.S. Representative Nita Lowey (D-NY), criticizing the company saying that Bud Light should ―promote responsible—not reckless—drinking.‖ Brand perception scores took a major hit. In another example, for a promotion of its “Krispy Kreme Klub,” the company posted the acronym KKK on its Facebook page. Of course, it immediately heard about it from social media followers, and issued an apology as well as the explanation for the mistake. Perhaps a closer examination of publicity tactics before release could have helped prevent these issues. But companies must be ready to respond quickly when negative publicity does occur. One effective tactic is the use of the video news release (VNR), a publicity piece produced by publicists so that stations can air it as a news story. 108. As the silos constituting marketing and public relations continue to break down, there is some potential for both positive and negative ramifications. Discuss how the blending of PR and marketing activities could result in both positive and negative consequences. (LO 17-1) Marketing objectives that may be aided by public relations activities include raising awareness, informing and educating, gaining understanding, building trust, giving consumers a reason to buy, and motivating consumer acceptance. MPR adds value to the integrated marketing program by: 

Building marketplace excitement before media advertising breaks.



Improving ROI by reducing overall marketing costs.



Creating advertising news where there is no product news.



Introducing a product with little or no advertising.



Providing a value-added customer service.



Building stronger brand-to-customer bonds.



Influencing opinion leaders.



Defending products at risk. 1-294

One of the major threats of using an MPR structure is that public relations functions may become subservient to marketing efforts—a concern expressed by many opponents of MPR. The key to the successful use of MPRs is integration with IMC, though such a task may prove to be difficult to accomplish. 109. There is an old saying that ―any publicity is positive publicity,‖ essentially meaning that anytime a company gets its name in the press, it is good for the company. Indicate whether you agree with this statement and explain why or why not. (LO 17-2) This often-heard statement obviously seems to reflect a misunderstanding of the power of publicity. One would certainly get a strong argument against this statement from Audi, Tylenol, Texaco, Wendy‘s, and Walmart, to name a few of the companies that have suffered the consequences of negative publicity. Publicity is a very powerful tool, and while some companies have benefited from the power of positive publicity, numerous others have lost sales or even been driven from business by negative publicity. Any publicity is definitely not necessarily good publicity. Measuring effectiveness— the measures used to determine the effectiveness by marketing standards may be more difficult to employ. Traditional PR measures may not be as useful. Many companies have experienced the impact of negative publicity over the past few years as a result of product recalls, marketing blunders, etc. The power of publicity emanates directly from its high credibility. Because the source of the communication is generally perceived as being objective, or at least as not having a vested interest, the information is often treated differently than that of advertising and/or promotions. As a result, this information is passed on more readily, and in general is considered more believable. A contributing factor is the way that the media handle publicity. Unfortunately for many firms, negative publicity often receives more attention than does that of a positive nature. Audi, for example, experienced negative publicity on the TV show 60 Minutes regarding its Audi 5000 and accelerator sticking problems. While Audi won a subsequent court battle, the brand image was tarnished and the 5000 never recovered. Jack-in-the Box and Suzuki have also experienced the strong negative impact of negative publicity. Texaco, Firestone, Mattel, and many other companies have also been hurt by bad publicity, each attacking the problem in a different manner, and with different outcomes. While there are many ways to deal with negative publicity, one thing is certain—the company must face up to it and deal with it. It will not go away. 110. Many marketers have expressed the belief that younger demographics (i.e. teens and preteens) are much more socially conscious than preceding generations, and therefore need to be shown that companies are environmentally and socially responsible. Do you agree with this belief? Explain how companies could use some of the various forms of corporate advertising discussed in this chapter to convey this to consumers. (LO 17-4) Research indicates that support for social consciousness is very widespread. For example, 91% of consumers are more likely to buy from a company that supports environmental or social issues. It is probably accurate to say that today‘s consumers (of any age) think that if a company is not socially conscious, they might take their loyalties elsewhere. Companies can use many tactics to convey their social consciousness to consumers. Advocacy advertising is a form of corporate advertising which addresses social, business, or environmental issues. It is concerned with propagating ideas and elucidating controversial social issues of public

importance in a manner that supports the interests of the sponsor. While still portraying an image for the company or organization, advocacy advertising does so indirectly, by adopting a position on a particular issue rather than promoting the organization itself. Another form of advocacy advertising, issue ads are increasingly appearing in the media. While considered a form of advocacy advertising, issue ads may have no affiliation with a corporate or trade sponsor but may be sponsored by an organization to bring attention to what they consider to be an important issue. An increasingly popular method of image building is cause-related marketing, in which companies link with charities or nonprofit organizations as contributing sponsors. It is estimated that over $2 billion is spent on cause marketing in the U.S. each year. The company benefits from favorable publicity, while the charity receives much-needed funds. 111. Why is public relations and the tools used by PR potentially more effective than those employed by marketers even though the latter group may spend vastly more dollars to create a favorable image in the marketplace. (LO 17-2) Well-executed public relations offers companies several advantages. Because public relations communications are not perceived in the same light as advertising—that is, the public does not realize the organization either directly or indirectly paid for them—they tend to have more credibility. The fact that the media are not being compensated for providing the information may lead receivers to consider the news more truthful and credible. In addition, in both absolute and relative terms, the cost of public relations is very low, especially when the possible effects are considered. While a firm can employ public relations agencies and spend millions of dollars on PR, for smaller companies this form of communication may be the most affordable alternative available. Other advantages include a perception of public relations messages as news items which do not contribute to advertising ―clutter.‖ And it offers a way to target small market segments which is cost-effective. Finally, effective public relations helps develop a positive image for the organization. A strong image is insurance against later misfortunes.

Additional Discussion Questions (not in text) 112. The chapter discusses the lack of coordination that often exists between marketing and public relations departments. Discuss some of the reasons this might occur. What can be done to reduce this conflict to achieve greater coordination? (LO 17-1) One of the difficulties in implementing an IMC program is the fact that many of the communications functions operate as silos rather than in an integrated manner. Perhaps the best example of this is the marketing-public relations divide. Marketers are trained in business schools; PR people in journalism and/or communications schools. They do not always perceive the world the same. Not only that but they have been educated to do different jobs. PR people (rightfully) do not see their responsibilities as including marketing products. A problem associated with MPR is that it dilutes the credibility of PR, or at least has the potential to do so. Therefore, many would argue that marketing and public relations should remain separate.

While there are good arguments on both sides, the bottom line is what is best for the organization or corporation. In a well-functioning organization, PR needs to understand the role of marketing and vice versa. Both must recognize that working together is for the betterment of the organization. Thus by getting both parties to understand what the others do and why, many of the barriers to effective communications will be eliminated. 113. Examine a number of examples of different types of sponsorships corporations are currently engaging. Analyze the reason for the sponsorship, and evaluate whether it employs a wise strategy or not. (LO 17-3) Sponsorships are clearly on the increase—particularly in sports and entertainment. Many companies sponsor NASCAR. Others sponsor NCAA college football games (PlayStation Fiesta Bowl, Capital One Orange Bowl, AdvoCare Texas Bowl). Buick sponsors golf tournaments and Verizon sponsors concerts. The list goes on. Thinking about reasons why companies sponsor these events, it becomes evident that they believe their target markets will recognize these associations and they will gain value from this association. Sometimes the sponsorships are to gain awareness and/or recognition (for example, NASCAR), other times there are even more involved marketing strategies—Cadillac promotes rock concerts in an attempt to make their cars more attractive to younger people. Buick attempted the same positioning using Tiger Woods to appeal younger audience (before his scandal), and then did the same with Peyton Manning. NCAA football sponsors use the same tactic. They reach a desirable audience demographically and socioeconomically, building up goodwill along the way. 114. Research studies have indicated that cause marketing can actually lead to an increased intention to purchase a brand. Explain why this is the case and provide examples that you feel may pertain. (LO 17-5) Cause marketing can be a win-win situation for the supporter and the recipient. For the receiver, much needed assistance in the form of monies, etc. will help the cause. For the supporter, consumers may take a positive attitude toward the actions, with the goodwill carrying over to the brand and/or organization. For example, in February 2014, CVS pharmacies announced they would no longer sell cigarettes in their stores. The positive publicity led to enormous exposure on local and national news. Consumers texted and tweeted their praise for taking this position, and much goodwill was created for CVS. Other companies that have been supporters of various causes, like TOMS shoes, P&G, and Nika Water, among many others, have directly benefited by their support of causes which consumers identified with. 115. Putting one‘s name on a stadium can be an expensive proposition, and the prices continue to increase. Discuss whether this would be a good investment for a company, and why or why not. (LO 17-3). A risk taken by a company in naming a stadium is the cost of hundreds of millions of dollars, which can cause stockholders and consumers concern over the value of such an investment. At the same time, naming a stadium can lead to increased name exposure—particularly for those companies that don‘t have strong brand recognition. For example, MetLife insurance, whose name is on the New York Jets and New York Giants stadium, believes it has been a very good investment, based on increased exposure alone. In addition, research has shown that 99 percent of fans can recall the name of the sponsors of their stadiums, and 35 percent say it causes them to have a more favorable impression of the brand.

Naming rights don‘t always work out. Many stadiums have had their names change as companies changed their names, went out of business, or just withdrew their support. In this case no one wins. The keys to success may be to have brands that are purchased by many segments, have good exposure, and visibility and brand recognition. 116. The chapter discusses cause marketing, advocacy advertising, and issue ads. Explain the differences between these forms of communication and give examples of each. (LO 17-5) All of these forms of communication fall under the rubric of corporate advertising. While each is similar in that the ads are not designed to sell products or services, but rather support causes, there are differences in intent: Advocacy advertising ―is concerned with propagating, ideas and elucidating controversial social issues of public importance in a manner that supports the interests of the sponsor.‖ The sponsor may advocate a position such as supporting Obamacare, saving water, environmental concerns, etc. While the sponsor may not have a direct link, they usually do. While essentially a form of advocacy ads, issue ads usually do not identify the sponsor, and may be paid for by unions, social and or political groups, etc. Their purpose for sponsoring these ads is to bring pubic attention to an issue they consider important or have a stake in. The least controversial of the three, cause-related ads show a company, organization, or group‘s support for a cause—no reciprocity involved. Exhibit 17-21 provides an excellent example of a cause-related ad. Others include support for the Leukemia Society, American Cancer Society, Make-a Wish Foundation, etc. 117. Social media have had a profound impact on the power of publicity. Explain what this means and whether you believe it to be true or not. Provide examples to support your position. (LO 17-2) Social media is like word of mouth on steroids. Regardless of whether it is positive or negative, when something goes viral on social media, millions of people are exposed. Brands have become successful almost entirely on the basis of going viral. Brands and people have suffered from both positive (Gangnam Style) and negative (Lindsay Lohan, Justin Bieber) publicity through social media. Clearly marketers would love to be able to capitalize on positive publicity, and control negative postings. Unfortunately for them they cannot. There are numerous examples of persons, brands, and companies brought down and succeeding through traditional PR channels. The advent of social media and the extreme speed and size of the market reached just magnifies this exposure. Just ask Tiger Woods or Lance Armstrong.

IMC Exercise Instruct students to find examples of various types of public relations activities engaged in by organizations. These include both traditional and nontraditional methods of public relations. Also, have them find an example of a company engaged in sponsorship of an event such as a music concert tour or sporting event. They should be asked to evaluate the company‘s sponsorship of the event with regard to issues such as the target audience they are trying to reach and how they might benefit from the sponsorship of the event.

CHAPTER 18 MEASURING THE EFFECTIVENESS OF THE PROMOTIONAL PROGRAM Chapter Overview This chapter discusses one of the most critical—yet controversial—issues in all of advertising. While it seems perfectly logical that managers on both the advertising and client side would like to know whether the programs they have implemented are effective, in reality, the majority of advertising and promotional programs go untested. Compounding this is the fact that many of those programs that are evaluated use inadequate or inappropriate measures in making this determination. The purpose of this chapter is to discuss why organizations need to measure the effectiveness of their programs, and when, where, and how such measures should be used. The chapter begins with a discussion of the reasons why advertising effectiveness measures should be taken and why they commonly are not. A discussion of how, when, what, and where such measures should be used follows, with a description of many of the techniques commonly used also provided. The chapter concludes with a discussion of some of the problems involved in measuring the effectiveness of these programs and establishes some of the essentials for proper testing.

Learning Objectives 50.

Compare reasons for and against measuring the effectiveness of promotional programs.

51.

Describe the tools and processes available for assessing promotional program effectiveness.

52.

Discuss the limitations of current methods for measuring advertising effects.

53.

Compare different methods of measuring effectiveness of other promotional programs.

Chapter and Lecture Outline I.

ARGUMENTS FOR AND AGAINST MEASURING EFFECTIVENESS

As noted in the beginning of this chapter, it seems logical that research on the effectiveness of the promotional program would be conducted, yet we also find that this is not always the case. Reasons why research should be conducted and reasons why it is not are both presented. HHHHH. Reasons to Measure Effectiveness—Four major reasons are offered for why measures of effectiveness should be taken. These include: 1. Avoiding costly mistakes—A lot of money is spent on advertising each year. If a program is not achieving its objectives, the marketing manager needs to know so they can stop spending (wasting) money on it. 2. Evaluating alternative strategies—Measuring a program‘s effectiveness helps a firm determine which strategy among all of the alternatives they should pursue. 3. Increasing the efficiency of advertising in general—Conducting research helps companies develop more efficient and effective communications. Additionally, an increasing number of clients are demanding accountability for their promotional programs and putting more pressure on the agencies to produce. 4. Determining if objectives are achieved—An assessment of how program elements led to the attainment of the goals should take place, and/or reasons for less-than-desired achievements must be determined. IIIII.

Reasons Not to Measure Effectiveness—A variety of reasons (and excuses) are offered to explain why the effectiveness of the advertising/promotional campaign is not taken. Perhaps the most common of these are: 5. Cost—Costs associated with testing is the number one cited reason for not testing. Good research can be expensive in terms of both time and money. Many managers decide that time is critical, and they must implement the program while the opportunity is available. Many believe the monies spent on research could be better spent on improved production of the ad, additional media buys, and the like. 6. Research problems—It is often difficult to isolate the effects of promotional elements because each variable in the marketing mix affects the success of a product or service. 7. Disagreement on what to test—The objectives sought in the promotional program may differ by industry, by stage of the product life cycle, or even for different people within the firm. There are numerous ways to measure these and not always a consensus as to what measure should be used. 8. The objections of creative—It has been argued by many (and denied by others) that the creative department does not want its work to be tested and many agencies are reluctant to submit their work for testing. This is sometimes true. 9. Time—Managers believe they already have too much to do and just can‘t get around to testing, and they don‘t want to wait to get the message out because they might miss the window of opportunity.

While some of these arguments have merit, others result from excuse making, lack of proper planning, politics, or a lack of understanding of the value associated with conducting such research.

Professor Notes:

II.

CONDUCTING RESEARCH TO MEASURE ADVERTISING EFFECTIVENESS

This section discusses how research to measure effectiveness should be conducted. More specifically, it addresses the issues of what to test, as well as where and how such evaluations should take place. What to Test—Each of the elements of the promotional program should be examined. Research should be designed to determine the effectiveness of: 10. Source factors—An important question is whether the spokesperson being used is effective and how the target market will respond to them or if the spokesperson has maintained their effectiveness over time. 11. Message variables—Both the message and the means by which it is communicated are bases for evaluation and could impact message effectiveness, including the headline, illustrations, text, and layout. 12. Media strategies—Research may be designed to determine which media class (broadcast vs. print) generate the most effective results, the location within a particular medium (front page or back page), and size or length of time the ad or commercial runs. Another factor is the vehicle option source effect—the differential impact that the advertising exposure will have on the same audience member if the exposure occurs in one media option rather than another. 13. Budgeting decisions—The relationship between the ad budget and sales is often hard to determine because using sales as an indicator of effectiveness ignores the impact of other marketing mix elements. When to Test—Effectiveness testing can generally be classified as: 14. Pretesting—Pretests are those that occur prior to the implementation of the campaign. Pretests may occur at a number of points, from as early on as idea generation to rough execution to testing the final version before implementing it, and more than one type of pretest may be used. 15. Posttesting—Posttests are those that are taken once the program has been implemented. Posttesting is designed to (1) determine if the campaign is accomplishing the objectives sought and (2) serve as input into the next period‘s situation analysis. Figure 18-2 lists some classifications of testing methods. Where to Test—There are certain advantages and disadvantages associated with where effectiveness tests take place. Again, two different testing environments are discussed. 16. Laboratory—Laboratory tests are conducted in a specific location to which consumers are brought—for example, testing labs, theaters, etc. The major advantage is control. The major disadvantage is a lack of realism and the potential for testing bias.

17. Field tests—Field tests are those taken under more natural viewing situations, such as phone surveys, inquiry tests, etc. The major advantage is that they offer a more realistic viewing situation. At the same time, a lack of control and a number of other distracting conditions are disadvantages associated with these methods.

How to Test—Figure 18-3 lists nine principles of advertising testing that have been endorsed by the nation‘s largest advertising agencies. PACT, or Positioning Advertising Copy Testing, principles were developed by advertisers and their agencies to provide guidelines on conducting appropriate advertising effectiveness studies. Figure 18-4 provides five guiding principles of digital measurement. Professor Notes:

III.

THE TESTING PROCESS

The actual testing of ads may take place throughout the campaign. Four types of tests are discussed. Concept Generation and Testing—Figure 18-5 describes the process involved in concept testing. As noted, concept testing takes place very early on in the development of the campaign and is designed to explore consumers' responses to ads and/or campaigns being considered. Focus groups and mall intercepts are commonly employed methods at this stage. Rough Art, Copy, and Commercial Testing—Because of the high costs associated with testing, completed advertisements and commercials, many advertisers (or their agencies) conduct such tests prior to the completion of the final product. Figure 18-7 describes some of the terminology used to describe these tests. Results of these tests have been shown to correlate highly with those taken after the ads have been completed. Two types of popular tests include: 

Comprehension and reaction tests, which assess whether an ad is offensive and whether it conveys the meaning intended.



Consumer juries, which ask consumers to rate a selection of layouts or copy versions presented in pasteups on separate sheets. A number of issues with consumer juries are discussed including that the consumer may become a self-appointed expert, that the number of ads that can be evaluated is limited, that a halo effect is possible (participants like a few aspects and overlook other weaknesses), and that preferences for specific types of advertising may overshadow objectivity.

18. A/B testing—The process of A/B testing involves the testing of two versions of an advertisement or homepage to see which will be more effective prior to launch. In the vast majority (if not all) of these cases, the ads or web pages are finished products. JJJJJ.

Pretesting of Finished Ads—Many advertisers prefer to test the ad in its finished form. A variety of both print and broadcast measures may be used. 19. Pretesting finished print messages—A number of methods for pretesting print messages are provided. Some of the more common of these are: Portfolio tests—A laboratory methodology designed to expose a group of respondents to a portfolio consisting of both control and test ads. Respondents are then asked what information they recall from the ads. The assumption is that the ads that yield the highest recall are the most effective. A variety of the portfolio test is the mock magazine test, in which an ad is placed in an actual magazine and a similar methodology is employed.

Readability tests—A popular readability test is the Flesch formula, which is named after its developer, Rudolph Flesch. It assesses the readability of the copy by determining the average number of syllables per 100 words. New print pretesting measures—Many companies have introduced new methodologies that improve on existing methods. Many of these involve hybrid measures that either measure effectiveness in different ways, or in different channels. 20. Pretesting finished broadcast ads—Some of the more popular methods for pretesting broadcast ads are: Theater tests—One of the most popular lab methods for pretesting finished commercials where participants are invited to view pilots of proposed TV programs. On-air tests—Some of the firms conducting theater tests also insert the commercials into actual TV programs in certain test markets, which often include single-source ad research. Physiological measures—These involve a laboratory setting and the measures indicate the receiver‘s involuntary response to the ad. Some include: 

Pupil dilation—Research in pupillometrics is designed to measure dilation and constriction of the pupils of the eyes in response to stimuli.



Galvanic skin response (GSR)—Also known as electrodermal response (EDR), GSR measures the skin‘s resistance or conductance to a small amount of current passed between two electrodes.



Eye tracking—Eye tracking involves asking viewers to view an ad while a sensor aims a beam of infrared light at the eye. Eye tracking has increasingly been used to measure the effectiveness of websites and online ads.



Brain waves—Electroencephalographic (EEG) measures can be taken from the skull to determine electrical frequencies in the brain. These electrical impulses are used in two areas of research: alpha activity, which refers to the degree of brain activation, and hemispheric lateralization, which distinguishes between alpha activity in the left and right sides of the brain.

KKKKK. Market Testing of Ads—Many of the methods already mentioned are also used in the posttesting of advertisements. The text once again discusses methods of market testing ads of both the print and broadcast varieties. 21. Posttests of print ads—Three of the most common forms of posttesting print ads include: Inquiry tests—Inquiry tests are designed to measure advertising effectiveness on the basis of inquiries generated from ads appearing in various print media. More complex methods of measuring effectiveness through inquiries may involve (1) running the ad in successive issues of the same medium; (2) running split-run tests, in which variations of the ad appear in different copies of the same newspaper or magazine; and/or (3) running the same ad in different media. Recognition tests—The most common posttest of print ads. The recognition method, most closely associated with Starch, lets the advertiser assess the impact of an ad in a single issue of a magazine, over time, and/or across different magazines. Some researchers have

criticized aspects of recognition measures on the basis of problems of false claiming, interviewer sensitivities, and unreliable scores. The measures used in the Starch test methodology are shown in Figure 18-12. Recall tests—Recall tests attempt to measure recall of specific ads. Perhaps the best known of these is the Gallup & Robinson Magazine Impact Research Service (MIRS) described in Figure 18-13. 22. Posttests of broadcast commercials. Day-after recall tests—The most popular method of posttesting employed in the broadcasting industry for decades was the Burke Day-After Recall test. A number of disadvantages to recall tests are discussed in the text. Persuasive measures—Include purchase, intent, and frequency-of-purchase criteria. Diagnostics—These measures are designed to garner viewers‘ evaluations of the ads, as well as how clearly the creative idea is understood and how well the proposition is communicated. Rational and emotional reactions to the ads are also examined. Comprehensive measures—Some companies provide comprehensive approaches in which each of the three measures just described can be obtained through one testing program. Test marketing—Many companies conduct tests designed to measure their advertising effects in specific test markets before releasing them nationally. Tracking print/broadcast ads—Tracking studies have been used to measure the effect of advertising on awareness, recall, interest, and attitudes toward the ad and/or brand as well as purchase intentions. Professor Notes:

IV.

ESTABLISHING A PROGRAM FOR MEASURING ADVERTISING EFFECTS

To this point in the chapter, a number of methods of testing the effectiveness of print and broadcast ads have been presented. In each case, these measures were discussed in respect to their contributions as well as their limitations. In this section, the chapter discusses how the marketer might establish a sound program for conducting effectiveness research. Problems with Current Research Methods—A number of problems with existing research methods are discussed, with the PACT program discussed earlier used as a standard against which to measure these methods. In this section, each of the PACT principles are discussed, with suggestions as to how each principle might be met. Essentials of Effective Testing—Again referring to the PACT program, four suggestions are offered that we believe will improve the effectiveness of the evaluation program. These include: 

Establish communications objectives. 1-306



Use a consumer response model.



Use both pretests and posttests.



Use multiple measures.



Understand and implement proper research.

Professor Notes:

MEASURING THE EFFECTIVENESS OF OTHER PROGRAM ELEMENTS

The majority of this chapter has focused on the measurement of advertising effectiveness. Obviously, measuring the effectiveness of other program elements is important as well. The final section of this chapter discusses the measurement of effectiveness of sales promotions programs, sponsorships, and nontraditional media. Measuring the Effectiveness of Sales Promotion— Sales promotions are not limited to retailers and resellers of products. A number of organizations measure sales promotions and are discussed in this section of the chapter. Measuring the Effectiveness of Nontraditional Media—Some progress has been made in the measurement of the media discussed in Chapter 13. 

The effectiveness of print versus online flyers—This study examined the difference between online and traditional flyers effects on memory and purchase behaviors.



The effects of parking lot-based media—The Traffic Audit Bureau (TAB) is tracking the effectiveness of this form of advertising to give advertisers more reliable criteria on which to base purchase decisions.



The effects of in-store radio and television—Interactive Market Systems (IMS) introduced software that enables clients to measure the effectiveness of in-store radio. The company planned to introduce similar software designed to measure in-store television advertising effectiveness.



The effectiveness of other media—A number of companies provide measures to determine the impact of package designs, POP displays, trade show exhibits, and the like. Nielsen Entertainment and Massivemedia now offer a service to measure video game advertising effectiveness as well as that of other outdoor media.

Measuring the Effectiveness of Sponsorships—Many organizations have increased their investments in sponsorships. Essentially, measures of sponsorship effectiveness can be categorized as exposurebased methods or tracking measures. Measuring the Effectiveness of other IMC Program Elements—Many of the organizations mentioned in this chapter offer research services to measure the effectiveness of specific promotional program elements. A number of studies have been conducted in an attempt to measure the combined effects of combining IMC elements. These studies continue to increase in scope and methodology employed. Professor Notes:

Teaching Suggestions Due to the importance and amount of information presented in this chapter, we suggest that the lecture cover at least two time periods. The first session might be used to discuss the importance of conducting effectiveness studies, some of the reasons why such studies are not conducted, and some of the pretest measures. The second session could cover posttests and the PACT guidelines. In addition, the second session should discuss ways of measuring communications objectives. As in some of the previous chapters, this subject matter can be presented in a very interesting fashion. The media frequently provide information that can be used to keep the student current, and to provide ―real world‖ applications. Sources such as Ad Age, Adweek, and The Wall Street Journal often have articles relating to this subject matter as does the online site eMarketer. In addition, single-source systems are often in the news. We have found through our experiences that academics seem to place more emphasis on the importance of measuring effectiveness than do practitioners. We believe that this may be one of the more important elements of the entire decision sequence model of promotional planning and suggest that this importance be stressed to students as they will soon be the practitioners.

Answers to Discussion Questions 139. The chapter noted that many practitioners today focus their determination of an ad’s effectiveness almost entirely on whether it achieves attention. Based on what you have learned throughout this text, explain why this is not likely to be a good strategy. (LO 18-3) There is no surefire way to test advertising effectiveness. While it is important that marketers‘ attempts to measure effectiveness be guided by all of the principles discussed, the research should be guided by a model of human response to communications that encompasses reception, comprehension, and behavioral response. Most current methods do little more than provide recall scores, despite the fact that many researchers have shown recall to be a poor measure of effectiveness. Models that do claim to measure such factors as attitude change or brand preference change are often fraught with problems that severely limit their reliability. Once again, a problem with digital metrics is that they often don‘t provide insights into the consumer response processes because the measures are behavioral and provide no insights into the emotional side. An effective measure must include some relationship to the communication process. 140. Many marketers believe that there needs to be a completely different set of measures of advertising effectiveness for digital media. Discuss some of the measures of effectiveness used in the digital domain and whether traditional measures such as those described in this chapter might also be used in the digital world. (LO 18-4) The MRI-Simmons Starch Ad Measure uses the traditional Starch measures and includes additional digital measures as well. Measures used in the Starch test methodology are shown in Figure 18-12. Its general objective is determining recognition of print ads and providing insight into the involvement readers have with specific ads. While the Starch method has some critics, it is widely used in the posttesting of ads, and has clear applications in the digital domain. Ad tracking may also be applied to both print and digital ads. Tracking studies have been used to measure the effects of advertising on awareness, recall, interest, and attitudes toward the ad and/or brand as well as purchase intentions. Personal interviews, phone surveys, mall intercepts, 1-309 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

and online surveys have been used. Tracking studies yield perhaps the most valuable information available to the marketing manager for assessing current programs and planning for the future. The major advantage of tracking studies is that they can be tailored to each specific campaign and/or situation, including digital ones. 141. Explain what is meant by ―advertising attribution‖ and its relevance to measuring ad effectiveness. What advantages are potentially accrued by using this method? (LO 18-2) Advertising attribution refers to the process of analyzing contributions of each advertising element to the overall marketing mix. As a result of Web 2.0 analytics, it is now possible to measure individual contributions of each exposure as well as the combined effects through (1) attribution (the process of analyzing the contribution of each advertising element); (2) optimization (using predictive analytics to run planning scenarios); and (3) allocation (distributing resources across marketing activities to optimize scenarios). The text discusses the value of pursuing an integrated marketing communications approach as specific tools are often better than others for accomplishing specific objectives, and more importantly, they do not contribute to the program in isolation (often referred to as silos) but act synergistically with each other. In other words, ―the whole is greater than the sum of its parts!‖ 142. Explain why it is important to pretest ads. Why do many advertisers not do so? (LO 18-1) Pretests are those tests that take place before the advertisement or commercial is made available for viewing by the public. These tests may take place at a number of points from as early on as idea generation to testing the final version before showing it. There are a variety of pretests available, including both lab and field tests. Examples of pretests include focus groups, consumer juries, physiological measures, in-home tests, and theater tests. Marketers pretest ads so that they can avoid mistakes and fine tune them before they are exposed to the public at large. Before spending a great deal of money on an ad that doesn‘t work, they will get some idea of their potential effectiveness prior to going to the market. If there are specific elements of the ad that are not working, corrections can be made. The reasons cited for not pretesting include cost and time factors. Many marketers do not want to spend the additional dollars required to test. This can be a risky strategy, and the costs of making a mistake may exceed those of testing. Others feel that the cost is not warranted, as the ad has no elements of controversy, is simple, etc. Some marketers skip the pretest phase as they have only a short window of opportunity, and do not have time to pretest. 143. Explain what factors should be tested when measuring advertising effectiveness. Also describe some of the dependent measures that should be considered in this process. Do you think advertisers test each of these measures and employ various dependent measures? (LO 18-4) Important factors to test when measuring advertising effectiveness include source factors (is the spokesperson effective and how will the target market respond?); message variables (the message and the means by which it is communicated); media strategies (are the strategies chosen the most effective for the situation?); and budgeting decisions (how does the budget size impact ad effectiveness?). Dependent variables which should also be considered include determining if specific communication objectives are established and achieved (such as increased sales, ad recall, recognition, etc.) However, we are reminded that there is no surefire way to test advertising 1-310 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

effectiveness. We still have a long way to go to determine the overall effectiveness of an IMC program. All the advertising effectiveness measures discussed in the text have their inherent strengths and weaknesses. They offer the advertiser some information that may be useful in evaluating the effectiveness of promotional efforts. While not all promotional efforts can be evaluated effectively, progress is being made. 144. Describe the measures used to determine the effectiveness of sponsorships. Why is it important to attempt to measure sponsorship effectiveness? (LO 18-2) Measures of sponsorship effectiveness can be categorized as exposure-based methods or tracking measures: 

Exposure methods can be classified as those that monitor the quantity and nature of the media coverage obtained for the sponsored event and those that estimate direct and indirect audiences. While commonly employed by corporations, scholars have heavily criticized these measures. For example, Michel Pham argues that media coverage is not the objective of sponsorships and should not be considered as a measure of effectiveness.



Tracking measures are designed to evaluate the awareness, familiarity, and preferences engendered by sponsorship based on surveys. A number of empirical studies have measured recall of sponsors‘ ads, awareness of and attitudes toward the sponsors and their products, and image effect, including brand and corporate images.

As with all other IMC touch points, marketers would like to measure the ROI of event. But this is usually not possible, so they must focus on communication-oriented objectives, Most marketers limit their sponsorship evaluations to brand awareness and impressions. The key question that needs to be asked is ―how do you do sponsorships that build brand equity and maintain financial responsibility?‖ 145. In the decision sequence model presented in Chapter 1, the final stage is measuring effectiveness of the IMC program to provide feedback. This feedback is critical to the future planning process. Yet research shows that many companies do not conduct effectiveness research. Explain why they do not and why it is important that they do. (LO 18-1) There are several reasons why brands choose not to conduct effectiveness research. One of the major reasons cited for not conducting effectiveness research include costs associated with testing, research problems, disagreement on what to test, objections from creative, and the time required for proper testing. Good research can be quite expensive both in terms of both time and money. Many managers decide that time is critical, and they must implement the program while the opportunity is available and many believe the monies spent on research could be better spent on improved production of the ad, additional media buys, and the like. Another reason for not measuring effectiveness is that it is often difficult to isolate the effects of promotional elements. Each variable in the marketing mix affects the success of a product or service. Because it is often difficult to measure the contribution of each marketing element directly, some managers become frustrated and decide not to test at all. Additionally, the objectives sought in the promotional program may differ by industry, by stage of the product life cycle, or even for different people within the firm. There are numerous ways to measure these, but not always a consensus as to what measure should be used. Problems also arise for testing ad effectiveness when there are objections from creative. Sometimes the creative department does not want its work to be tested and many agencies are reluctant to submit their work for testing. Finally, there are often time constraints in which

advertisers don‘t prioritize testing. Managers believe they already have too much to do and just can‘t get around to testing, and they don‘t want to wait to get the message out because they might miss the window of opportunity. Marketers should care about testing because it can help them in avoiding costly mistakes, it aids them in evaluating alternative strategies, helps to increase the efficiency of advertising in general, and aids in determining if the objectives set have been achieved. 146. Creatives have long argued that measuring the effectiveness of their ads would stifle the creative process and lead to less creativity and more objective-seeking ads. The outstanding creative ads of the past would no longer be part of the future, they say. Some recent articles have contended that the ads of today are not creative and tend to copy each other. Take a side on this position, and cite examples to support it. (LO 18-1) Advertisement effectiveness testing does not aim to stifle creativity, but instead works to ensure that the creative ideas conceptualized by the creative team resonate with target audience members. However, ad agencies‘ creative departments argue that tests are not true measures of the creativity and effectiveness of ads, that applying measures stifles their creativity, and that the more creative the ad is, the more likely it is to be successful. They want permission to be creative without the limiting guidelines marketing may impose. Apple‘s 1984 commercial is a good example of a very creative idea and concept that was not tested for its effectiveness with audience members but is still recognized as one of the best and most memorable advertisements of all time even today. At the same time, the marketing manager is ultimately responsible for the success of the product or brand. Given the substantial sums being allocated to advertising and promotion, it is the manager‘s right, and responsibility, to know how well a specific program—or a specific ad—will perform in the market. Many successful brands rely on testing creative concepts to ensure their efficiency and resonation with the intended target audience. Student views and evaluation of this topic will vary. 147. A/B testing has been used by marketers for decades to evaluate two different versions of finished ads and/or web pages. Some experts now believe that A/B testing would be more effective if employed earlier in the campaign development process. Explain what they mean by this, and argue for or against this position. (LO 18-1) A/B testing is about testing different versions of finished ads. Unfortunately, once ads are finished it has cost a lot of money, and companies are often not willing to assume that cost with no final product should both test poorly. By testing earlier, it is possible to see that some ads are just not going to be effective, and the company can cut their losses with much less monetary outlay. Think about the commercials that should have been killed or changed in the pretesting stage. Had this been done, many dollars would have been saved as well as a lot of bad PR. The downside is that emotional ads do not test well in earlier stages of development, so a potentially effective commercial may have been discarded. However, this is less likely to be the case than the likelihood of eliminating or changing an ad that has tested very poorly early on. 148. This chapter discussed the Ogilvy Awards. Describe what these awards are and how they have changed over time. Give examples of companies that have won these awards (you can find past winners online) and why they have won them. (LO 18-1) Have students go to the website https://www.warc.com/Topics/ARFOgilvyAwards.topic and view award winners, as well as download the case studies. When reviewing any of these case studies, you will see a number of criteria used to evaluate the program‘s success. You‘ll also see some criteria that may not be used as properly as it should. Can we really attribute sales and market share gains directly to the IMC program? 1-312 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

Students should be asked to evaluate the metrics used in the cases, and at the same time discuss whether all of these used are appropriate. They should also compare the effectiveness programs used to those criteria in the book that determine essentials for proper measurement.

Additional Discussion Questions (not in text) 149. Some companies test their commercials in rough formats described in the chapter. Others only test the commercials in finished form. Discuss some of the advantages and disadvantages of conducting tests at both stages. (LO 18-2) The clear advantage of rough testing is the cost savings. Given that roughs correlate so highly with finished ads, many advertisers will use them to explore the potential effectiveness of them before too much money has been spent. For some types of commercials—particularly those involving emotion—roughs may not be as effective. Cartoon versions may not capture the emotions the message intends to communicate. For this reason, advertisers will test finished ads. The major problem with testing finished ads comes from the fact that as more money is spent to produce the commercial, more pressure will follow to use it, given the investment. Thus, commercials may be used when they test less than effective, rather than going back and starting over. One might speculate that testing all commercials in rough form might provide some insights into whether it makes sense to proceed. 150. Most of this chapter focuses attention on the measurement of traditional forms of advertising. How are companies measuring nontraditional advertising forms? (LO 18-2) As noted in earlier chapters, there have not been a lot of new methodologies provided to measure the impact of the newer media options. Of course, the Internet has its measurement criteria, some of which are unique to the medium (and some of which have questionable validity and reliability), while others are traditional (tracking, recall, etc.). For most of the other media—particularly those discussed in Chapter 13 under branded entertainment—few new measures have been developed. Most of the determination is made by looking at impressions or potential impressions likely to be generated by placements, etc. As you know, impressions are not true measures of effectiveness. As also noted, many of those using branded entertainment don‘t seem to be concerned about effectiveness. Of those who attempt to determine the impact of the placements, integrations, etc., they continue to hold out for the Holy Grail—sales. Still others track the number of hits to their website after the placement has occurred—perhaps a more revealing metric than sales. Partly because of management attitude, and partly because of the novelty of these new media, there are not a lot of measures of effectiveness in place. Hopefully, as the media mature, these measures will follow. 151. Explain why it is so difficult to measure the effectiveness of an IMC program that uses multiple program elements. (LO 18-3) One of the arguments for not using sales as an indicator of advertising success is the fact that other marketing factors—price, product, and distribution as well as external factors will contribute to the sales of a product. A similar argument exists for measuring the contribution of IMC elements. One of the benefits to be derived from an IMC program is the cumulative impact that occurs through multiple media, points of contact, etc. that likely results in a Gestalt effect—that is, the

whole is greater than the sum of its parts. As marketers have discovered, it if very difficult to separate the individual contributions that each medium makes in such a program. One of the reasons for this problem is that consumers may not know or remember where they have seen a communication. In tracking advertising for 17 years for a bank, we often found misreporting of media sources—that is people saying they recall an ad from TV, when there were not TV commercials being run, etc. Consumers just aren‘t that attuned to where they see messages. Another factor is that while one might be able to recall which medium the message appeared in, it is much more difficult to determine the degree of impact of that medium. In addition, message factors, and source factors—just like price and product will also confound the studies. 152. How have marketers employed the methodology of eye tracking? Give examples of companies that have employed this methodology. When does eye tracking seem to be most useful? (LO 183) Eye tracking has been used to observe viewers‘ eyes to see where they go in watching a commercial or print ad, and where they focus and how much time is spent there. This form of tracking has been used for quite some time, and has been proven to offer valuable insights. The methodology has now been extended to other areas of communications research. Package designers have experimented with various label designs to determine which will stand out on store shelves. Print researchers have examined the movement of the eye when one is reading a newspaper or magazine. A popular use of this methodology now is to see where one‘s eyes go when viewing a website, and how long certain aspects of a site attract attention. Results show that viewers start at the top left (consistent with previous research) and then proceed through the rest of the site. Different banner or ad types will hold the eye‘s attention, etc. Again, as a physiological measure, eye tracking provides some insights as to effectiveness— particularly attention. And, again, this measure needs to be combined with others to determine the ―why‖ of such movements. 153. Describe the Starch Ad Readership Report and the measures provided therein. Discuss how Starch has had to adapt this report due to changing market conditions, and the new metrics now provided. (LO 18-2)

The Starch report has been relied upon for decades as a standard for testing print ads. The measures taken include the noting score, brand associated score and the read most score. These scores have been employed since the reports started. Recently, Starch has added additional measures. These include brand disposition, purchase behavior or intention, actions taken, and publication and advertising engagement. Like many other companies that have measured traditional media advertising effectiveness, Starch has had to adapt their methodology and measures provided to adapt to the changing media environment. As an example, is the addition of the measure of advertising engagement. As noted in the text, engagement is the new ―hot‖ measure. Even though there are a number of problems associated with this measure, clients nevertheless demand it. Should Starch not offer this (or other measures) clients demand, the company runs the risk of being considered outdated, and business will move elsewhere.

154. Explain why different metrics may be more useful to marketers in determining the effectiveness of their advertising at different times. Give examples of which metrics may be useful as consumers go through the purchase decision process. (LO 18-4) Chapter 7 discussed advertisers‘ use of consumer funnels to understand the consumer decision making process and to establish communications objectives. Using these traditional funnels or some of the newer decision making scenarios proposed requires an advertiser attempting to measure the effectiveness of his/her campaign to employ different media at various stages of the decision-making process. Using different media requires the use of different metrics to determine their effectiveness. For example, at the top of the funnel, where awareness is important, the advertiser may want to use TV. Recall of the ad would perhaps be the most effective measure. Further down the funnel, comprehension would be a critical measure. Tests that measure recognition, and comprehension of the message may be more important at this point. To measure the ability of the ad or website to gain attention, the marketer may wish to use eye tracking. To get the best measure of the campaign‘s effectiveness, tracking methods may be the most valuable metric.

IMC Exercise Have students find an example of a current or recent advertising campaign being used by a company. Have them explain the various measures of effectiveness that might be used by the company to track effects of the campaign over time or through the consumer purchase funnel. They should explain why particular testing methods would be appropriate and how the information they provide can be used by the marketer at various stages of the funnel.

CHAPTER 19 INTERNATIONAL ADVERTISING AND PROMOTION Chapter Overview The purpose of this chapter is to introduce the student to the role of advertising and promotion in a company‘s international marketing program. We discuss the growing importance of companies being able to compete in the global marketplace and the importance of international advertising and promotion. The international environment and the major factors influencing marketing and promotional decisions in foreign markets are discussed and attention is given to the issue of global or standardized versus local or customized marketing and advertising. This chapter also examines how companies organize for international advertising, select agencies, and make decisions in various areas such as research, creative strategy, and media selection. While the primary focus of this chapter is on international advertising, attention is also given to how other IMC tools are used in international marketing, including sales promotion, public relations, and digital/social media.

Learning Objectives 54.

Describe the role and importance of international marketing and promotion.

55.

Discuss how economic, cultural, legal, and other factors in the international environment affect advertising and promotional decisions.

56.

Compare global versus localized advertising and promotion.

57.

Discuss the decision areas of international advertising.

58.

Describe the role of other elements of the promotional mix in the international IMC program.

Chapter and Lecture Outline I.

THE IMPORTANCE OF INTERNATIONAL MARKETS

Throughout this book, attention is focused primarily on the development of promotional programs for products and services sold to the U.S. market. However, many companies are recognizing the opportunities that foreign markets offer for new sources of sales and profits as well as the necessity of marketing their products internationally. Today, world trade is driven by global competition among global companies for global consumers. It has become increasingly important for U.S. companies to adopt an international marketing orientation since imports are taking a significant amount of the domestic market for many products and are likely to continue doing so. The balance-of-trade deficit (when the monetary value of imports exceeds that of exports) and movement toward a global economy is requiring companies to become more adept at marketing their products and services to other countries. Professor Notes:

II.

THE ROLE OF INTERNATIONAL ADVERTISING AND PROMOTION

Advertising and promotion are important parts of the international marketing program of firms competing in the global marketplace. In 2022, an estimated $330 billion was spent on advertising in the U.S. While the United States still leads the world in terms of advertising spending, expenditures outside of the U.S. have increased dramatically over the past decade and are now over $450 billion annually. It is worth noting and discussing the importance of advertising and promotion for large foreign-based multinationals such as Unilever, Nestle, Samsung, and L‘Oréal. Figure 19-1 shows the top 10 companies by worldwide advertising spending. Advertising and promotion are the most visible as well as the most culture-bound of a firm‘s marketing functions. Companies planning on marketing and advertising their products or services abroad are faced with an unfamiliar marketing environment and consumers with different customs, values, consumption patterns, and habits, as well as different purchase motives and abilities. Media options are often more limited in foreign countries than in the U.S. and different creative and media strategies, as well as changes in other promotional mix elements, are often required for foreign markets. Professor Notes:

III.

THE INTERNATIONAL ENVIRONMENT

Just as with domestic marketing, companies engaging in international marketing must carefully analyze and consider the major environmental factors of each market in which they compete. Consideration of environmental factors is important, not only in evaluating the viability and/or potential of each country as a market, but also in designing and implementing a marketing and promotional program. Figure 19-2 shows some of the forces marketers must consider in each category when analyzing the environment of a country or market. Major environmental factors that must be considered include:

LLLLL. The Economic Environment—A country‘s economic conditions indicate its present and future potential for consuming. Marketers must consider the economic infrastructure or the communications, transportation, financial, and distribution networks needed to conduct business in a particular country. Asian countries are expected to exhibit the biggest growth of the consumer class among the world‘s 30 largest consumer markets. Currently 55 percent of the global consumer class live in Asia, especially in the world‘s two largest consumer markets, India and China. The recent COVID-19 pandemic slowed China‘s economic growth, although it is expected to recover as restrictions are lifted. Both China and India have the fundamentals to sustain high growth rates, including large numbers of younger consumers, high savings rates, and a growing middle class of consumers. Many multinational companies are also looking to other emerging markets such as Vietnam, the Philippines, and Bangladesh, as well as emerging economies in sub-Saharan African nations such as Nigeria and Kenya. MMMMM. The Demographic Environment—International marketers must also examine the demographic characteristics of a country including factors such as income levels and distribution, age and occupation distributions, household size, literacy, education, and employment rates. Many marketers are turning their attention to developing countries at the bottom of the economic pyramid where consumer markets are slowly emerging. For example, Latin America remains one of the world‘s largest potential markets, although the low incomes of many in the region are still problematic. As many European countries as well as the U.S., Canada, Japan, and China are experiencing low or even negative population growth and an aging consumer base, companies are looking to other parts of the world for growth. NNNNN. The Cultural Environment—An aspect of the international marketing environment that is very important to advertising and promotion is the culture of each country. Among the most important aspects of culture are the language, customs, tastes, attitudes, lifestyle, values, religion, and ethical/moral standards of each society. Marketers must be sensitive not only in determining what products and services they can sell to foreign cultures but also in communicating with them. Advertising is often the most effective way to communicate with potential buyers and create markets in other countries. But it can also be one of the most difficult aspects of the international marketing program because of problems in developing messages that will be understood in various countries. Another aspect of culture that is very important for international marketers to understand is values. Cultural values are beliefs and goals shared by members of a society regarding ideal end states of life and modes of conduct. Society shapes consumers‘ basic values, which affect their behavior and determine how they respond to various situations. Various examples are provided in the chapter of brands recognizing the cultural values of a particular country. OOOOO. The Political/Legal Environment—The political and legal environment is one of the most important factors influencing advertising and promotional programs of international marketers. Government regulations and restrictions can affect a variety of aspects of a company‘s advertising program, including: 

The types of products that may be advertised.



The content or creative approach that may be used.



The media that all advertisers (or different classes of advertisers) are permitted to employ.



The use of social and digital media.



The amount of advertising a single advertiser may use in total or in a specific medium. 1-319



The use of foreign languages in ads.



The use of advertising material prepared outside the country.



The use of local versus international advertising agencies.



The specific taxes that may be levied against advertising.

Professor Notes:

IV.

GLOBAL VERSUS LOCALIZED ADVERTISING

In recent years a great deal of attention has been focused on the concept of global marketing whereby a firm utilizes a standard marketing plan for all countries in which it markets its product or service. Global advertising falls under the umbrella of global marketing as a means of implementing this strategy by using the same advertising approach in all markets. The theorizing of Harvard professor Theodore Levitt helped popularize the concept of global marketing. However, not everyone agrees with Levitt‘s global marketing theory, particularly with respect to advertising, as they argue that products and advertising messages must be designed and/or adapted to meet the differing needs of consumers in various countries. The advantages and limitations of global marketing and advertising in particular should be discussed. Advantages of Global Marketing and Advertising—The use of a global marketing and advertising program offers numerous advantages to a company including: 

Economies of scale in production and distribution.



Lower marketing and advertising costs as a result of reductions in planning and control.



Lower advertising production costs.



Abilities to exploit good ideas on a worldwide basis and introduce products quickly into various world markets.



A consistent international brand and/or company image.



Simplification of coordination and control of marketing and promotional programs.

PPPPP. Problems with Global Advertising—While the concepts of global marketing and advertising have received a great deal of attention recently, not everyone agrees with this strategy. Some of the problems with global marketing and advertising include: 

Differences in culture, market, and economic development.



Consumer needs and usage patterns.



Media availability.



Legal restrictions.

These disadvantages often make it extremely difficult to develop an effective universal approach to marketing and advertising. ●

Advertising in particular is difficult to standardize because of cultural differences in circumstances, language, values, beliefs, lifestyle, and so on.

●

Usage patterns and perceptions of a product may vary from one country to another and require adjustments in the marketing and advertising program rather than just using a global campaign.

●

Many experts believe that marketing a standardized product the same way all over the world can turn off consumers, alienate employees, and blind a company to diversities in customer needs.

●

Some experts argue that cultures around the world are becoming more diverse, not less so.

QQQQQ. When Is Globalization Appropriate?—While many advertisers view globalization of advertising as a difficult task, some progress has been made in learning what products and services are best suited to worldwide appeals. Products and services that can take advantage of global marketing and advertising opportunities include: 23. Brands or messages that can be adapted for a visual appeal, avoiding the problems of trying to translate words into dozens of languages. 24. Brands that are promoted with image campaigns that play to universal needs, values, and emotions. 25. High-tech products and new products coming to the world for the first time, not steeped in the cultural heritage of a country. 26. Products with nationalistic flavor if the country has a reputation in the field. These products capitalize on the country-of-origin effect, which refers to consumers‘ general perceptions of quality for products made in a given country 27. Products that appeal to a market segment with universally similar tastes, interests, needs, and values. RRRRR. Global Products, Local Messages—While the pros and cons of globalized marketing and advertising continue to be debated, many companies are taking what might be called an inbetween approach by standardizing their products and basic marketing strategy but localizing their advertising messages to appeal to the local realities and conditions of each market. This approach has been given different labels such as ―Think global, act local‖ or ―Global vision with a local touch.” Although some marketers use global ads with little or no modification, most companies adapt their messages to respond to differences in language, market conditions and other factors. Many global marketers use a strategy called pattern advertising whereby their ads follow the same basic approach, but themes, copy and sometimes even visual elements are adapted to differences in local markets. The TAG Heuer ads shown in Exhibit 19-11 are an example of pattern advertising as different celebrities are used for various countries but the creative elements of the ad such as design and layout remain the same. Another way marketers adapt their campaigns to local markets is by producing a variety of ads with a similar theme and format and allowing managers in various countries or regions to select those messages they feel will work best in their markets. Professor Notes:

DECISION AREAS IN INTERNATIONAL ADVERTISING

As with domestic marketing, certain organizational and functional decisions must be made by companies developing advertising and promotional programs for international markets. This section examines these decision areas. Organizing for International Advertising—The initial decision a company must make when it decides to market its products to other countries is how to organize the international advertising and promotion function. There are three basic options for organizing this function. 28. Centralization—All decisions are made and planning is done at the firm‘s home office. Complete centralization is likely when market and media conditions are similar from one country to another, when the company has only one or a few international agencies, when it uses global marketing and advertising, or when it desires a consistent image worldwide. 29. Decentralization—Under a decentralized organizational structure, marketing and advertising managers in each market have the authority to make their own decisions such as selecting agencies, developing budgets, conducting research, approving creative themes and executions, and selecting media. 30. Combination—Many companies actually use a combination of the first two approaches whereby the home office will have the most control over advertising policy, guidelines and operations in all markets, while managers in local offices will be responsible for submitting advertising plans and budgets for their markets which must be reviewed and approved by the international advertising manager. This approach allows for consistency and uniformity in a firm‘s international advertising program yet still permits local input and adaptation of the promotional program. SSSSS. Agency Selection—One of the most important decisions a firm engaged in international marketing must make is the selection of an advertising agency. The three basic alternatives in selecting an agency include: 

Choosing a major agency with both domestic and overseas office. A number of multinational companies are consolidating their advertising with one large agency to develop a consistent global image. IBM was one of the first to do this in 1994 and many large companies have followed. Another example includes Mars whose businesses include snack foods, pet care, and confectionery products and brands such as M&M‘s, Snickers, Skittle, Pedigree, and Orbit gum. In 2019, they consolidated all of its global media business with WPP‘s GroupM media network. Advertising executives also noted that a major reason for all of the account consolidation is that agencies now have the ability to communicate and manage globally.



Choosing a domestic agency affiliated with agencies in other countries or belonging to a network of foreign agencies. Many of the large agency holding companies such as the WPP Group, Publicis Groupe, Omnicom, and Interpublic Group own agencies throughout the world that can handle their clients‘ advertising in various countries.



Selecting a local agency for each national market in which the company sells its products or services. In many countries, smaller agencies may, because of their independence, be more willing to take risks and develop the most effective, creative ads. This also increases the morale and involvement of local managers by giving them input into the agency selection process.

31. Criteria for agency selection—The selection of an agency or agencies to handle a firm‘s international advertising depends on how the firm is organized for international marketing 1-322 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

and the type of assistance it needs to meet its goals and objectives in foreign markets. Specific criteria a company might use in selecting an agency are shown in Figure 19-3. TTTTT. Creative Decisions—Creative strategy development for international advertising is basically similar in process and procedure to domestic advertising as communication objectives must be set based on the marketing strategy and market conditions for each market, major selling ideas must be developed, and specific appeals and execution styles must be chosen. An important factor influencing the development of creative strategy for international markets is the issue of global versus localized advertising. Global advertising uses the same basic appeal and execution style in all countries and requires the development of advertising that will transcend cultural differences and communicate effectively in every country. Companies following a localized advertising strategy must determine what type of selling idea, appeal and execution will work in each market. A product or service may have to be positioned differently in each market depending on consumers‘ usage patterns and habits. UUUUU. Media Selection—One of the most difficult decision areas for international advertisers is that of media strategy and selection. U.S. firms usually find that there are major differences in media outside this country and media conditions may vary considerably from one area to another, particularly in developing countries. Problems and differences include the types of media available, the characteristics of media, availability of media information, and restrictions from one country to another. Media planners have two basic media options available. 32. Local media—Using the local media of a country to reach its consumers, such as local magazines, newspapers, radio, billboards, direct mail and, where available and/or permitted, television. Many advertisers choose the local media of a country to reach its consumers. There are varying media opportunities internationally than there are in the U.S. For example, print media still perform quite well in the U.S. while struggling in other countries. 33. International Media—International advertisers can also reach audiences in various countries through the use of international media that have multimarket coverage. The primary types of international media are magazines and newspapers. As use of print media is declining, more marketers are moving their media spending to digital, although television remains popular. Some multinational commercial television stations and networks such as STAR India are operating in Europe and Asia and are likely to continue to expand with the growth of direct broadcast by satellite (DBS) in homes. Professor Notes:

VI. THE ROLES OF OTHER PROMOTIONAL-MIX ELEMENTS IN INTERNATIONAL MARKETING The focus of this chapter has been on advertising since it is usually the primary element in the promotional mix of the international marketers. However, as in domestic marketing, promotional programs for foreign markets will generally include other elements such as personal selling, sales promotion and public relations. The role of these other promotional mix elements will vary depending on the firm‘s marketing and promotional strategy in foreign markets.

Sales Promotion—Many companies rely on sales promotion tools and techniques to help sell their products in foreign markets. Promotional tools that are effective in the U.S. such as free samples, premiums, contests, and gifts may also work well in other markets. One form of promotion that has become very popular among many U.S. firms for use in foreign markets is sponsorship of sporting events, concerts, and other music-oriented radio and television programs. Unlike advertising, which often can be done on a global basis, sales promotion must often be adapted to local markets. Kashani and Quelch note several important differences among countries that must be considered in developing a sales promotion program including: ●

Economic development—The ability to use various sales promotion tools can be influenced by the stage of economic infrastructure and stage of development of a country.

●

Market maturity—The stage of development of the market for the product or service within a country can dictate that different types of sales promotion tools are needed to introduce a product or service versus competing in a mature market.

●

Consumer perceptions—Consumer perceptions of and willingness to use various sales promotion tools varies by country.

●

Trade structure—The willingness and ability of channel members to accommodate sales promotion programs. Retailers in many countries do not want to take time to process coupons, post promotional displays, or deal with premiums or packaging that require special handling or storage.

●

Regulations—Legal restrictions and regulations on sales promotion vary by country and can be very restrictive, affecting the type of promotions that can be used.

VVVVV. Public Relations—Public relations plays an important role in supporting and enhancing the marketing and advertising efforts of companies involved in international advertising. Public relations activities are needed to deal with local governments, media, trade associations and the general public. The job of PR agencies in foreign markets is not only to help the company sell its products or services but also to present the firm as a ―good corporate citizen‖ who is involved with and concerned about the future of the country. Companies must have a favorable reputation and image if they are to be successful in foreign markets, as groups may feel threatened by the presence of a foreign multinational in their country. Public relations efforts may also be needed to deal with specific problems a company faces in international markets. Many multinational companies are choosing ad agencies that offer public relations capabilities so their entire communication program can be integrated and conducted on a global basis. The chapter discusses major public relations problems companies such as McDonald‘s, the NBA, and Google have encountered in foreign markets. WWWWW.

Digital and Social Media.

34. Worldwide growth of the Internet—The Internet is coming of age as a global marketing medium as well as an important IMC tool for companies around the world. As of 2022, there were nearly 5.5 billion Internet users around the world. Internet usage is highest in China, which now has more than 1 billion people online followed by India with 834 million, the United States with 293 million and Japan with 119 million. Internet use in international markets is still limited in some countries but is expected to develop quickly as telecommunications companies move into emerging markets.. 35. Use of digital and social media in international marketing—Digital media are now an integral part of the IMC program for most international marketers as they have websites for specific 1-324 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

countries and/or regions which allow them to tailor the information they provide to the needs, interests, and lifestyles of consumers in these markets. The use of social media is also becoming prevalent in countries around the world. Facebook has become the first truly global social networking brand that has now has more than 2.9 billion users around the world. Facebook‘s parent company Meta also owns Instagram, which had 1.4 billion users in 2022 and 500 million daily active users, 80 percent of whom live outside the United States. Twitter has also become a global social media platform as in 2022 the micro-blogging site had 368 million monthly active users. However, Twitter‘s growth has stagnated, which is creating concern over its viability as a marketing platform. As the digital revolution continues, marketers will be making greater use of digital and social media in their global as well as regional and local IMC programs. The use of social networking sites will become more prevalent, and marketers are also expected to increase their use of mobile marketing techniques since more consumers are now using their smartphones and other mobile devices to access and surf the Internet. Professor Notes:

Teaching Suggestions This chapter focuses on international advertising and promotion. It is very important to cover this topic as many companies, including those based in the U.S., Japan, and Europe, recognize that their domestic markets offer limited opportunity for expansion due to slow population growth, saturated markets, and intense competition. Moreover, imports are taking a larger share of the domestic market for many products and are likely to continue to do so. Companies must learn how to defend against foreign inroads into their domestic markets and how to market their products and services to foreign countries. We are living in very fascinating and rapidly changing time with respect to developments in the international arena. It is important that students are encouraged to keep abreast of these social, political, and economic changes, how they are affecting the global marketplace, and their implications for international marketing and advertising. While most of the chapter discusses issues of relevance to international advertising, it also covers the role of other integrated marketing tools in international marketing including sales promotion, public relations and the use of the internet and digital/social media. An excellent source of information on international advertising is Advertising Age as the online version has a section on global news.

Answers to Discussion Questions 155. The chapter opener discusses how Tourism Australia uses global advertising. Discuss the importance of international markets to the Australian tourism industry and the role of advertising and other IMC tools in attracting tourists to Australia. (LO 19-1, 19-2, 19-5) Tourism is a major component of Australia‘s economy, which relies heavily on visitors from other countries to come and spend time in the land down under. Prior to the COVID-19 pandemic it welcomed 9.5 million international visitors in 2019 who spent an estimated $45 billion. However, the country was closed to visitors for nearly 2 years during the pandemic, and finally reopened its borders in early 2022 to people from anywhere in the world as long as they were vaccinated. Tourism and the hospitality industry are still recovering, challenged by widespread staff shortages, a lack of airline flights that was pushing up airfares, rising inflation, and a general reluctance of people still riskaverse from the pandemic to invest the time and money to travel to long-haul destinations such as Australia. Tourism Australia recognized that it needed to let the world know that its doors were open again and to lure visitors to Australia. However, the agency knew that the post-COVID-19 travel market was more competitive than ever with many destinations all fighting for the same slightly smaller pool of high-yielding travelers. It needed a campaign that would stand out, and so in 2022, launched its first global advertising campaign in 6 years. The campaign is called ―Come and Say G‘day‖ and features a 9-minute live action film that introduces Ruby, a CGI animated kangaroo who is the brand ambassador for the campaign, featuring the voice of Australian actress Rose Byrne. It incorporates a remake of the iconic song ―Down Under‖ by Men at Work and the return of the ―Come and Say G‘day‖ slogan made famous by actor Paul Hogan during the 1980s. The integrated campaign also includes television commercials (in 15-, 30-, and 60-second versions), print, and high-impact, out-of-home advertising placements, as well as social, digital, and content marketing initiatives. Tourism Australia has partnered with international airlines, state tourism organizations, and key distribution partners and travel agents around the world. Tourism Australia is hoping the ―Come and Say G‘day‖ campaign will stand out on the global stage. It is seen as a critical part of the agency‘s efforts to rebuild its visitor economy and tourism industry.

156. Find examples of companies that were official sponsors of the 2022 FIFA World Cup that was held in Qatar. Do you think the controversy surrounding Qatar’s hosting of the Word Cup had a negative impact on these companies? Why or why not? (LO 19-1, 19-2) The FIFA World Cup is also the world‘s most widely viewed sporting event. More than 3 billion people worldwide tune in to the month-long tournament on television, and over 3 million spectators usually attend the 64 matches played. Qatar is the smallest nation, both by population and by area, ever to have hosted the FIFA World Cup; the country is about the size of the state of Connecticut and has a population of just under 3 million. After being awarded the right to host the 2022 World Cup in 2010, Qatar spent more than a decade building seven new stadiums, 100 new hotels, a new airport, new highways, and a new driverless metro system to prepare for the players, media, and fans. However, in addition to these projects, Qatar had to deal with the fact that it was a very controversial choice to host the World Cup. Many questioned how a small nation of 3 million people and with no soccer pedigree managed to win the secret vote to host the event. Human-rights groups criticized Qatar‘s treatment of foreign workers building the stadiums and accommodations, noting many were injured and died while working on the projects due to unsafe labor conditions. Qatar‘s stance on social issues also was a concern, as homosexuality is illegal in the country, women have limited rights, and alcohol is either banned or very scarce. Concerns were also raised over holding the tournament during the traditional summertime slot given the intense heat in Qatar, so FIFA moved the 2022 World Cup to November and December. Official partners for the 2022 World Cup included adidas, Budweiser, Coca-Cola, Wanda Group, Hyundai/Kia, Qatar Airways, and Visa. One sponsor, Budweiser, was taken by surprise by Qatar‘s last-minute decision to ban beer at the stadiums. It has to scrap a public relations plan many years in the making, dismantle its elaborate tents at the matches, and suffer resulting financial and other consequences. Some marketing experts felt that it was more embarrassing for Qatar than Budweiser. Budweiser tried to turn around the negative publicity by tweeting photos of cases of beer in a warehouse and announcing a ―celebration on us‖ for the winning nation. Actual beer sales at the tournament were just a tiny portion of what Budweiser expected to get out of its sponsorship deal, which included expensive advertising; entertainment in Doha and fan festivals; and promotions at pubs, restaurants, and retail outlets in some 70 countries. But AB InBev, Budweiser‘s parent company, instead issued a statement promoting nonalcoholic beer (Budweiser Zero) at the World Cup. Most beer drinkers were not impressed, although there was likely little lasting impact on such a huge multinational company. 157. What are some of the political/legal factors that marketers must consider in developing advertising and promotional programs in a foreign market? Choose one of these political/legal factors and discuss how it has created a problem or challenge for a company in developing an advertising or promotional program in a specific country. (LO 19-2) A number of political and legal factors must be considered by those developing advertising and promotional programs in foreign markets. These include considerations of the types of products that may be advertised, the content or creative approach that may be used, the media that all advertisers are permitted to use, and the use of social and digital media. Some other considerations include the amount of advertising a single advertiser might be limited to in a specific medium, the use of foreign languages in ads, the use of advertising material prepared outside the country, the use of local versus international advertising agencies, and the specific taxes that may be levied against advertising. An example of the political and legal factors impacting tobacco packaging in Australia is provided in the text. In 2012 Australia‘s high court upheld the country‘s Plain Packaging Act, making it the first country to ban brand logos on all tobacco packages. The new law requires tobacco and cigarettes to

be sold in plain green packages that feature graphic pictures of the negative health effects of smoking such as blindness; mouth, throat, and lung cancer; and the dangers of secondhand smoke. The new law is being challenged by tobacco companies through the World Trade Organization; they have concerns that it could set a marketing precedent that is adopted by other countries. Tobacco companies wishing to enter the Australian market would certainly need to be aware of this legal restriction. 158. What is meant by a country-of-origin effect? Choose a product category for which there is a country-of-origin effect and discuss how a company or brand might use it in developing an advertising message. (LO 19-3) A country-of-origin effect refers to consumers‘ general perceptions of quality for products made in a given country. For example, Germany is known for excellent automotive engineering, and brands such as Mercedes or BMW are generally perceived as being of higher quality because they are from this country. BMW and Mercedes would want to utilize consistent high-end positioning of the product on the creative side to maintain this image. 159. Global Perspective 19-2 discusses the ―Real Magic‖ global marketing campaign for the CocaCola Company. Evaluate the creative strategy being used for this campaign as well as the ―onebrand‖ approach that unites various Coca-Cola soft drink brands under one image, rather than positioning each brand differently. (LO 19-1, 19-2) Coca-Cola is one of the most recognizable and valuable brands in the world, consistently ranking at or near the top of various brand value surveys. The flagship soft drink Coca-Cola is the world‘s number-one soft drink brand and is sold in more than 200 countries around the globe. While a number of different advertising campaigns have come and gone throughout the years, Coca-Cola has remained consistent in appealing to one basic emotion: pleasure. Many of the popular advertising campaigns used to sell Coca-Cola have been built around simple slogans using words such as smile, enjoy, feeling, and happiness that translate easily to consumers everywhere. In 2016, the company announced a major shift in its marketing strategy whereby all Coke trademark brands were united in one global creative campaign called ―Taste the Feeling.‖ The ―Taste the Feeling‖ campaign was designed to bring to mind the idea that drinking a Coca-Cola product is a simple pleasure that makes everyday moments more special and celebrates the experience of doing so. A major aspect of the new strategy was a ―one-brand‖ approach designed to unite the various brands under the Coke trademark—Coca-Cola, Coca-Cola Light/Diet Coke, Coke Zero Sugar, and Coca-Cola Life—and under one personality, sharing the equity of the brand across all the products. Although this campaign ran successfully for five years, in 2021 the company decided to refresh the brand platform for its trademark products, alter its logo design, and launch a new global campaign to support the changes. The new brand platform is called ―Real Magic‖ and emphasizes the unexpected moments of togetherness between people in a connected yet diverse world. The company says the ―Real Magic‖ brand philosophy is rooted in the insight that magic lives in unexpected moments of connection that elevate the everyday into the extraordinary—a timeless learning that feels more relevant than ever in today‘s hyperconnected yet divided world. The ―Real Magic‖ platform includes a new design identity for the Coke trademark brands, anchored by a fresh expression of the CocaCola logo. The logo has been altered into a ―hug‖ with the Coca-Cola letters resembling how they would appear wrapped around a bottle. The campaign targets gen Z consumers with a heavy emphasis on gaming, music, and sports. The integrated campaign also used social, digital, and out-of-home advertising, as well as a code hunt game where fans could win prizes including video gameplay sessions with celebrity gamers. CocaCola‘s chief marketing officer notes that the goal of ―real magic‖ is to put Coca-Cola trademark 1-329 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

brands at the center of cultural conversations for which the brand is trying to increase consumption. Its success, as compared to the previous approach, will be interesting to see. 160. Discuss the advantages and disadvantages of using a global advertising campaign for a company or brand. For what types of products or services is a global advertising approach appropriate? (LO 19-3) A global marketing strategy and advertising program offers certain advantages to a company, including the following: 

Economies of scale in production and distribution



Lower marketing and advertising costs as a result of reductions in planning and advertising production



Abilities to exploit good ideas on a worldwide basis and introduce products quickly into various world markets



A consistent international brand and/or company image



Simplification of coordination and control of marketing and promotional programs

Some of the problems with global marketing and advertising include: Differences in culture, market and economic development, consumer needs, media availabilities and legal restrictions make it extremely difficult to develop an effective universal approach to marketing and advertising. Advertising in particular is difficult to standardize because of cultural differences in circumstances, language, values, beliefs, and lifestyle. Usage patterns and perceptions of a product may vary from one country to another and require adjustments in the marketing and advertising program rather than just using a global campaign. While many in the advertising industry view globalization of advertising as difficult, some progress has been made in learning what products and services are best suited to global appeals: Brands or messages that can be adapted for a visual appeal, avoiding the problems of trying to translate words into dozens of languages. Brands promoted with image campaigns that play to universal needs, values, and emotions. High-tech products and new products coming to the world for the first time and not steeped in the cultural heritage of a country. Products with nationalistic flavor if the country has a reputation in the field. Products that appeal to a market segment with universally similar tastes, interests, needs, and values. 161. Many marketing and advertising experts argue there are limits to global advertising and the one-size-fits-all approach. Do you agree with their position? What are some of the reasons advertising needs to be more localized for specific regions or countries? (LO 19-2, 19-3) Very few products lend themselves to global advertising. Differences in culture, market, and economic development; consumer needs and usage patterns; media availability; and legal restrictions make it extremely difficult to develop an effective universal approach to marketing and advertising. Advertising may be particularly difficult to standardize because of cultural differences in 1-330 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

circumstances, language, traditions, values, beliefs, lifestyle, music, and so on. Some experts even argue that cultures around the world are becoming more diverse, not less so. Thus, advertising‘s job of informing and persuading consumers and moving them toward using a particular brand can be done only within a given culture. Consumer usage patterns and perceptions of a product may vary from one country to another, so advertisers must adjust their marketing and advertising approaches to different problems they may face in different markets. In addition, many experts believe that marketing a standardized product the same way all over the world can turn off consumers, alienate employees, and blind a company to diversities in customer needs. Multinational companies can also encounter problems when they use global advertising as local managers in countries or regions often resent the home office standardizing the advertising function and mandating the type of advertising to be used in their markets. 162. What are the three options available to marketers when organizing for international advertising and promotion? Discuss factors that will influence which option a marketer might use. (LO 19-4) One of the first decisions a company must make when it decides to market its products internationally is how to organize the international advertising and promotion function. This decision is likely to depend on how the company is organized for international marketing and business. There are three general options for organizing for international advertising. The first option is centralization. This option centralizes the international advertising and promotion function so that all decisions about agency selection, creative strategy, campaign development, media strategy, and budgeting are made at the firm‘s home office. Organizations are likely to organize via centralization when market and media conditions are similar from one country to another, when the company has only one or a few international agencies handling all of its advertising, when the company can use standardized advertising, or when it desires a consistent image worldwide. Centralization may also be best when a company‘s international business is small, and it operates through foreign distributors or licensees who do not become involved in the marketing and promotional process. The second option is decentralization. Under a decentralized organizational structure, marketing and advertising managers in each market have the authority to make their own advertising and promotional decisions. Local managers can select ad agencies, develop budgets, conduct research, approve creative themes and executions, and select advertising media. Organizations are likely to utilize a decentralized option when companies believe local managers know the marketing situation in their countries the best. They may also be more effective and motivated when given responsibility for the advertising and promotional program in their markets. Decentralization also works well in small or unique markets where headquarters‘ involvement is not worthwhile or advertising must be tailored to the local market. The third option is combination. This involves a combination of a centralized and decentralized approach. In this approach, the home office has the most control over advertising policies, guidelines, and operations in all markets. The international advertising or marketing communication manager works closely with local or regional marketing managers and personnel from the international agency (or agencies) and sets advertising and promotional objectives, has budgetary authority, approves all creative themes and executions, and approves media selection decisions, especially when they are made on a regional basis or overlap with other markets. This approach is best utilized when a company seeks consistency in a company‘s international advertising yet permits local input and adaptation of the promotion program. Most consumer-product companies find that local adaptation of

advertising is necessary for foreign markets or regions, but they want to maintain control of the overall worldwide image they project. 163. Discuss some of the differences in media that exist across various countries and how they might impact the media strategy used by marketers. (LO 19-4) Companies face a number of problems in developing media strategies for different countries. First, the types of media available in each country are different. For example, TV sets are not as prevalent in many homes in developing countries and even if they are, the amount of commercial time available may be limited. Companies who using the Internet and social media a major part of their integrated marketing communications strategy must consider the penetration of personal computers and smartphone in homes and businesses in foreign markets. The characteristics of media also differ from country to country in terms of coverage, cost, and quality of reproduction, restrictions and the like. Multinational companies also face problems in getting reliable media information such as circulation figures of magazines, audience profiles, and costs. Media rates may also fluctuate because of unstable currencies and economic conditions. There also may be differences in consumer characteristics and media usage patterns due to factors such as literacy rates or media preferences. 164. Digital and Social Media Perspective 19-1 discusses the growth and prevalence of digital and mobile marketing in China. Discuss the challenges and opportunities this presents to companies from the United States and Europe that are marketing their products and services in China. (LO 19-1, 19-2, 19-5) Global expansion is an important goal of multinational companies as domestic markets stagnate and they try to take advantage of the growth opportunities in international markets. And the market nearly every company has at the top of its list is China, whose 1.42 billion consumers and massive modernization drive over the past four decades have made the country the fastest-growing consumer market in the world. Over the next decade, China may add more consumption than any other country, and is expected to generate more than one-quarter of all global consumption growth. The average disposable income of Chinese consumers continues to rise, and demand is increasing for many products, including consumer electronics, automobiles, and luxury goods such as clothing, watches, jewelry, and fashion accessories. While China offers tremendous opportunities, many companies struggle to take advantage of them because they find China‘s market very different from the United States and other countries, requiring a different marketing mindset, as well as a different set of competencies. Marketers who hope to compete in China must understand that the country has moved away from traditional media and has become a digital and, more specifically, ―mobile first‖ market. In 2022, 82 percent of total media advertising spending in China went to digital, with more than 80 percent of digital ad spending dedicated to mobile. In addition, China is the world‘s largest e-commerce market. More than 70 percent of China‘s consumers are true omnichannel shoppers combining both online and offline purchases. Chinese consumers are enthusiast adopters and users of digital media and innovations with younger age cohorts including millennials and members of gen Z leading the way. Nearly 30 percent of Chinese gen Zers spend more than 6 hours a day on their mobile phones, with much of this time spent consuming digital content. This is nearly twice the amount of time as consumers in the United States and most European countries. Companies from the United States and Europe must learn to adapt their marketing strategies to compete successfully in China. First, they must adopt a mobile-first mindset because almost all media activity in China is consolidated on mobile devices. While U.S. companies are used to advertising and interacting with consumers on Facebook, Instagram, YouTube, Snapchat, and other social channels, 1-332 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

these are not where Chinese audiences gather. They interact with brands on WeChat, Weibo, Douyin (the name for TikTok in China), and other platforms that have their own kind of Internet language, memes, and influencers. Next, companies competing in China must go all-in on social media, which is used extensively by consumers to research and share information about brands, and viral marketing, which includes learning how to use key opinion leaders (KOLs). The intensity associated with using KOLs in China is very unique relative to other countries and often involves live-casting and streaming. KOLs encompass a variety of areas, including sports, gaming, and dramas. China‘s ―fan economy‖ is better developed and a much more important marketing vehicle than are tools such as Facebook and Instagram in the United States. The realities of competing in China have changed because rather than evolving, the digital revolution in China has leapfrogged other countries, and a different marketing approach and set of competencies are needed to compete there.

Additional Discussion Questions (not in text) 165. Discuss the arguments for and against the use of global marketing and advertising. What types of products and services are best suited for global advertising? What developments have taken place in recent years that support the use of global advertising and what factors might make this approach more difficult to use effectively? (LO 19-3) There are several advantages to global advertising including lower advertising production costs, the ability to exploit good creative ideas on a worldwide basis, the opportunity to have a consistent brand and/or company image all over the world, and the simplification of coordination and control of advertising programs. Problems with global advertising are that differences in culture, market and economic development, consumer needs and usage patterns, media availability and regulations make it extremely difficult to develop an effective universal approach to advertising. Advertising is very difficult to standardize because of cultural differences such as language, traditions, value, lifestyles, customs, and the like. Another problem with the use of global advertising is that consumer usage patterns and perceptions of a product may vary from one country to another and may require adjustments in marketing and advertising approaches. Marketers must also recognize that the use of a global advertising campaign can alienate consumers as well as local employees if they feel their individual differences or cultural diversities are being ignored. Advances in technology such as the Internet, digital media, cable and satellite television, travel and other areas are making the use of global marketing more feasible. Consumers around the globe are exposed to the same music, movies, TV shows, sporting events and websites. Advances in travel are making it possible for consumers to visit other countries and experience their culture. One thing that is making global marketing more difficult is the trend in many countries to return to more localized music, TV shows and other forms of entertainment. Some countries are trying to preserve their local culture and national identity and may be less receptive to brands from foreign countries that are advertised globally. Global advertising is likely to be inappropriate when there are strong cultural differences among consumers that may influence their interpretation of, and responses to, advertising or when consumer usage patterns and perceptions of a product or service may vary from one country to another. However, these cultural differences are disappearing rapidly, particularly among certain markets such as young people. 166. What is meant by the ―think globally, act locally‖ approach to global marketing and advertising? Discuss some of the ways marketers can adapt their advertising to local markets. (LO 19-3)

Proponents of global marketing such as Professor Theodore Levitt argue that the worldwide marketplace has become homogenized and the basic needs, wants and expectations of consumers transcend geographic, national and cultural boundaries. They argue that consumers around the world are very similar with regard to tastes, needs, wants, preferences and emotional desires and motives. More recently, support for the idea of global marketing has come from advocates of global consumer culture theory who argue that the globalization of markets had led to the existence of a global consumer culture in which many consumers share consumption values, regardless of where they reside. Obviously much has happened over the past two decades that lends greater support to the call for global marketing. There have been significant developments in communications and technology that are leading to the globalization of markets. Satellite-delivered programming has resulted in the television shows being seen by consumers around the world, as governments can no longer control what shows are seen in their countries. The Internet is clearly a new global medium that provides companies with access to consumers around the globe. Social media sites such as Facebook, Instagram, YouTube, Snapchat and Twitter are also popular in most countries. Entertainment such as sporting events, movies, TV shows, and concerts are now seen by consumers around the world and having an impact on them. Thus, products and services can be marketed in a similar fashion around the world using global marketing approaches. Not everyone agrees with the concept of pure global marketing arguing that total standardization is unrealistic and changes are required for local markets. They advocate a ―think globally, act locally‖ approach whereby the same basic advertising theme or approach is used in each country but modifications are made to adapt to differences in culture, language, market conditions and other factors. Marketers use this approach by adapting their campaigns to local markets by producing ads with a similar theme or positioning platform but with copy, visual, models and other executional elements that are adapted to the local market. 167. Many large multinational companies are consolidating all of their worldwide advertising with one large agency. Evaluate the pros and cons of this approach. (LO 19-4) A number of factors are driving this consolidation trend. Major corporations recognize they must develop a consistent global image for the company and/or its brands and speak with one coordinated voice. This can be very difficult to do if a company is working with numerous agencies around the world. For example, Dell entered into a partnership with the WPP Group to form a new global integrated marketing and communications agency that serves the company‘s global marketing needs. Dell had been working with more than 800 different marketing communication firms around the world and wanted to simplify its agency structure. IBM was the first major company to consolidate its global advertising with one agency. The reason given by IBM for consolidating its advertising with Ogilvy & Mather Worldwide was that the company had been projecting too many images with its advertising divided among so many agencies. IBM recognizes that it is competing in a global market for computers and feels it is important to deliver clear, consistent messages that take advantage of the high amount of equity in the IBM name. The agency consolidation allows IBM to gain greater control over, and facilitate coordination of, its worldwide advertising. IBM also thinks that high-tech products such as computers can be advertised using a global advertising campaign since the reasons for purchasing them are similar the world over. Companies are also consolidating their global advertising in an effort to increase efficiency and save money. Finally, advances in technology such as fax machines, e-mail, video conferencing, and airline connections make it much easier to manage accounts around the globe. The risk of the consolidation decision is that one centralized agency may not be able to develop as effective advertising in many foreign markets as a local agency. Local agencies often have a better understanding of the marketing and advertising environment in their country or region and thus may be able to develop more effective advertising than a large multinational agency. Using a single 1-334 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

agency also means that a marketer has no backup agency to turn to if there are problems such as ineffective ad campaign. Companies who consolidate also face the problem of selling the idea to regional offices and local country managers who may not like having control of advertising taken from them. 168. What are the three basic options a company has for organizing its international advertising and promotion function? Discuss the pros and cons of each. (LO 19-4) There are three basic options for organizing the international advertising and promotion function including centralization, decentralization or a combination of the two. The centralized organizational structure involves having all advertising and promotional decisions such as agency selection, research, creative strategy and campaign development, media strategy and budgeting done at a company‘s home office. Under a decentralized organizational structure, marketing and advertising managers in each market have the authority to make their own advertising and promotional decisions for their local markets. Under the combination approach, the home office or headquarters will have the most control over advertising policy, guidelines and operations in all markets. However, the local advertising managers will submit advertising plans and budgets and play a major role in working with the agency in adapting the advertising appeals to their particular markets and making media selection decisions. Centralization works well when market and media conditions are similar from one country to another, when, the company has only one or a few international agencies handling its advertising, when the company can use standardized advertising or when it desires a consistent image worldwide. Centralization also works best when a company‘s international business is small and it operates through foreign distributors or licensees. The decentralized approach is used when companies want to give more control and authority to local managers and believe they know the situations in their markets the best. Decentralization also works best in small or unique markets where advertising must be adapted to fit the conditions of the local market. The combination approach allows for standardization and consistency in a company‘s international advertising yet allows for local input or adaptation. 169. Discuss the role of sales promotion tools such as sampling and coupons in international marketing. What challenges might marketers face in using these tools in various countries around the world? (LO 19-5) Sales promotion tools such as sampling and coupons generally play the same role in international marketing as they do in a domestic marketing program. Samples can be a very effective way to get consumers in foreign markets to try a new product and realize the benefits of using it. As noted in the text, a number of companies such as WD-40, Haagen-Dazs, and Nestle have used extensive sampling programs to generate trial of their products. Coupons can be very important in encouraging consumers to try a new product or an established brand. However, while most consumers may be willing to accept a sample of a product, coupons might face more hurdles as consumers in some countries have negative attitudes toward them and retailers may not be willing to accept coupons as readily as in the United States and other countries where there are systems in place to handle and process them. Retailers in many countries do not want to handle coupons and other types of promotions that may require additional effort on their part. Thus, marketers must carefully evaluate the marketing situation in each country before developing and implementing a sales promotion program. 170. What are some of the cultural variables that marketers must considering in developing advertising and promotional programs in a foreign market? Choose one of these cultural

variables and discuss how it has created a problem or challenge for a company in developing an advertising and promotional program in a specific country. (LO 19-2) Cultural factors influence the development of advertising and promotional programs for foreign markets in a number of ways. Advertisers must consider the language, customs, tastes, attitudes, lifestyle, values, religion, and ethical/moral standards of each society when developing an advertising campaign. Cultural factors determine what products and services marketers can sell to foreign markets as well as how they can communicate with consumers. They must understand not only the language of the country but also its nuances, idioms, and subtleties. They must also be aware of the connotations of words and symbols they use in their ads and how advertising messages, including copy, images and slogans, will be translated. Students should choose a particular cultural variable such as customs, values, language or ethical/moral standards and find an example of how it has created a specific challenge or problem for marketers in a specific country. 171. Why do you think Facebook has become so popular in countries around the world? Discuss the importance of social media in the IMC programs of international marketers. (LO 19-5) The use of social media is becoming prevalent in countries throughout the world as Facebook now has nearly 2 billion users and is the leading social media site in the most countries while Instagram now has over 400 million active users. As discussed throughout the text, social media sites are becoming very popular with the growth of the internet and broadband connections, particularly through wireless. The growth of smartphones and other mobile devices are also driving the growth of social media in countries through the world as the majority of people now go online through their phones and this is likely to increase in the future. Facebook has been working to improve its platform and interface on mobile devices while Twitter already lends itself to mobile given its characteristics. The use of social media sites is also on the rise because people enjoy using them to communicate, stay in touch with friends, share pictures and other media, and to entertain themselves. Social media will continue to be an important part of the IMC programs of international marketers as companies recognize the value of using Facebook, Instagram, YouTube, Twitter, and other sites to communicate with consumers and are finding more ways to do so. Companies around the world recognize that having a Facebook page or YouTube page is as important as having a website and now a necessity as consumers expect to be able to connect with companies through social media. Moreover, it is important for marketers to monitor social media to see what consumers are saying about their companies and brands and be able to respond in a timely manner. There are still countries where Facebook, Instagram, YouTube, and Twitter do not have a presence, such as China, which present them with growth opportunities. However, China has its own social media sites such as Sina Weibo and Renren, which are very popular and provide an IMC platform for global marketers. The importance of social media in the IMC program of marketers will increase as additional sites are developed and adopted by consumers as part of their daily lives.

CHAPTER 20 REGULATION OF ADVERTISING AND PROMOTION Chapter Overview The purpose of this chapter is to examine the regulatory environment in which advertising and promotion operate including industry self-regulation and regulation by federal and state agencies. The chapter begins by examining the various ways the advertising industry attempts to police itself through the use of selfregulation by various parties including advertisers and agencies, trade associations, the business community, and the media. Attention is also given to appraising the value and effectiveness of self1-336 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

regulation. The remainder of this chapter focuses on governmental regulation of advertising, particularly at the federal level. We discuss the background of federal regulation of advertising and examine the role and functioning of the Federal Trade Commission, including its handling of deceptive advertising. Additional federal regulatory agencies that have some influence or power over advertising are also discussed along with advertising regulation at the state level. The chapter concludes with an examination of regulations affecting other promotional areas such as sales promotion, direct marketing, and marketing on the Internet.

Learning Objectives 1.

Explain the role and function of various regulatory agencies.

Evaluate the effectiveness of self-regulation of advertising.

Describe how advertising is regulated by federal and state regulatory bodies.

Discuss the regulation of sales promotion and direct marketing.

Discuss the regulation of marketing on the Internet including privacy and security, online endorsements, and native advertising.

Chapter and Lecture Outline I.

INTRODUCTION

Advertisers operate in a complex environment of local, state, and federal rules and regulations. Additionally, there are a number of advertising and business-sponsored associations, consumer groups, organizations, and media that attempt to police advertising through various self-regulatory programs and guidelines. While in most situations the various rules and regulations primarily influence individual advertisers and their messages, there are situations where advertising for an entire industry can be affected. The tobacco industry has already been banned from advertising on broadcast media, while there is currently strong sentiment to impose restrictions on the advertising and promotion of alcoholic beverages and direct-to-consumer drug advertising. Overview of Regulation—Regulatory concerns can play a major role in the advertising and promotion decision-making process. Regulation and control over advertising come from internal or selfregulation by various groups within the advertising industry and business community as well as from external federal and state regulatory agencies such as the Federal Trade Commission. While only the governmental agencies have the force of law, most advertisers will abide by the guidelines and decisions of internal or self-regulatory bodies. It is important for all of those involved in the advertising decision making process, both on the client and agency side, to have an understanding of various rules and regulations that affect advertising and promotion and how the regulatory bodies operate. Professor Notes:

II.

SELF-REGULATION

For many years, the advertising industry has practiced and promoted the use of voluntary self-regulation as a means of regulating and controlling advertising. Most advertisers and their agencies as well as the media recognize the importance of maintaining consumer trust and confidence in advertising. Selfregulation has also been viewed as a way of limiting government interference and control over advertising. Self-regulation and control of advertising emanate from all segments of the advertising industry, including individual advertisers and their agencies, business and advertising associations, and the media. Self-Regulation by Advertisers and Agencies—The self-regulatory process actually begins with the interaction of the client and agency when creative ideas are considered and evaluated. Most advertisers recognize that their ads are a reflection of the company and want to be sure that their advertising claims are truthful, verifiable, and do not mislead or deceive consumers. Internal control and regulation also come from advertising agencies, which are responsible for verifying all product claims made by the advertiser. Agencies generally take formal steps to protect themselves from legal and ethical perils through agency-client contracts. However, agencies have been held legally responsible for fraudulent for deceptive claims along with the client in some cases. Self-Regulation by Trade Associations—Many industries have developed self-regulatory programs and guidelines or codes for advertising. This is particularly true in industries where advertising is prone to controversy such as liquor and alcoholic beverages, drugs, and various products marketed to children. Many professions also maintain advertising guidelines through local, state, 1-338 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

and national organizations such as the Motion Picture Association of America, the Pharmaceutical Research and Manufacturers of America (PHRMA), or the Wine Institute. While industry associations‘ guidelines and codes are meant to show that member firms are concerned with the impact and consequences of their advertising, they have no legal basis for enforcing them and must rely on peer pressure or other sanctions to gain compliance. The issue of advertising hard liquor on television and the litigation surrounding this discussion is provided in this section. XXXXX. Self-Regulation by Business—A number of self-regulatory mechanisms have been established by the business community in an effort to control advertising practices. The largest and best known of these is through the Better Business Bureau (BBB), which promotes fair advertising and selling practices in all industries in local areas. The parent organization of the local BBB offices is the BBB National Programs, which plays a major role in the monitoring and control of advertising at a national level. This system of industry self-regulation is implemented through five units: the National Advertising Division (NAD), the Children‘s Advertising Unit (CARU), the Electronic Retailing Self-Regulation Program (ERSP), the Direct Selling Self-Regulatory Council (DSSRC), and the Digital Advertising Accountability Program (DAAP). The BBB National Programs also has an appellate unit, the National Advertising Review Board (NARB). Staffed primarily by attorneys, the NAD, CARU, ERSP, and DAAP review advertising claims that are national in scope. CARU reviews advertising directed to children under the age of 12, and ERSP examines advertising claims in direct-response advertising, including infomercials and home shopping channels, while DAAP regulates online behavioral advertising (OBA) across the Internet. YYYYY. The BBB National Programs and the NAD/NARB—The BBB National Programs, working through the NAD/NARB/CARU/ERSP and the DSSRC, is a valuable and effective selfregulatory body. The BBB National Program‘s mission is to sustain high standards of truth and accuracy in national advertising and the organization has a formal process that they follow for self-regulation. and constitute the advertising industry‘s most effective self-regulatory mechanism. The Advertising Self-Regulatory Council (ASRC) was merged into BBB National Programs in 2019. The NAD (National Advertising Division) has examined advertising for truth and accuracy since 1971 and has published more than 5,000 decisions, focusing on areas that include product performance claims, superiority claims against competitive products, and all kinds of scientific and technical claims. Figure 20-1 outlines the sources of cases and decisions received by the NAD with the majority of these complaints coming from marketers who are simply challenging the claims made by their competitors. The Children‘s Advertising Review Unit‘s activities include the review and evaluation of childdirected advertising in all media, as well as online privacy issues that affect children. CARU also provides a general advisory service for advertisers and agencies and has developed self-regulatory guidelines for children‘s advertising. BBB National Programs is also involved in the self-regulation of direct selling through the Direct Selling Self-Regulatory Council (DSSRC), established in 2019 in partnership with the Direct Selling Association (DSA). Its mission is to enhance consumer and regulatory confidence in advertising and marketing in the direct selling marketplace through independent, third-party review of claims disseminated by or on behalf of direct selling companies. The BBB National Programs is also involved in the Digital Advertising Accountability Program (DAAP), which is a data privacy program that enforces self-regulatory standards for online and mobile advertising. Its

mission is to build trust in the digital marketplace by ensuring that markets provide consumers with transparency and choice regarding the collection and use of their data for interest-based ads. The Self-Regulatory Principles for Online Behavioral Advertising, shown in Figure 20-2, are designed to address consumer concerns regarding the use of personal information for interestbased advertising and focus on transparency and consumer control issues. 1. Advertising associations—Various groups in the advertising industry have also been proponents of self-regulation. These include the two major national organizations, the 4As, which is the major trade association representing U.S. advertising agencies, and the American Advertising Federation (AAF). These associations have established guidelines for truthful and responsible advertising and have been active in the legislative area of advertising and in influencing agencies to abide by their codes and principles. The 4A‘s creative code is provided in Figure 20-3. ZZZZZ. Self-Regulation by Media—Another very important self-regulatory mechanism in the advertising industry is that of the media. Most media maintain some form of advertising review process and may reject any ads they regard as objectionable. Newspapers and magazines have their own set of advertising standards, requirements, and restrictions that will often vary depending on the size and nature of the publication. Advertising on television and radio has been regulated for years through codes developed by the industry trade association—the National Association of Broadcasters (N A B). While the N A B suspended all of its code provisions in 1982, many individual broadcasters, such as the major TV networks, have incorporated major portions of the code provisions into their own standards. Probably the most stringent review process and standards of any media are those of the four major television networks through their ―Standards and Practices‖ divisions, which carefully review all commercials submitted to the network or affiliate stations. Figure 20-4 shows a sampling of the TV network‘s guidelines for children‘s advertising. The four major networks receive nearly 50,000 commercials a year for review; nearly two-thirds are accepted and only 3 percent are rejected. Most problems with the remaining 30 percent are resolved through negotiation, and the ads are revised and resubmitted. Some digital advertising platforms also have restrictions regarding the advertising of certain types of products and services such as Facebook‘s restrictions on private gun sales. AAAAAA. Appraising Self-Regulation—The three major participants in the advertising process—the advertisers, agencies, and media—all work both individually and collectively to encourage truthful, ethical, and responsible advertising. The advertising industry views self-regulation as an effective mechanism for controlling advertising and prefers this form of regulation to government intervention. Self-regulation has been effective and has probably led to the development of standards and practices that are higher than those imposed by law and beyond the scope of proper legislation. Over 90 percent of advertisers comply with NAD decisions since failure to do so can result in government action. There are, however, limitations to self-regulation and this process has been criticized in a number of areas. Concern has been expressed over the time it takes the NAD to resolve a complaint, and over staffing and budgeting constraints, which limit the NAD/NARB system‘s ability to investigate more cases and complete them more rapidly. Selfregulation has also been criticized for being self-serving to the advertisers and the advertising industry and for lacking the power to be a viable alternative to federal or state regulation. Professor Notes:

III.

FEDERAL REGULATION OF ADVERTISING

Governmental control and regulation of advertising comes from various federal, state, and local laws and regulations with enforcement being the responsibility of various government agencies. The most important source of external regulation of advertising comes from the Federal Trade Commission (FTC). In addition, depending on the advertiser‘s industry and product or service, other federal agencies such as the Federal Communications Commission, the Food and Drug Administration, the U.S. Postal Service, and the Bureau of Alcohol, Tobacco, Firearms and Explosives may have regulations that affect advertising. Advertising and the First Amendment—Freedom of speech or expression, as defined by the First Amendment, is the most basic federal law governing advertising in the United States. The courts have extended First Amendment protection to commercial speech, which is speech that promotes a commercial transaction. The text discusses some of the landmark cases where the federal courts have issued rulings supporting the coverage of commercial speech by the First Amendment. We also discuss a more recent case involving Nike and whether the First Amendment protects statements the company made to defend its labor practices. The development of the Central Hudson Test for determining restrictions on commercial speech is discussed in this section of the chapter. Background on Federal Regulation of Advertising—Federal regulation of advertising originated in 1914 with the passage of the Federal Trade Commission Act, which created the FTC. This act was originally passed to help enforce antitrust laws, and false advertising was not prohibited unless there was evidence of injury to a competitor. Another important piece of legislation was the Wheeler-Lea Amendment, which Congress passed in 1938. It amended Section 5 of the FTC Act and empowered the FTC to act against unfair or deceptive acts or practices if there was evidence of injury to the public. Proof of injury to competition was not necessary. The Federal Trade Commission—The FTC is charged with the responsibility of protecting both consumers and businesses from anticompetitive behavior and unfair and deceptive practices. The major divisions of the FTC include the Bureaus of Competition, Economics, and Consumer Protection. The Bureau of Consumer Protection investigates and litigates cases involving acts or practices alleged to be deceptive or unfair to consumers. Since the 1970s, the FTC made enforcement of laws regarding false and misleading advertising a top priority. Several new programs were instituted, budgets were increased, and the commission became a very powerful regulatory agency. However, many of these programs, as well as the expanded powers of the FTC to develop regulations on the basis of ―unfairness,‖ became controversial. At the root of this controversy is the fundamental issue of what constitutes unfair advertising. The Concept of Unfairness—Under Section 5 of the FTC Act, the Federal Trade Commission has the mandate to act against unfair and deceptive advertising practices. While the FTC has taken steps to define and clarify the meaning of deception, for many years the Commission was less clear with regard to the meaning of unfairness. In response to this problem, the FTC sent Congress a statement in 1980 that contained an interpretation of unfairness. According to the FTC policy, the basis for unfairness is that a trade practice (a) causes substantial physical or economic injury to consumers (b) could not be reasonably avoided by consumers, and (c) must not be outweighed by countervailing benefits to consumers or competition. Practices considered unfair are claims made. without prior substantiation, claims that might exploit such vulnerable groups as children and older adults, and instances where consumers cannot make a valid choice because the advertiser omits important information about the product or competing products mentioned in the ad.

Deceptive Advertising—Deceptive advertising can take a number of forms ranging from intentional false or misleading claims by an advertiser to ads that may be true in a literal sense but leave consumers with a false or misleading impression. Regulatory agencies must make a distinction between false or misleading messages and those that rely on puffery, which refers to the use of subjective claims or statements about a product or service. The chapter discusses the battle between Pizza Hut and Papa John‘s over the latter‘s use of puffery as a defense for its ―Better Ingredients. Better Pizza‖ tagline and how Domino‘s Pizza joined the war by running a commercial poking fun at Papa John‘s puffery defense (see Exhibit 20-10). While unfair or deceptive acts or practices in advertising are the primary focus of the FTC, these terms have never really been precisely defined. In 1983, the FTC put forth a new working definition of deception, which argued that the commission will find deception ―if there is a misrepresentation, omission or practice that is likely to mislead the consumer acting reasonably in the circumstances to the consumer‘s detriment.‖ There are three essential elements to this definition or deception. The first element is that the misrepresentation, omission or practice must be likely to mislead the consumer. The second element is that the act or practice must be considered from the perspective of the reasonable consumer. The third key element is materiality, which means that the act influenced the consumer‘s decision-making process in a detrimental way. The FTC does have several programs for helping in the evaluation of an ad for deception. 1. Affirmative disclosure—The FTC may require advertisers to include types of information in their ads so consumers will be aware of all the consequences, conditions, and limitations associated with the use of the product or service. The goal of affirmative disclosure is for consumers to have sufficient information to make an informed decision. Another area where the FTC is seeking more specificity from advertisers concerns country of origin claims. In 1998 the FTC issued new guidelines for advertising or labeling a product as ―Made in USA‖ which requires that all significant parts and processing that go into the product must be of U.S. origin and the product should have no or very little foreign content. 2. Advertising substantiation—The FTC‘s advertising substantiation program requires advertisers to have documentation to support the claims in their ads and to prove they are truthful. The program requires substantiation of claims made with respect to safety, performance, efficacy, quality, or comparative price. Many advertisers oppose the FTC‘s advertising substantiation program. They argue it is too expensive to document all their claims and most consumers either won‘t understand or aren‘t interested in the technical data. The FTC‘s challenge of the claims made by Reebok and Skechers for their toning shoes on grounds that that lacked proper substantiation or the FTC‘s challenge of Volkswagen‘s ―clean diesel‖ claims can be discussed here. The FTC‘s Handling of Deceptive Advertising Cases. 36. Consent and cease-and-desist orders—Allegations that a firm is engaging in unfair or deceptive advertising come to the attention of the FTC from a variety of sources including complaints from competitors, from consumers, from other governmental agencies, or from the commission‘s own monitoring and investigations. Once the FTC decides that a complaint is justified and warrants further action, it notifies the offender, who then has 30 days to respond to the complaint. The FTC complaint procedure will then depend on the response and actions taken by the advertiser. An advertiser charged with deceptive advertising can agree to a settlement with the FTC by signing a consent order, which is an agreement to stop the practice or advertising in question. This agreement is for settlement purposes only and does not constitute an admission of guilt by the advertiser. Most FTC inquiries are settled by

consent orders. If the advertiser chooses not to sign the consent decree, a hearing can be requested before an administrative law judge. The judge‘s decision can be appealed to the full five-member commission by either side. If the commission upholds the complaint, the advertiser can appeal the case to the federal courts. Since the appeal process may take some time, the FTC has the power to issue a cease-and-desist order requiring the advertiser to stop the specified advertising claim until a hearing is held. Violation of a cease and desist order is punishable by a fine of up to $10,000 a day. Figure 20-5 summarizes the FTC complaint procedure. 37. Corrective advertising—A problem may exist even if an advertiser ceases using a false or deceptive advertisement since consumers may still retain some or all of the deceptive claim in memory. To address this problem of residual effects of prior deceptive advertising, the FTC developed a program in the 1970s known as corrective advertising. Under this program, an advertiser found guilty of deceptive advertising can be required to run additional advertising (corrective ads) designed to remedy the deception or misinformation contained in previous ads. Corrective advertising is probably the most controversial of all the FTC programs as advertisers have argued that it infringes on First Amendment rights of free speech. The effectiveness of corrective advertising campaigns has also been questioned, as has the FTC‘s involvement in specifying the content of corrective messages. The text discusses the landmark corrective advertising case involving Listerine mouthwash and another case involving Campbell Soup. While the FTC‘s authority to order corrective advertising has been challenged in several cases, its right to do so has been upheld by appellate courts. Developments in Federal Regulation by the FTC—Over the past decade, the FTC has focused its attention on the enforcement of existing regulations, particularly in areas such as telemarketing and Internet privacy. The FTC also has focused on eliminating false e-mail advertising and has stepped up its enforcement against senders of deceptive or misleading claims via e-mail. The commission also scrutinized the use of testimonial ads more carefully, particularly with respect to the use of a ―results not typical‖ disclosure in situations where the outcomes are more likely to vary substantially than be typical for most consumers. The FTC has been active in bringing enforcement action against deceptive health claims as well as companies and principals in the mortgage lending industry for deceptive and unfair practices in servicing mortgage loans. The FTC has also become more involved in the area of environmental marketing and the use of ―green‖ claims for carbon offset, landfill reduction, and sustainable packaging. Another area where the FTC has recently been active is deceptive practices involving for-profit universities. In 2021, the FTC began sending nearly $50 million in refunds to students attending the for-profit University of Phoenix as part of a record $191 million settlement. The FTC is also focusing attention on protecting consumers‘ online privacy and the collection of sensitive information, particularly for those using social media platforms such as Facebook, Instagram, TikTok, Twitter, and Snapchat. The commission will continue to be the primary regulator of advertising and marketing practices in the United States, although the direction of the FTC is likely to be influenced by the political party of the presidential administration. Additional Federal Regulatory Agencies. The Federal Communications Commission—The FCC has jurisdiction over the radio, television, telephone, and telegraph industries. Its authority over the airways gives it the power to control advertising content and to restrict what products and services can be advertised on radio and television. It can also eliminate obscene and profane programs and/or messages and those it finds in poor taste. The FCC generally works closely with the FTC in the regulation of advertising. For example, the FCC and FTC have been investigating the advertising of long-distance phone services, as they are concerned that many of these ads deceive 1-343 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

consumers. In recent years, the FCC has become very active in enforcing laws governing the airing of obscene, indecent and profane material. For example, in 2004 the FCC levied fines against shock-jock Howard Stern for indecent content and Clear Channel Communications, which carried his syndicated radio show. The FCC has also become involved in issues affecting the area of publicity and public relations such as making sure that broadcasters screen news releases to ensure that they clearly disclose the nature, source, and sponsorship of material. The crackdown is designed to address a marketing practice whereby promotional videos sent to TV stations are represented as news stories. The FCC is also currently considering the regulation of the use of product placements in television shows. Unlike some countries, the United States does not prohibit product placements in the broadcast or motion picture industries. Some are calling on the FCC to require the TV networks to disclose product placements by using some form of onscreen notification system. The Food and Drug Administration—Now under the jurisdiction of the Department of Health and Human Services, the FDA has authority over the labeling, packaging, branding, ingredient listing, and advertising of packaged foods and drug products. The FDA has limited authority over nutritional claims made in food advertising and can set rules for promoting food and drug advertising. In 1996, President Clinton signed an executive order declaring that nicotine is an addictive drug giving the FDA broad jurisdiction to regulate cigarettes and smokeless tobacco. However, the U.S. Supreme Court ruled in March 2000 that the FDA has no power to regulate the manufacture and sale of cigarettes. This decision blocked the FDA rules that would have restricted tobacco advertising from taking effect. However, in 2009 Congress passed a tobacco-control bill giving the FDA sweeping new powers over the packaging, manufacturing, and marketing of tobacco products. The Family Smoking Prevention and Tobacco Control Act was signed into by President Obama and imposes many restrictions on the advertising and promotion of tobacco products, as discussed in the chapter. The American Legacy Foundation was established as part of the Master Settlement Agreement with the charge to reduce tobacco use. The A L F has developed a number of successful programs such as the Truth® campaign that was launched in 2000 to reduce smoking among youth. In 2016, the Food and Drug Administration was given the authority to regulate electronic cigarettes (ecigarettes) as well as other tobacco products. Another area where the FDA has become more involved includes the advertising of prescription drugs with some groups calling for a total ban on direct-to-consumer advertising. Additionally, cannabis or marijuana advertising also now falls under the jurisdiction of the FDA. The U.S. Postal Service—The U.S. mail is a major advertising medium, as a large number of marketers use the mail to deliver advertising and promotional messages. The U.S. Postal Service has control over advertising involving the use of mail and ads involved with lotteries, fraud, and obscenity regulations. The regulation against fraudulent use of the mail has been used to control deceptive advertising by numerous direct-response advertisers. Bureau of Alcohol, Tobacco, Firearms and Explosives—The ATF is an agency within the Treasury Department that enforces laws, develops regulations, is responsible for tax collection in the liquor industry, and regulates and controls the advertising of alcoholic beverages. This agency is also responsible for including warning labels on alcohol advertising and banning the use of active athletes in beer commercials. The advertising of alcoholic beverages has become a very controversial issue, with many consumer and public interest groups calling for a total ban on the advertising of beer, wine, and liquor. The Lanham Act—While most advertisers have relied on self-regulatory mechanisms and the FTC to deal with the problem of deceptive or misleading advertising by their competitors, many companies are becoming more active in filing lawsuits against competitors who they feel are making false

claims under the Lanham Act. This act, which was originally written in 1947 as the Lanham Trade-Mark Act, was amended to encompass false advertising and provides individual advertisers with the opportunity to file a civil suit against a competitor. Many companies are using the Lanham Act to sue competitors for their advertising claims, particularly since comparative advertising has become so common. The Trademark Law Revision Act of 1988 closed some loopholes in the Lanham Act and has made it even easier to sue competitors for making false advertising claims. Under the Lanham Act you are required to prove five elements to win a false advertising lawsuit containing a comparative claim. You must prove that: 

False statements have been made about the advertiser‘s product or your product.



The ads actually deceived or had the tendency to deceive a substantial segment of the audience.



The deception was ―material‖ or meaningful and is likely to influence purchasing decisions.



The falsely advertised products or services are sold in interstate commerce.



You have been or likely will be injured as a result of the false statements, by either loss of sales or loss of goodwill.

Professor Notes:

IV.

STATE REGULATION

In addition to the various federal rules and regulations, advertisers must also concern themselves with numerous state and local controls over advertising. For many years, state regulation of advertising was based on the Printers’ Ink model statutes. Many states have since modified the original statutes and adopted laws similar to those of the Federal Trade Commission Act that serve as a basis for false and misleading advertising. As the federal government became less involved in the regulation of advertising during the 1980s, many state attorneys general began to enforce state laws regarding false or deceptive advertising. The National Association of Attorneys General (NAAG) moved against a number of national advertisers because of inactivity by the FTC during the Reagan administration. The foray of the NAAG into the regulation of national advertising raised the issue of whether states working together can create and implement uniform national advertising standards that supersede federal authority. However, the American Bar Association panel that examined the FTC concluded that the Federal Trade Commission is the proper regulator of national advertising and recommended that the state attorneys focus their attention on practices that harm consumers in a single state. It remains to be seen how the NAAG will proceed and fare in its efforts to regulate national advertising. However, it has become evident that states will become involved in the policing of national, as well as local, advertising. Advertisers are concerned over this trend toward increased regulation of advertising at the state and local levels, as they do not want to have to modify

national advertising campaigns to comply with regulations of individual states. While the FTC recognizes the need for greater cooperation with the states, the agency believes regulation of national advertising should be its responsibility. Professor Notes:

REGULATION OF OTHER PROMOTIONAL AREAS

Sales Promotion—Both consumer- and trade-oriented promotions are subject to various regulations. The FTC regulates many areas of sales promotion through the Marketing Practices Division of the Bureau of Consumer Protection. The state attorney general offices and local regulatory agencies police many promotional practices. Various aspects of trade promotion, such as allowances, are regulated by the Robinson-Patman Act, which gives the FTC broad powers to control discriminatory pricing practices. Specific sales promotion tools that are subject to regulations include: 38. Contest and sweepstakes—Marketers must be careful to ensure that their contest or sweepstakes is not classified as a lottery, which is considered a form of gambling. A second important requirement is that the marketer must provide full disclosure of the promotion regarding issues such as the number of prizes to be awarded, odds of winning, duration and dates of termination, and availability of lists of prize winners. Many marketers are now using the Internet and social media sites to run their contests and sweepstakes. This is creating additional issues that marketers must consider, such as whether automated or repetitive electronic submissions will be accepted, content of submissions, and online data privacy laws if the promotion is being marketing using e-mail. Marketers that post audio/visual entries on YouTube or feature a contest on Facebook, Instagram, or Twitter must comply with each site‘s guidelines for on-site promotions. 39. Premiums—Marketers must make a fair representation of the value of a premium offer. Marketers must also be careful in the use of premium offers for special audiences such as children. The Children‘s Advertising Review Unit has voluntary guidelines concerning the use of premium stating that advertising promoting a premium must emphasize the product rather than the premium offer. 40. Trade allowances—Marketers using various types of trade allowances must be careful not to violate any stipulations of the Robinson-Patman Act, which prohibits any form of price discrimination. Certain sections of the Robinson-Patman Act prohibit a manufacturer from granting wholesalers and retailers various types of promotional allowances unless they are made available to all customers on proportionally equal terms. The Robinson-Patman Act also regulates vertical cooperative advertising. 41. Direct marketing—The Federal Trade Commission enforces laws in a number of areas that relate to direct marketing including mail-order offers, the use of 900 telephone numbers, and

direct-response television advertising. In addition to the FTC, the United States Postal Service enforces laws dealing with the use of the mail to deliver advertising and promotional messages or receive payments and orders that have been delivered by other means such as print or broadcast advertising. Both the FTC and Postal Service police direct-response advertising very closely to ensure that the ads are not deceptive or misleading or misrepresent the product or service being marketed. Laws also forbid mailing unordered merchandise to consumers and rules govern the use of negative option plans whereby a company proposes to send merchandise to consumers and expects payment unless the consumer sends a notice of rejection or cancellation. The FTC also has rules requiring that direct marketers promptly ship merchandise. Another area of direct marketing facing increased regulation is telemarketing. With the passage of the Telephone Consumer Protection Act of 1991, marketers who use telephones to contact consumers must follow a complex set of rules developed by the Federal Communications Commission. Under these rules, telemarketers are required to maintain an in-house list of residential telephone subscribers who do not want to be called and consumers who continue to receive unsolicited calls can sue for damages. This law also applies to personal cell phone numbers. In 2003 Congress approved the FTC‘s proposal for a National Do Not Call Registry under which consumers can sign up to be put on a list that will bar them from receiving calls from telemarketers. The National Do Not Call Registry has withstood several legal challenges by the direct marketing industry and in 2005, the FTC, FCC and individual states began enforcing it. Companies can be fined $11,000 for each call that violates the FTC provisions. The National Do Not Call Registry contains nearly 250 million phone numbers. The direct-marketing industry is also scrutinized by various self-regulatory groups such as the Direct Marketing Association and the Direct Selling Association that have specific guidelines and standards firms are expected to adhere to and abide by. However, many critics argue that these groups are not doing enough to keep consumers from receiving unwanted marketing messages, such as calls from telemarketers and direct-mail offers and solicitations. Direct mail has also been under attack as many consumers are tired of seeing their mailboxes bulging with catalogs as well as other forms of direct mail and want to take action. Some states have considered legislation that would create state-run do-not-mail registries that would allow consumers to keep unsolicited direct mail out of their mailboxes. Marketing on the Internet—Two major areas of concern with regard to marketing on the Internet are privacy and security issues and online marketing to children. 42. Privacy and Security—Consumer privacy and security have become major issues among government regulators as a result of high profile data breaches and concerns over the collection and use of consumer data for marketing purposes. The major privacy issue regarding the Internet that has emerged involves undisclosed profiling whereby online marketers can profile a user on the basis of name, address, demographics, and online/offline purchasing data. Marketers argue that profiling offers them an opportunity to target specific niches and reach consumers with custom-tailored messages. However, the FTC has stated that Internet sites that claim they don‘t collect information but permit advertisers to surreptitiously profile viewer sites are violating consumer protection laws and are open to a charge of deception. Companies that collect Internet usage data and information have joined together under the banner of the Network Advertising Initiative and developed a selfregulatory code that requires websites to disclose their use of ad servers and permit consumers to opt out of data collection that could be used for profiling. Consumer privacy 1-347 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

and security have become major issues with the FTC in recent years. The agency has requested that marketers voluntarily step up the disclosures they make about data they collect and seek permission from consumers before tracking their Internet surfing behavior. Many marketers now adhere to the Digital Alliance Ad Choices program, which is a self-regulatory initiative that was implemented by BBB National Programs as part of its Digital Advertising Accountability Program. However, critics argue that the program only blocks behavioral ad targeting, rather than stopping behavioral data collection. There continues to be calls for the FTC to oversee the development of a Do Not Track program that would prohibit websites or mobile app operators from compiling or disclosing personal data to third parties for targeted marketing purposes. Digital and Social Media Perspective 20-1 discusses how the European Union is addressing privacy and data protection with the passage of the General Data Protection Regulation (GDPR) and how efforts are under way in California and other states to address the problem with similar regulations. 43. Online Marketing to Children—One of the biggest concerns regarding the Internet is how to restrict marketers whose activities or websites are targeted at children. Concerns over online marketing to children led to the passage of the Children’s Online Privacy Protection Act of 1998, which the FTC began enforcing in April 2000. This law requires posted privacy policies and verifiable parental consent before marketers can collect personally identifiable information from children, such as names and email addresses. As of July 1, 2013, the FTC began enforcing updates to the COPPA to bring the law in line with changes that have occurred in the market including the growth of mobile device usage among children and the data collections that goes along with it. An FTC investigation brought against YouTube in 2019 regarding the violation of children‘s privacy is discussed in this section of the chapter. The complaint filed against them could require YouTube to change its practices to better protect children and is also seen as a signal that the FTC plans to step up its enforcement of the child-privacy law. Another company fined for a COPPA violation was Epic Games Inc., developer of Fortnite, one of the world‘s most popular video games. In late 2022, the company agreed to pay $520 million to resolve FTC allegations that it violated the COPPA by collecting personal information from Fortnite players under the age of 13 without notifying their parents or obtaining verifiable parental consent. 44. Online Endorsements and Native Ads—The FTC has also taken action to address the issue of endorsements made through social media sites and blogs. In 2009, the agency passed a new set of guidelines for online endorsements that require online endorsers and bloggers to disclose any material connection to an advertiser. Under the new guidelines, paid endorsers who post on social media sites such as Facebook, or post product reviews on e-commerce sites such as Amazon, can be held liable if they do not identify themselves as such. The guidelines were updated in 2013 and 2015, and discuss requirements related to proximity, prominence, and multimedia. The new FTC guidelines and updates require that marketers, as well as their advertising agencies and third-party networks, clearly understand how they can use endorsers and to make sure that they are in compliance with the rules and regulations. The FTC provides a simple mnemonic for marketers it calls M.M.M.: mandate a disclosure policy that complies with the law, make sure people who work for you or with you know what the rules are, and monitor what they are doing on your behalf. 45. Native Ads—Another aspect of online marketing where the FTC has become involved is native advertising, which refers to online ads that are similar in format and topic to content on the publisher‘s website. In late 2015 the FTC published its long-awaited guidelines for native advertising: a major goal of the guidelines is to ensure that there are no misleading representations or omissions about an online advertisement‘s true nature or source. The 1-348 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

guidelines state that when labels such as ―advertisement‖ are necessary, they need to be prominent on first contact with consumers, and disclosures should appear near a native ad. They also emphasize the need to disclose that native content is an ad before the consumer clicks on it and note that labels such as ―sponsored content‖ or ―presented by‖ may not be sufficient to avoid misleading consumers regarding the intention of the content. 46. Spamming—Another Internet related area receiving regulatory attention is spamming, which is when a marketer sends unsolicited multiple commercial electronic messages to consumers. A number of states have enacted anti-spamming legislation and a federal antispam bill (CANSPAM) act went into effect on January 1, 2004. While the CAN-SPAM Act carries severe penalties for violators, thus far it has done little to stop unsolicited e-mail messages. Professor Notes:

Teaching Suggestions Regulatory factors are a major concern for marketers and consideration should be given to the various laws, rules and regulations that can constrain and restrict advertising and other forms of promotion. While students may have some knowledge of the area of advertising regulation, it is unlikely that they will understand the extent to which advertisers must deal with regulatory concerns from various governmental agencies or self-regulation by various business, advertising, and media organizations. For example, the chapter opener discusses issues involving celebrity endorsements using online platforms. The guidelines indicate that marketers using digital media are subject to the same truthful advertising laws that other forms of advertising always have been. One of the goals of the FTC has been to clarify or establish when someone promoting a product on a social media platform or a review site such as Amazon or Yelp becomes an endorser. It is also important to discuss the Federal Trade Commission and the changes that have occurred in its power and role over the past decade. You might refer student to the Advertising SelfRegulatory Council website, (now a part of the BBB National Programs, Inc.), which can be found at www.asrcreviews.org and contains information on the ASRC‘s various self-regulatory programs.

Several of the landmark cases supporting protection of advertising as a form of commercial speech under the First Amendment are covered in this chapter. You may also find it helpful to research some of the important cases involving advertising regulation in more detail and discuss them in class. These include some of the older and well-known deceptive advertising cases such as Profile Bread, Ocean Spray Cranberry Juice, STP, and Listerine. There is an excellent article in the October 17, 1994 issue of Advertising Age on the landmark legal battle between Campbell Soup Co. and the FTC that was the impetus for the FTC program on corrective advertising. An interesting area for discussion is just how involved the government and FTC should be in the regulation of advertising and whether programs such as advertising substantiation or corrective advertising are necessary. Attention should also be given to discussing the Lanham Act, which has become a significant development in the area of advertising regulation. Competitors are now suing one another under this act rather than just complaining to the 1-349 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

NAD/NARB or the FTC. An excellent article on the Lanham Act and its implications for advertising is ―Us vs. Them: The Minefield of Comparative Ads,‖ by Bruce Buchanan and Doron Goldman, Harvard Business Review, May/June 1989, pp. 38–50. Attention should also be given to legal developments affecting other IMC tools such as direct marketing, sales promotion, and the Internet. For example, in February 2003, Congress approved the FTC‘s proposal for the formation of a National Do Not Call Registry and this program is now in effect. Direct marketing groups such as the Direct Marketing Association have filed several lawsuits against the FTC registry. However, thus far, the courts have upheld the registry‘s validity and it has reduced the number of households to which telemarketers can make phone calls. We suggest that you stay abreast of developments concerning the status of the Do Not Call Registry by referring to publications such as Advertising Age or going to the DMA website at https://thedma.org.

Answers to Discussion Questions 172. The chapter opener discusses how Kim Kardashian was fined $2.6 million by the Securities and Exchange Commission (SEC) for promoting a cryptocurrency on Instagram. Discuss why she was fined by the SEC and why she agreed to settle the case and pay the fine rather than challenging it. (LO 20-1, 20-5) In June 2021, at the height of the cryptocurrency craze, Kim Kardashian posted a message on Instagram promoting Ethereum Max (EMAX), a brand-new token. The post also included instructions for potential investors to access the EMAX website where they could purchase the tokens. It turns out that EMAX had paid her $250,000 to promote the tokens. The U.S. Securities and Exchange Commission (SEC), the government agency charged with regulating the securities and investments market and protecting the investing public, decided that Kardashian did a little too much influencing when it came to EMAX. Even though Kardashian had labeled her Instagram post as an ―ad,‖ it wasn‘t enough to satisfy the government regulators. After a year-long investigation, the SEC ruled that Kardashian had failed to disclose how much she was paid for the post promoting EMAX tokens and fined her $1.26 million to settle the charges. She also agreed not to promote any cryptocurrency assets for three years. The settlement helped her avoid a much more public and intrusive process that might have involved a deposition and document collection. What got Kim Kardashian in trouble with the SEC is that she included only the hashtag ―#Ad‖ at the bottom of the post and did not include a more detailed disclosure mentioning how much she was paid. While celebrities and influencers have long used disclosures like ―#Ad‖ on Instagram, Facebook, and other social media sites to tell their followers that a post is sponsored or paid for, the disclosure requirements for promoting cryptocurrencies and tokens, which are considered securities by the SEC, are stricter. Investors are entitled to know whether the publicity for a security is unbiased, and Kardashian failed to disclose the information. Making investment decisions based on the advice of a celebrity is probably not a good idea. 173. Discuss the need for regulation of advertising and other IMC tools. Do you advocate more or less regulation of advertising and other forms of promotion by governmental agencies such as the Federal Trade Commission and the Food and Drug Administration? (LO 20-1, 20-3, 20-4) There is a need for regulation of advertising and other IMC tools as consumers rely on the information provided by marketers to make consumption decisions. If this information is false and/or misleads the consumer then, the advertising and other forms of promotion are not fulfilling this basic

function. Consumers also have a right to know that the claims made in advertising and other forms of promotion such as the efficacy, performance, quality or safety of a product can be supported by the companies that make them. They also should be aware of any consequences, conditions, and/or limitations associated with the use of a product or service. While most marketers are honest and truthful in their advertising and promotion messages, there are still many who use deceptive messages to persuade consumers to purchase their product or service. Thus, there is a need for governmental agencies such as the FTC and FDA to become involved in the regulation of advertising to ensure that consumers are receiving accurate and truthful information and can make informed choices. Opponents of government regulation argue that the advertising industry does a very good job of regulating itself through voluntary self-regulation. They also note that legislation such as the Lanham Act serves as a deterrent to companies who might engage in deceptive advertising as they can be sued by competitors for doing so. While self-regulation of advertising and promotion has been effective, it is unrealistic to think that it is sufficient for regulating this complex industry. Thus, regulation by government agencies is necessary to protect consumers and to ensure that they are receiving truthful and accurate information upon which they can base their purchase decisions and choose among the myriad of brands available in most product/service categories. 174. Discuss the role the BBB National Programs, Inc. plays in the self-regulation of advertising and other forms of marketing communication. Evaluate the arguments for and against voluntary self-regulation as an effective way of protecting consumers from misleading or deceptive advertising and other marketing practices. (LO 20-2) The Advertising Self-Regulatory Council (formerly known as the National Advertising Review Council) was formed by the three leading advertising industry associations—the American Association of Advertising Agencies, American Advertising Federation, and the Association of National Advertisers—along with the Council of Better Business Bureaus to sustain high standards of truth, accuracy, and social responsibility in national advertising. In 2009, the CEOs of three other major marketing associations—the Direct Marketing Association, Electronic Retailing Association, and the Interactive Advertising Bureau—joined the N A R C Board of Directors. For many years, the advertising industry, business community, and the media have promoted the use of voluntary selfregulation as a means of regulating and controlling advertising. These organizations recognize the importance of maintaining consumer trust and confidence and for advertising to be perceived as truthful and non-offensive. It can be argued that self-regulation has resulted in advertising standards and practices higher than those imposed by law. On the other hand, critics of self-regulation argue that it is self-serving to the advertisers and advertising industry as groups such as the NAD/NARB lack the power and authority to properly regulate and control advertising. These agencies do not have the staff or budget to investigate cases and it takes them too long to resolve them. The incentive for advertisers to cooperate with self-regulatory bodies is based on several factors. First, it is in the best interest of all advertisers to maintain consumer trust and interest in advertising. Peer group pressure and sanctions may also provide an incentive to cooperate with self-regulation. Finally, most advertisers view self-regulation as preferable to government interference and control over advertising as the latter may result in more stringent and troublesome regulations. In 2015, an American Bar Association working group released a report that reviewed and suggested improvements to the advertising industry‘s self-regulatory system. The ABA report concluded that that current system administered by the NAD works well but did find areas needing improvement. 175. Do you agree with the DISCUS argument that advertising for hard liquor should be treated the same as advertising for beer and wine? Should advertising for spirits be confined to late night programs on the networks or should the ads be permitted to run earlier in the evening as well as during major sporting events such as National Football League (NFL) games? (LO 20-2)

The decision by the Distilled Spirits Council of the United States (DISCUS) to overturn the selfimposed ban on broadcast advertising has been very controversial. DISCUS has argued that marketers of distilled spirits want to break down the public perception that spirits are stronger or more dangerous than beer and wine and thus deserving of harsher social and political treatment. The vicepresident for marketing and strategy at Seagram, the company that actually ended industry‘s ban by airing an ad for Crown Royal Canadian whiskey, has argued that distilled spirits should have the same access to broadcast media as beer and wine. He noted that ―the average consumer talks about liquor as being hard…so therefore liquor has to have sort of specialness or evilness about it.‖ The distilled spirits companies argue that the alcohol content of standard drinks of beer, wine, or distilled spirits (either straight or in a mixed drink) are equivalent. It should be noted that the Federal Trade Commission argues that there is no basis for treating liquor ads differently than advertising for other types of alcohol. It is likely that distilled spirits are at a competitive disadvantage to beer and wine if marketers of the products cannot advertise on television. This is particularly true in today‘s media environment as narrowcasting is now possible through television, which means distilled spirits marketers can target their advertising to specific segments of the adult population. Moreover, image advertising is very common in the marketing of alcoholic beverages and television is an excellent medium for creating brand images. However, critics argue that television advertising provides marketers with a very effective way to advertise hard liquor and will encourage young people to drink. They also argue that allowing ads for hard liquor on network television shows, particularly during prime time, will result in many young people under the legal drinking age of 21 seeing them, which may encourage them to drink. However, limiting ads for hard liquor to late night programs will reduce the likelihood that young people will view them. It is likely that the level of advertising for hard liquor will continue to increase on cable networks and local affiliates of the four major networks. However, it is still in the best interest of the four major networks to refrain from accepting commercials for hard liquor during prime time shows. Accepting hard liquor ads will lead to more controversy and increase the likelihood that public advocacy groups such as MADD and the Center for Science in the Public Interest will step up their efforts to ban all alcohol advertising from television and radio. This issue can be the basis for an interesting class discussion, as you should ask students to discuss whether they are influenced by advertising for alcoholic beverages and if they think advertising for hard liquor should be viewed differently than beer or wine. 176. The chapter discusses how Volkswagen was fined for making advertising claims that its diesel cars were low emission, environmentally friendly and met government emission standards. The Federal Trade Commission argued the claims were false and misleading and could not be substantiated. Evaluate the claims made by Volkswagen from a deceptive advertising perspective. Why do you think the company agreed to pay large sums of money to settle the FTC allegations rather than appealing them? (LO 20-1, 20-2) In a major case involving inadequate advertising substantiation, the FTC took action against Volkswagen Group of America in 2016 charging that the company's ―clean diesel‖ advertising campaign was deceptive. The U.S. Environmental Protection Agency discovered that special software installed in Volkswagen diesel-powered vehicles was designed to defeat emissions testing, making the cars seem far cleaner and safer for the environment than they actually were as the cars were emitting up to 40 times more toxic fumes than permitted. In its complaint, the FTC alleges that during a seven-year period, Volkswagen deceived consumers by selling or leasing more than 550,000 diesel cars based on false claims that the cars were low-emission, environmentally friendly, met emissions standards, and would maintain a high resale value. The FTC sought a court order requiring Volkswagen to compensate consumers who bought or leased any of the affected vehicles between late

2008 and late 2015, as well as an injunction to prevent Volkswagen from engaging in this type of conduct again. The deceptive advertising done by Volkswagen has cost the company more than $15 billion thus far. In October 2016, a U.S. district court approved a $14.7 billion settlement requiring Volkswagen to mail notifications to all current affected owners and lessees of their diesel 2.0-liter cars informing them of a $10 billion buyback program. This settlement was in addition to the estimated $25 billion in fines, penalties, and restitution the company has had to pay the U.S. government and consumers in connection with the case. Volkswagen ended up offering full compensation packages to the nearly 600,000 Volkswagen owners in the U.S. affected by their deception. While they hoped the settlement would make the case go away, the controversy greatly damaged Volkswagen‘s image in the U.S. market. It may take years for the company to fully rebuild credibility and trust among consumers. 177. Find several examples of advertising claims or slogans based on puffery rather than substantiated claims. Discuss whether these advertising claims can be defended on the basis of puffery. (LO 20-3) Puffery has been defined as ―advertising or other sales presentations which praise the item to be sold with subjective opinions, superlatives, or exaggerations, vaguely and generally, stating no specific facts.‖ For example, POM Wonderful advertises its juices as ―Crazy Healthy,‖ Nestle claims that it ―makes the very best chocolate,‖ and Bayer aspirin calls itself the ―wonder drug that works wonders.‖ The use of puffery is very common, and students should be asked to find additional examples of ads that use puffery and evaluate them. They should have no problem finding ads in magazines or on television that use puffery. Defenders of puffery argue that it represents a form of ―poetic license‖ or allowable exaggeration and does no harm as consumers can recognize it and do not really believe the claims. However, critics of puffery argue that consumers cannot distinguish between puffery and verifiable, fact-based claims. Preston argues that puffery burdens consumers with untrue beliefs and has a negative effect on their purchase decisions. The argument over puffery concerns how much latitude advertisers should be given for use of superlatives and subjective claims. One could take the position that puffery may make advertising more interesting; however, it may also have the capacity to mislead consumers. 178. Ethical Perspective 20-1 discusses the significant increase in the number of false advertising cases involving food and beverage products in recent years. What are some of the reasons for this increase? Do you think the large number of class-action lawsuits being filed against food and beverage companies is justified? (LO 20-2) Food and beverage companies spend millions of dollars on advertising every year to promote their brands and differentiate them from competitors. Many of the ads rely on puffery or claims based on superlatives and subjective terms such as delicious, best, healthy, or nutritious. Despite efforts of the FTC and FDA to regulate the advertising of food and beverage products, there has been a tremendous increase in the number of lawsuits brought against marketers over the past decade. Class-action litigation against food and beverage companies hit a record high in 2020 with 220 lawsuits filed compared to only 45 in 2010. Consumer advocates argue that a major reason for the increase in lawsuits is that federal regulators have made little progress in providing definitions and clarifying what terms such as ―healthy,‖ ―all natural,‖ or ―artificially flavored‖ really mean. They also argue that for a number of years the FTC and FDA have been lax in addressing the problem of exaggerated food and beverage marketing claims. Many are calling for an overhaul of not only advertising, but front-of-package food labeling through a standardized system of symbols to convey

whether a product is truly healthy. A bill was introduced in Congress in late 2021 that would address the problem and also direct federal regulators to specifically define terms like healthy and natural. However, opposition from food and beverage lobbyists has made its passage in a narrowly divided Congress very difficult. While lawsuits regarding health-related claims are prevalent, food companies are also being challenged for touting their environmental actions and sustainability of their products in their advertising and labeling. Several lawsuits have alleged that companies ―greenwash‖ their products for consumers by claiming them to be environmentally friendly in describing their farming processes and other practices. Another area with a large number of false advertising cases involves vanilla flavoring. A number of lawsuits have alleged that products labeled and advertised as ―vanilla‖ contain flavoring ingredients that do not come from vanilla beans or vanilla extract. Artificial flavoring has also been an issue for a number of other food and beverage products, including against Frito-Lay North America for Tostitos ―hint of lime‖ chips (which are artificially flavored), and Kroger‘s sparkling water products labeled with misleading (artificially produced) flavors such as ―Black Cherry,‖ ―White Grape,‖ and ―Kiwi Strawberry.‖ Consumer advocates argue that much of this litigation could be avoided through more stringent federal oversight of food marketing claims by the FTC and FDA. They say that without official FDA guidance, industry confusion and consumer class action lawsuits are likely to continue. In the interim, many view legal activism as the most effective way to hold food and beverage companies accountable for questionable advertising and labeling claims. However, critics also note that many class action suits brought against food and beverage companies are dubious and in some cases border on extortion as the plaintiffs are looking for settlements that include monetary compensation, much of which goes to the attorneys rather than the class of consumers. Examples include lawsuits against Ben & Jerry‘s for describing the cows that provide the milk for their ice cream as ―happy,‖ and against Kraft Heinz accusing the company of misleading advertising, based on the time it takes to prepare a single-serving cup of its Velveeta microwavable macaroni and cheese. While Kraft Heinz markets the product as being ready in 3½ minutes, the plaintiff argues that this is only the amount of time each cup needs to be microwaved and the actual preparation process, from stirring in water to letting the cheese sauce thicken, takes longer. It is difficult to determine where the line between accuracy in advertising and false or misleading claims actually lies. 179. Discuss the regulations governing the advertising and promotion of cannabis or marijuana in the United States and the challenges they present for marketers of cannabis products. Do you think the government should loosen the restrictions on how cannabis can be advertised? Defend your position. (LO 20-3, 20-4) The regulation of cannabis or marijuana falls under the jurisdiction of the Food and Drug Administration (FDA). While marijuana is legal for medicinal purposes in 33 states, as well as recreational use in 11 states, the FDA still classifies it as a dangerous drug. The marketing for marijuana falls under the Food, Drug and Cosmetic Act. Once a state legalizes medicinal and/ or recreational use of marijuana, state regulators must decide how dispensaries and retailers can market their product to consumers. Regulations can affect everything from store signage, the content of advertisements, permissible locations and platforms for ads, and required disclosures. Some of the states that have legalized marijuana have regulations that cover all of these areas while there are others that have not addressed advertising of the product at all. Further, some states model their advertising regulations on similar products such as alcohol, whereas others have decided to treat 1-354 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

marijuana advertising uniquely. There is not much conformity between states with respect to marijuana advertising regulation, which may be due, in part, to the continuing conflict between state and federal law relating to legalization. Most social media platforms do not allow for the promotion of drugs, including marijuana. Another challenge facing marketers is that there is still a stigma associated with marijuana because users are often perceived as ―stoners‖ who are lazy, unproductive, and even criminal. It appears that if the majority of states in the U.S. have made marijuana legal for use for medicinal purposes, the FDA should likely do away with its classification of marijuana as a dangerous drug. Once it does this, it is likely that remaining states will make it legal for medicinal consumption. The FDA should then establish uniform legislation for the regulation of cannabis advertising. If advertisers are left to their own devices in some areas of the country, it could lead to problems similar to those experienced in the early days of alcohol and tobacco advertising. 180. What are some of the regulatory issues marketers must take into consideration in using sales promotion and direct marketing as part of their IMC programs? (LO 20-4) Many marketers are now developing contests, sweepstakes, and other types of promotions that are implemented online over on their websites or social media pages. There are a number of issues that must be considered regarding a marketer‘s own rules that govern the promotion, such as whether automated or repetitive electronic entries will be accepted, how the contest or sweepstakes website will detect violations and restrictions on length, size, or format of content submitted. If the promotion is marketed using e-mail, marketers must comply with the CAN-SPAM Act. If the online entry form collects personal information from persons under the age of 13, marketers must comply with the Children‘s Online Privacy Protection Act. Marketers using promotions on social media platforms must comply with each site‘s guidelines for online promotions. For contests that involve user-generated content such as photos, videos, or short stories, the rules must contain specific language granting the company the necessary rights to use the content. Some social media sites also have their own restrictions on how marketers can conduct contests and sweepstakes on their platforms. 181. Digital & Social Media Perspective 20-1 discusses the GDPR program being used in the European Union and how it may be the basis for privacy regulations in the U.S. Discuss the major issues facing digital marketing and social media platforms such as Google, Facebook, TikTok, and Instagram with regard to privacy. How will impending regulations affect the use of digital marketing by marketers? (LO 20-1, 20-5) Advertising through digital media has surpassed the use of traditional media such as television, radio, and print. One of the primary reasons marketers have shifted their advertising spending to search engines such as Google and Bing as well as display advertising on websites and social media platforms—such as Instagram, TikTok, and Facebook—is the tremendous amount of information they have about their users. To address new issues related to digital marketing, in 2012 the European Commission began developing plans for data protection reform across the European Union (EU). A key component is the introduction of the General Data Protection Regulation (GDPR), which took effect in May 2018 across the 28-nation bloc of EU countries. The new regulations apply to any organization operating within the European Union, as well as any organization outside of the EU, that offers goods and/or services to customers in the EU. This means that nearly every major company in the world needs a GDPR compliance strategy because regulators in the EU can fine companies as much as 4 percent of annual sales for the most serious violations. Some key privacy and data protection requirements of the GDPR include requiring the consent of data subjects when collecting and processing data from them, making collected data anonymous to 1-355 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

protect privacy, providing data breach notification, safely handling the transfer of data across borders, and requiring certain companies to appoint a data-protecting officer to oversee GDPR compliance. Efforts are underway in the United States to develop regulations similar to the broad privacy rules enacted in the European Union. California passed a new law, the California Consumer Privacy Act (CCPA), that went into effect in 2020, and gives the state‘s residents the most sweeping online privacy rights in the nation and also includes some of the most stringent rules for companies. The CCPA gives California the strongest data privacy law in the U.S., providing consumers with the right to know what information companies collect about them online, to get that data deleted, and to opt out of the sale of their personal information. Several other states have passed similar laws regulating privacy that go into effect in 2023. The California Consumer Privacy Act is comprehensive, and likely to be used as a guideline for other states as well as a possible model for national legislation. Several industry trade groups including the Interactive Advertising Bureau (IAB) and Association of National Advertisers (ANA) are urging Congress to create a federal regulatory framework around privacy that will protect consumers and avoid the problem of conflicting and damaging state laws, which would create major challenges for companies. Companies are now taking steps to address the new privacy regulations because they really have no choice but to do so. It is likely that security breaches will continue, even as more strict regulations are enacted. However, technology companies must recognize failure to protect consumers‘ privacy may result in the greatest breach of all—the loss of consumer trust. 182. Evaluate the guidelines now used by the FTC requiring bloggers and social media influencers to disclose any material connection to a company whose product or service they are endorsing. How might this affect companies that use influencers as part of their digital marketing programs? (LO 20-1, 20-5) In 2009, the FTC revised its rules and regulations regarding the use of endorsements and testimonials in advertising for the first time since 1980. One of the goals of the revised guidelines is to clarify what an endorser such as a celebrity or blogger can say about a product or service in a testimonial. The new FTC rules state that celebrity endorsers can be held liable for false statements about a product or service, and all endorsements must include results or outcomes consumers can generally expect from using it. The other major area covered in the revision to the FTC guidelines applies to the use of endorsements and testimonials made online, particularly through social media. The Guides point out that marketers using digital media are subject to the same truthful advertising laws that other forms of advertising always have been. With these new regulations, the FTC has sought to clarify and establish when a blogger or consumer promoting something on social media becomes an endorser of the product. The FTC Guides for endorsements and testimonials state that if there is a ―material connection‖ between the endorser and the seller of the product or service, full disclosure is required. What this basically means is that any time an endorser receives money or something of value, such as free products or services, it must be clearly and conspicuously disclosed when they are discussing or promoting the brand on social media. The FTC Guides also dictate how much disclosure is required and if these rules apply to short-form platforms like Twitter. For companies using influencers, this will require that they know what constitutes an endorsement because they do not always require explicit wording by the endorser stating that they approve of a product or service. Marketers will also need to track how they are creating material connections such as by paying someone, providing them with free products, or offering entries into a sweepstakes or contest. Marketers must also train their employees and monitor the way endorsers are being used. The FTC provides a very helpful and simple mnemonic for marketers it calls M.M.M.: mandate a disclosure policy that complies with the

law, make sure people who work for you or with you know what the rules are, and monitor what they are doing on your behalf.

Additional Discussion Questions (not in text) 183. Discuss the role the media play in the self-regulation of advertising. Do you view selfregulation as an effective way of protecting consumers from offensive or misleading advertising? (LO 20-2) The media are an important self-regulatory mechanism in the advertising industry. Most major media have some type of review process for advertising and can reject ads they find objectionable. Some media exclude ads for an entire product class such as Reader’s Digest’s ban on tobacco and liquor ads. Many magazines and newspapers have standards regarding the type of advertising they will accept. However, these standards vary depending on the nature and size of the publication. Large, established publications may have more stringent standards than those less financially secure and in need of advertising revenue. The major television networks have incorporated many of the provisions of the codes used by the National Association of Broadcasters into their own standards. The networks have the most stringent advertising review process of any media as their standards and practices division reviews all commercials before they can be aired on the network or an affiliate. Commercials that are considered too offensive or potentially misleading are sent back to the advertiser for revision and resubmission. However, most of the cable channels do not have the same standards as the networks and advertisers often will run ads on cable to circumvent the review more stringent requirements of the networks. Media self-regulation plays an important role in protecting consumers from offensive or misleading advertising. However, given the myriad of magazines and newspapers, as well as the increasing number of cable channels, it is possible for advertisers to find a way to reach consumers with their messages. 184. The text discusses the decision by the California Supreme Court in the Nike case to view statements about a company’s labor policies or operations in ads or press releases as commercial, rather than political in nature and thus not subject to First Amendment protection. Do you agree or disagree with this ruling? Discuss how this ruling might affect various forms of integrated marketing communications used by Nike and other companies in California? (LO 20-1) Freedom of speech or expression is the most basic federal law governing advertising in the United States. For many years, freedom of speech protection did not include advertising and other forms of speech that support a commercial transaction. However, the courts have extended First Amendment protection to advertising as a form of commercial speech. There have been a number of landmark cases where the federal courts have issued ruling supporting the coverage of commercial speech such as advertising under the First Amendment. However, the courts have ruled that only truthful commercial speech is protected, not advertising or other forms of promotion that are false, misleading, or deceptive. In the case involving Nike, the California Supreme Court reversed the decisions of two lower courts and ruled that Nike‘s public relations campaign defending its labor policies and working conditions inside its factories in Asia should be considered commercial speech, even though it was not talking specifically about its shoes. The court ruled that corporations know that issues such as labor conditions and policies contribute to the public‘s perception of a company and consumers‘ willingness to buy its products. At issue here is how to distinguish between political and commercial speech. The U.S. Supreme Court has ruled that the First Amendment protects political speech, even when inaccurate. However, this is not true for advertising and other forms of commercial speech used to sell a product or service. Nike has argued that its public relations activities defending its labor

practices and working conditions, which have included the issuing of press releases and writing letters to colleges faced with student activists calling for the boycott of Nike products, are not the same as advertising and cannot be considered commercial in nature. However, the California Supreme Court ruled that if Nike could misrepresent the conditions under which its shoes are made without any punishment through its public relations efforts, then any company could use the First Amendment to make false statements about its products or practices with the intent of increasing sales. It is important to note that the California Supreme Court did not decide whether Nike really was guilty of abusing workers or misleading consumers, leaving these issues for an eventual trial court. The U.S. Supreme Court heard oral arguments and reviewed 34 briefs regarding the case but dismissed it for lack of jurisdiction and sent it back to California for trial. Rather than risk a costly and protracted trial, Nike decided to settle the case and the California Supreme Court decision now stands. Thus, companies doing business in the state run the risk of attracting a lawsuit if their public relation campaigns touch upon their products or operations. The outcome alters the definition of commercial speech and leads to new restrictions on claims that companies can make about their policies, practices, and behavior. Treating press releases, letters, and other public statements defending a company‘s actions as equivalent to advertising could also result in companies being less willing to speak out on important public issues and have a profound impact on their public relations activities. It will be interesting to see if additional cases regarding the PR activities of a company result in lawsuits in California as well as other states. 185. What is meant by advertising substantiation? Should advertisers be required to substantiate their claims before running an ad or only be required to provide documentation only if their advertising claims are challenged? (LO 20-3) Advertising substantiation is a FTC program requiring advertisers to have supporting documentation for their claims and to be able to prove that they are truthful before running their ads. Proponents argue that advertisers should be required to substantiate their claims before running an ad so that they have a reasonable basis for making the claim. Prior substantiation provides consumers with a basis for believing advertising claims such that they can make rational and informed decisions. It also deters companies from making claims that they cannot adequately substantiate. Opponents of prior substantiation argue that it is too expensive to have a company document all of their claims and that most consumers would not be interested in the technical data and evidence used to substantiate them. Requiring formal, prior substantiation might also result in advertisers resorting to puffery rather than making specific performance or efficacy claims. 186. What is corrective advertising? Why do you think corrective advertising is so controversial? Evaluate the arguments for and against corrective advertising? (LO 20-3) Corrective advertising is a Federal Trade Commission program whereby and advertiser found guilty of deceptive advertising can be required to run additional ads designed to remedy the deception resulting from consumer exposure to the previous ads. The purpose of corrective advertising is to remedy the misinformation, incorrect beliefs or perceptions that consumers may have developed as a result of deceptive or misleading advertising. Corrective advertising is also designed to help restore competition to the stage that prevailed before the deceptive advertising occurred. The FTC can determine the extent of corrective advertising effort required of an advertiser by considering the length of time for which the deceptive ads were run and the extent to which the market holds misperceptions or incorrect beliefs because of the deceptive ads. Consumer research may be needed to determine the prevalence of the misperceptions in the market, their impact on purchase behavior, and how strongly these false beliefs are held. Regarding media in which corrective ads should appear, the FTC considers the media the advertiser used in running the deceptive ads and requires that corrective ads be run in these vehicles.

Corrective advertising is very controversial because advertisers view it as a drastic remedy that infringes on First Amendment right of freedom of speech by requiring them to run the corrective messages. They argue that corrective advertising puts the FTC in the business of creating ads when they require particular content in corrective messages. Moreover, the monies that must be spent to run corrective messages comes out of the advertiser‘s media budgets and means they have less funds available for messages promoting their brands. They also question whether corrective messages are effective. 187. A number of states are considering legislation that would create Do Not Mail list registries, which would allow consumers to keep unsolicited direct mail out of their mailboxes. Discuss the arguments for and against legislation that would prohibit marketers from sending direct mail to consumers. (LO 20-4) There are several arguments in favor of legislation that would create Do Not Mail list registries. The typical American household receives nearly 40 pounds of direct mail each year, most of which is unsolicited, never opened and rarely generates a response. The response rate for direct mail solicitations is only about 2 percent, which makes this a very inefficient process. Most consumers also find it very annoying as most of the direct mail offers that consumers receive come from companies they have never bought anything from and/or have no interest in buying from them. Environmental groups argue that the vast amount of direct mail solicitations and catalogs that consumers receive have a major environmental impact as it takes 53 million trees to product the 3.6 million tons of paper in all of the catalogs and direct mail pieces. Advocates of the creation of Do Not Mail registries argue that consumers should have the right to decide if they want to receive catalogs and other types of direct mail rather than have to sift through all of the unwanted solicitations they receive. The creation of Do Not Mail registries is opposed by marketers as well as the Direct Marketing Association, which is the primary trade organization for the direct marketing industry. The DMA argues that there are already provisions available for those consumers who do not want to receive unsolicited direct mail as they can pay $1 and have their name put on Do Not Mail list for three years. They note that the service is supported by the United States Postal Service and has more than 4.5 million subscribers. However, the online service prevents companies from adding a person‘s name to their list but does not stop catalogs and other mail solicitations they are already receiving. The DMA also refutes the environmental impact of direct mail by noting that the trees are planted to replace those cut down for wood and paper products and that Americans can save over 3 billion miles of driving by eliminating trips to retailers and shopping by catalog instead. Finally, the DMA argues that direct mail is important to businesses that rely on it to communicate with consumers and creates nearly $700 billion in economic activity annually. Thus, there would be a major economic impact if Do Not Mail legislation were to be enacted. 188. The chapter discusses the controversy surrounding the direct-to-consumer (DTC) advertising of prescription drugs. Evaluate the arguments both for and against pharmaceutical companies being allowed to advertise their drug products directly to consumers. (LO 20-3) In 1997, the Food and Drug Administration (FDA) issued new guidelines making it easier for pharmaceutical companies to advertise their prescription drugs directly to consumers. Reasons given for easing the restrictions are that increased advertising will help educate consumers by providing them with more information about their options and encourage people to see doctors about medications who might not have done so otherwise. However, physician, consumer, and health groups have questioned whether some of the ads are accurate and inform consumers of the risks associated with taking these drugs and have raised concern over the increase in drug advertising. Consumer groups have asked the FDA to enforce the ―fair balance‖ provision that requires drug ads to give both the benefits and risks of taking a medication. Critics argue that much of the advertising

done by pharmaceutical companies only shows the benefits of taking a drug and that the disclaimers and cautionary voiceovers are not sufficient in getting consumers to research the potential side effects associated with many drugs. Insurance companies and employers who pay for medical coverage of their employees have also raised concern over the increase in prescription drug advertising. They argue that the ads will drive up the costs of health care since advertising is expensive and added to the costs of drugs and encourages consumers to request higher-cost brand names rather than less expensive generic alternatives. Concerns over DTC drug advertising escalated in late 2004 when Merck had to pull its popular Vioxx medication from the market after it was determined that the drug increased the risk of heart attack in some people. This led critics to call for a moratorium on the DTC advertising of new drugs following their approval until the product is in the marketplace long enough for the FDA to have confidence that it is as safe as thought to be when it was approved. The argument for an even longer moratorium gained momentum recently after it was announced that Merck and Schering-Plough, which co-market Vytorin, delayed for 21 months the results of a study that showed the cholesterol medication did not reduce plaque buildup in arteries as claimed. The pharmaceutical industry is recognizing that it needs to address the problems with DTC advertising. In 2005, the industry‘s trade association released voluntary guidelines calling for better presentation of risk information. However, critics have argued that the industry developed these standards to preempt stricter guidelines that might be imposed by the FDA. In 2007, Congress passed legislation giving the FDA more power to regulate DTC drug advertising. The new bill gives the FDA power to require drug companies to submit TV ads for review before they run, but it can only recommend changes, not require them. It also gives the FDA the power to impose fines if a drug company‘s ads are found to be false and misleading. Many argue that the FDA needs even more authority to regulate DTC advertising of prescription drugs. They note that the U.S. is one of only two countries that permit the DTC advertising of prescription drugs and many feel the practice should be banned entirely. 189. Discuss how the National Do Not Call Registry developed by the Federal Trade Commission is impacting the direct marketing industry. What arguments might direct marketers use in trying to have this program rescinded? (LO 20-4) Congress approved the FTC‘s proposal for the formation of a National Do Not Call Registry in February 2003 and this program contains nearly 250 million phone numbers. Marketers face penalties of $11,000 per incident for calling someone on the list. The new federal rules do not cover telemarketing activities that occur within a state and, thus, do not involve interstate commerce. However, many states now have their own Do Not Call registries and these will continue to be important to protect consumers from unwanted calls originating from companies doing business within the state where they reside. The creation of the National Do Not Call Registry has greatly reduced the number of households that telemarketers can call. However, it has not had the negative effect anticipated by the telemarketing industry. Telemarketers can still call consumers with whom they have an established relationship and many companies have shifted their focus from cold-calling for prospects to managing existing customer relationships. These customers are generally receptive to calls from telemarketers, which has increased the efficiency of the business. The primary arguments direct marketers can use in trying to implement this program is that it violates their First Amendment rights and that such a program is not needed. The Direct Marketing Association, which is the primary trade group for the direct marketing industry, has argued that consumers already have a number of do-not-call options. They can already ask to be excluded from an individual company's telemarketing list at the same time they can sign up with state lists or pay $5 to sign up on the voluntary national list maintained by the Direct Marketing Association. The DMA argues that the national registry will impose more bureaucracy on the direct marketing industry and that the industry that the same goal can be achieved by the industry itself with better education and 1-360 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

enforcement. The Direct Marketers Association and the American Teleservices Association, which represents callers, each has separately sued the Federal Trade Commission over its Do Not Call telemarketing rules. The DMA's lawsuit contends the FTC has overstepped its legal authority to prevent fraud by attempting to ban legitimate telemarketing, and that its action also violates marketers' First Amendment rights at free speech. The American Teleservices Association, which represents callers, made similar claims in its suit. However, in February 2004, the U.S. Court of Appeals upheld the validity of the National Do Not Call Registry, ruling that it is a valid commercial speech regulation. The two major trade associations may yet appeal the case to the U.S. Supreme Court.

CHAPTER 21 EVALUATING THE SOCIAL, ETHICAL, AND ECONOMIC ASPECTS OF ADVERTISING AND PROMOTION Chapter Overview The purpose of this chapter is to evaluate the social, ethical, and economic aspects of advertising. Advertising is a very powerful and influential force in our society, and this text would not be complete without considering the various perspectives and criticisms regarding its social and economic effects. The first half of the chapter focuses on the various criticisms of advertising from an ethical and societal perspective. Attention is then given to appraising the effects of advertising on the economy including its effect on consumer choice, competition, and product costs and prices. Perspectives regarding the economic effects of advertising are summarized by considering two principal models or schools of thought: the Advertising = Market Power and Advertising = Information perspectives. It should be noted that the primary focus in this chapter is on social and economic aspects of advertising, as this is the promotional mix variable that is the subject of the most concern, controversy, and regulation.

Learning Objectives 1.

Discuss various ethical perspectives on advertising and promotion.

Discuss various social perspectives on advertising and promotion.

Evaluate the social criticisms of advertising.

Discuss the effect of advertising on consumer choice, competition, and prices.

Chapter and Lecture Outline I.

INTRODUCTION

Because of its high visibility and pervasiveness, along with its persuasive character, advertising has been the subject of a great deal of controversy and criticism. Various parties and scholars have attacked advertising for a variety of reasons including its excessiveness, the way it influences society, the methods used by advertisers, its supposed exploitation of consumers, and its effect on our economic system. The role of advertising and other forms of marketing communication in society is a controversial one and a discussion of the area would not be complete without considering the various criticisms regarding its social and economic effects as well as some of the responses to these charges. Professor Notes:

II.

ADVERTISING AND PROMOTION ETHICS

While many laws and regulations determine what advertisers can and cannot do, not every issue is covered by a rule or guideline. In many situations, advertisers must make decisions regarding appropriate and responsible actions based on ethical considerations rather than what is legal or within industry guidelines. Ethics are moral principles or values that govern the actions and decisions of an individual or group. While a particular action or practice may be within the law, this does not necessarily mean it is ethical. Ethical issues must be considered in making integrated marketing communication decisions as a lapse in ethical standards or judgment can result in actions that are highly visible and can be damaging to a company‘s reputation and image. Advertising is subject to considerable criticism because it is judged by a variety of groups with different norms, values, and ethical standards. Arguments on both sides of controversial ethical and social issues will be presented in this chapter. However, students may have to draw their own conclusions as to which position is right or wrong. A discussion of the ethics of promoting alcoholic beverages to college students, particularly underage college students, and the potential hazards for promoting alcohol consumption to consumers in general can be discussed with students here. Other ethical discussions can focus on the topics of targeting at-risk populations with menthol or fruit flavored tobacco products, advertising to children or ads promoting sexual permissiveness and objectifying women in order to sell products. Professor Notes:

III.

SOCIAL AND ETHICAL CRITICISMS OF ADVERTISING

Much of the controversy over advertising stems from the ways it is used by many companies as a selling tool and because of the impact advertising has on society‘s tastes, values, and lifestyles. There are a number of criticisms of specific techniques used by advertisers as well as charges against its impact on society in general. BBBBBB. Advertising as Untruthful or Deceptive—One of the major attacks against advertising is that many ads are misleading or untruthful and end up deceiving consumers. The issue of what constitutes deception, as we discussed in Chapter 20, is a very difficult one. However, a concern of many critics is the extent to which advertisers are deliberately untruthful or misleading in their advertising. Figure 21-1 shows that Americans‘ trust in media reporting continues to remain low, as it has since 2016. Most large companies are unlikely to risk their reputation and image or subject themselves to prosecution by various regulatory groups by making overtly false or misleading advertising claims. Many of the companies involved in outright fraud or deception are often smaller, local companies or those using direct mail to advertise their products and services. However, national advertisers will often test the limits of various industry and governmental rules and regulations and make claims that may give their brands an advantage in highly competitive markets. Critics of advertising often question whether consumers are receiving proper information to make an informed choice since advertisers usually only present information that is favorable to their brands. Many critics feel that advertising should be primarily informative in nature and not be permitted to use puffery or embellished messages. Others argue that advertisers should have the right to present the most favorable case for their products and services. They note that most consumers can protect themselves from being persuaded against their will and that various regulatory bodies and mechanisms are sufficient to keep advertisers from deceiving or misleading consumers. Figure 21-2 lists the advertising ethics and principles of the American Advertising Federation, which many advertisers use as a guideline in preparing and evaluating their ads. CCCCCC. Advertising as Offensive or in Bad Taste—Another common criticism of advertising, particularly by consumers, is that ads are offensive, tasteless, irritating, boring, obnoxious, and so on. A number of studies have found that consumers feel most advertising insults their intelligence and that many ads are in poor taste. 47. Sources of distaste—Consumers can be offended or irritated by advertising in a number of ways. Some are offended that a product or service is even advertised at all (such as contraceptives or personal hygiene products). A research study of prime-time commercials found a strong product class effect with respect to the type of ads consumers perceived as distasteful or irritating. Another way advertising can offend consumers is by the type of appeal or the manner of presentation. Ads that use fear appeals or exploit consumer anxieties, such as fear of social rejection, are often the target of criticism. 48. Sexual appeals—The type of advertising appeals that have received the most criticism for being offensive or in poor taste are those using sexual appeals and/or nudity. In fact, a study in Australia of TV viewership found that the issue resulting in the most complaints to the country‘s advertising Standards Bureau involved sex, sexuality, and/or nudity—almost three times more than any other issue. These techniques are often used as ways of gaining consumers‘ attention and in some cases may not even be appropriate to the product being advertised. Even if the sexual appeal is appropriate for the product, many people may still be offended. Advertisers who use nudity and sexual suggestiveness argue that their ads are not offensive and are consistent with contemporary values and lifestyles that are more accepting of this type of advertising. Another common criticism of sexual appeals is that they can be demeaning to women (and men as well) by depicting them as sex objects. An interesting

study is discussed here that examined differences between men and women in their attitudes toward sex in advertising. This study found interesting differences in how the two sexes view the use of sexual appeals, including that half of men said they liked sexual ads while only 8 percent of women said they felt the same way. Women were also much more likely than men to say that sexual ads promote a deterioration of moral and social values. 49. Shock advertising—Many advertisers are relying on shock advertising by using nudity, suggestiveness, and/or other startling images to gain consumers attention and shock them. Companies that have been known for using shock advertising over the years include Benetton, Calvin Klein, and American Apparel. Clothing retailer Abercrombie & Fitch has also been criticized in recent years for the sexual-laden content in its quarterly catalogs. The company recently toned down its catalogs and eliminated the racy ads and sexual images that offended many parents. Advertisers often complain about the double standard that exists for TV programs and commercials, noting that even the most suggestive commercials are bland compared with what is shown in many television programs. The networks argue, however, that they have to scrutinize commercials more carefully because they encourage people to imitate behaviors, whereas programs are merely meant to entertain. Not all shock ads are designed to gain one‘s attention to commercial products. Exhibit 21-13 is an excellent example of how cause marketers are now employing this tactic. DDDDDD. Advertising and Children—One of the most controversial topics advertisers must deal with is the issue of advertising to children. A study conducted by the Campaign for a Commercial-Free Childhood estimated that children ages 2 to 11 see more than 40,000 commercials a year on TV alone, not to mention the ones they may see on the Internet, cell phones, video games, and so on. Concern has also been expressed over marketers‘ use of other promotional vehicles and techniques such as radio ads, point-of-purchase displays, premium offers, and the use of commercial characters as the basis for television shows. Arguments can be presented on both sides of this controversial issue. More recently, there has been strong public criticism of companies marketing vapes to children and teens (Exhibit 21-14). The scrutiny that vaping brand Juul has faced in proposals that the brand has made their product more attractive to children is discussed here. Arguments against advertising to children include: 63) Children, especially young ones, are vulnerable to advertising because they lack the necessary experience and knowledge to understand and evaluate the purpose of persuasive advertising appeals. 64) Children cannot differentiate between commercials and television programs, do not perceive the selling intent of commercials, and cannot distinguish between fantasy and reality. 65) Children must be able to understand how advertising works and develop a skeptical or critical attitude to defend themselves against it. 66) Advertising to children is inherently unfair or deceptive. Arguments in favor of advertising to children include: 67) Advertising is a part of life and children must learn to deal with it as part of the consumer socialization process of acquiring the skills needed to function in the marketplace.

68) Studies have shown that children are capable of perceiving persuasive intent and the inability to perceive such intent does not necessarily lead to incorrect beliefs about a product. 69) Children are also protected from the potential influences of commercials by network censors and industry self-regulatory groups 70) Advertisers have a right under the First Amendment to communicate with consumers who make up their primary target audience Concerns over advertising and other forms of promotion directed at children diminished somewhat during the late 1990s and the early part of the new decade. However, the issue has once again begun receiving a considerable amount of attention as various groups are calling for restrictions on advertising targeted to children. The American Psychological Association (APA), the nation‘s largest organization of psychologists, issued a report criticizing the increasing commercialization of childhood and calling for new curbs on marketing aimed at children. There are also growing concerns about increases in the number of ads that encourage kids to visit websites, and the content of children‘s programming. Advertising to children will remain a controversial topic. Some groups feel that the government is responsible for protecting children from the potentially harmful effects of advertising and other forms of promotion, while others argue that parents are ultimately responsible for doing so. EEEEEE. Social and Cultural Consequences—Concern is often expressed over the impact of advertising on society, particularly with respect to its influence on values and lifestyles. Opinions regarding the value of advertising as an important social influence agent are often very negative and it is criticized for a number of reasons. 50. Advertising encourages materialism—Many critics claim that advertising has an adverse effect on consumer values by encouraging materialism, which refers to a preoccupation with material things rather than intellectual or spiritual concerns. Advertising can create materialism in many ways such as: 

Seeking to create needs rather than merely showing how a product or service fulfills them.



Surrounding consumers with images of the good life, and suggests the acquisition of material possessions leads to contentment and happiness and adds to the joy of living.



Suggesting material possessions are symbols of status, success, and accomplishment and/or will lead to greater social acceptance, popularity, sex appeal, and so on.

The criticism of advertising on the basis of creating materialism assumes that materialism is undesirable and done at the expense of nonmaterialistic goals. But many believe materialism is an acceptable part of the Protestant ethic, which stresses hard work and individual effort and initiative and views the accumulation of material possessions as evidence of success. Others argue that the acquisition of material possessions has positive economic impact by encouraging consumers to keep consuming after their basic needs are met. Many Americans believe economic growth is essential and materialism is both a necessity and an inevitable part of this progress. 51. Advertising makes people buy things they don't need—Another common criticism of advertising is that it has the power to manipulate consumers and make them buy things they do not need. Persuasive advertising which plays on consumers‘ emotions, anxieties, social and psychological needs and desires is viewed as undesirable. This type of advertising is seen as going beyond basic needs or necessities in appeals to sell products and services. Only 1-365 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

informational advertising, which reports factual, functional information such as price performance, and other objective criteria, is viewed as acceptable and desirable. Defenders of advertising offer a number of rebuttals to these criticisms. They argue that a substantial amount of advertising is essentially informational in nature and that it is difficult to separate desirable, informational advertising from undesirable, persuasive advertising. They also note that most lower-level needs in our society are satisfied and it is natural for consumers to be concerned with higher order needs, and for advertising to appeal to these wants and desires. They also note that advertising cannot make consumers do things against their will and they can defend themselves against advertising. Consumers do have a choice and can ignore ads for products and services that they do not really need. 52. Advertising and stereotyping—Advertising is often accused of creating and perpetuating stereotypes through its portrayal of certain groups including women, ethnic minorities, and other groups. a. Women—Advertising has received a great deal of criticism for its stereotyping of women. Critics charge that advertising generally depicts women as being preoccupied with beauty, household duties, and/or motherhood or shows them as decorative objects or sexually provocative figures. Critics also argue that advertisers have failed to acknowledge the changing role of women in society. While sexism and stereotyping of women still exist, advertising‘s portrayal of women is improving in many areas as more advertisers recognize the changing role of women in our society and the importance of portraying them realistically. One reason for these changes is the emergence of females in key agency roles. Women advertising executives are likely to be more sensitive to the portrayal of their own gender and to strengthen the role of women beyond stereotypical housewives or a position of subservience to men. b. African Americans and Hispanics—African Americans and Hispanics have also been the target of stereotyping in advertising. For many years, advertisers ignored all nonwhite ethnic groups as identifiable subcultures and viable markets and ads were either not targeted to them and the use of Black or Hispanic models and spokespersons was very limited. Advertisers are trying to increase the incidence of minority groups in ads while avoiding stereotypes and negative role portrayals. Advertisers are also finding that advertising developed specifically for the culturally diverse markets, is an effective way of reaching this ethnic market. c. Other groups—It has become increasingly difficult for advertisers not to offend some segment of the public. However, advertisers must be sensitive to the portrayal of specific types of people in their ads. One area where changes are occurring is in advertising targeted to LGBTQ consumers. Many major advertisers are turning to gay themes in their mainstream commercials, though often subtly. LGBTQ ads are now relatively common on TV. 53. Advertising and the media—The fact that advertising plays such an important role in financing the media has led to concern on the part of many that advertisers can influence or even control the media. The text discusses how the media sometimes face challenges from advertisers who stop advertising in a publication when they find their editorial coverage objectionable or unfavorable to the company. a. Arguments supporting advertiser control:

The media‘s dependence on advertising revenue makes them susceptible to various forms of influence such as exertion of control over editorial content, biasing editorial opinions, limiting coverage of controversial topics or stories, and influencing the program content of television. Newspapers and magazines receive most of their total revenue from advertising, whereas commercial television and radio derive nearly all of their income from advertising. Thus, the media may be reluctant to carry stories detrimental to companies who purchase large amounts of advertising time or space. There have been several situations where advertisers have brought pressure to the media and influenced content or programming decisions. Some of these situations have been in response to pressure or the threat of boycotts from consumer groups opposed to program content. b. Arguments against advertiser control: It is in the best interest of the media that advertisers not influence them too much. To retain public confidence, they must report the news fairly and accurately and not be perceived as biased or attempting to avoid controversial issues. Media executives point to the vast amount of topics they cover and the investigative reporting they do as evidence of their objectivity. It can be argued that advertisers need the media more than the media need any individual advertiser, particularly when the medium reaches a large audience or does a good job of reaching a specific market segment. The media in the U.S. are basically supported by advertising, which allows consumers to enjoy media for a fraction of what it would cost without advertising. Although not perfect, a system of advertising-supported media provides us with the best option for receiving information and entertainment and is probably more desirable than the alternatives of paying higher subscription costs, pay-per-view, or having governmentsupported media. FFFFFF. Summarizing Social Effects—Negative opinions regarding advertising have been around just as long as the field itself and it is very unlikely that they will ever disappear. It is important that the advertising industry remains cognizant of, and continually addresses the various issues and concerns over, the effects of advertising on society. Advertising is a very powerful institution, but it will only remain so as long as consumers have faith and trust in the ads they see and hear every day. It is important to note that advertising and other integrated marketing communication tools, such as direct marketing and public relations, are also used to promote worthy causes and to deal with problems facing society such as drunk driving, drug abuse, and the obesity crisis. Many advertising agencies do pro bono work for nonprofit organizations and various causes and the media often donate free advertising time and space for these ads. Professor Notes:

IV.

ECONOMIC EFFECTS OF ADVERTISING

Considerable attention has been given to examining the economic impact of advertising. Advertising plays an important role in a free-market system such as that found in the U.S. and other countries by making consumers aware of products and services and providing them with information that can be used to make purchase decisions. However, advertising‘s economic role goes beyond this basic function of information provision, as it is a very powerful force that can affect the functioning of an entire economic system. It is viewed by many as a positive force that encourages consumption and fosters economic growth. On the other hand, many critics of advertising view it as having detrimental economic effects, by not only failing to perform its basic function of information provision adequately, but also adding to the costs of products and services and discouraging competition. A number of major issues regarding the economic effects of advertising are considered. Effects on Consumer Choice—Some critics argue that advertising has a negative effect on consumer choice, as large advertisers use their power to limit our options to a few well-advertised brands. Economists argue that advertising is used by large national advertisers to achieve differentiation and brand loyalty, usually at the expense of smaller brands. These large companies often end up charging a higher price and are able to achieve a more dominant position in the market than smaller companies that cannot compete against their large advertising budgets. When this occurs, advertising restricts choices and becomes a substitute for competition based on price or product quality. Defenders of advertising argue that it does not create brand monopolies and reduce the opportunities for new brand or product introduction. The opportunity to advertise gives companies the incentive to develop new brands and improve existing ones. Advertising is instrumental in helping companies inform consumers about their new products. GGGGGG. Effects on Competition—One of the most common criticisms economists have with advertising concerns its effect on competition. They argue that large firms with huge advertising budgets create a barrier to entry, which makes it difficult for other firms to enter the market. This, in turn, leads to less competition and higher prices. Large advertisers enjoy certain competitive advantages such as economies of scale in advertising, particularly with respect to factors such as media costs. Large advertisers clearly enjoy certain competitive advantages. There are economies of scale in advertising, particularly with respect to factors such as media costs. Additionally, large advertisers usually sell more of a product or service, which means they may have lower production costs and can allocate more monies to advertising, so they can afford the costly but more efficient media like network television. While advertising may have an anticompetitive effect on a market, there is no clear evidence that advertising alone reduces competition, creates barriers to entry and thus increases market concentration. Defenders of advertising note that it is unrealistic to attribute a firm‘s market dominance solely to advertising as there are a number of other factors to consider such as price, product quality, distribution effectiveness, production efficiencies, and competitive strategies. While market entry against large established competitors is difficult, companies with a quality product offered at a reasonable price find that advertising actually facilitates their market entry by making it possible to communicate with consumers. HHHHHH. Effects on Product Costs and Prices—A major area of debate among economists, advertisers, consumer advocates and policymakers concerns the effects of advertising on product costs and prices. Critics offer several reasons why advertising results in higher prices:



The large sums of money spent on advertising and promotion are an expense that is passed on to consumers in the form of higher prices.



Advertising increases product differentiation and adds to the perceived value of the product in the mind of the consumer, which allows advertised brands to command premium prices.



There are often large differences in prices between national brands and private label brands that are physically and functionally similar, which is evidence of the added value created by advertising. Consumers pay higher prices for this added value.

Proponents of advertising offer several counterarguments to the claim that advertising increases prices: 71) Price insensitivity and brand loyalty can be created by a number of nonadvertising factors such as product quality, packaging, favorable usage experience, and market position. 72) They acknowledge that advertising costs are at least partly paid for by consumers. But advertising may help lower the overall cost of a product more than enough to offset them. 73) Advertising can make a market more competitive, which often leads to greater price competition. Several studies have found lower consumer prices in markets permitting advertising for a product versus those that did not. IIIIII.

Summarizing Economic Effects—Economists‘ perspectives regarding the effects of advertising can be divided into two principal models or schools of thought, each of which makes different assumptions regarding the influence of advertising on the economy: 54. Advertising equals market power—This model reflects traditional economic thinking and views advertising as a way of changing consumers‘ tastes, lowering their sensitivity to price, and building brand loyalty among buyers of advertised brands. This results in higher profits and market power for the large advertiser, reduces competition, and leads to higher prices and fewer choices for consumers. Proponents of this viewpoint are generally negative in their assumptions regarding the economic impact of advertising. 55. Advertising equals information—This model takes a more positive viewpoint of advertising‘s economic effects, as it views advertising as providing consumers with useful information; increasing their price sensitivity, which moves them toward lower-priced products; and increasing competition in the market. Advertising is viewed as a means of communicating with consumers and telling them about a product and its major features and attributes. More informed consumers put pressures on firms to lower prices and improve quality. Proponents of this model assume that the economic effects of advertising are favorable and view it as contributing to efficient and competitive markets. These two perspectives take very divergent views regarding the economic impact of advertising as shown in Figure 21-4. It is unlikely that the debate over the economic effects of advertising will be resolved soon. Many economists will continue to take a negative view of advertising and its effects on the functioning of the economy, while advertisers will continue to view it as an efficient way for companies to communicate with their customers and an essential component of our economic system. Figure 21-5, excerpts from a speech given by famous ad executive Leo Burnett, summarizes the perspective of most advertising people on the economic effects of advertising.

Professor Notes:

Teaching Suggestions In this chapter we evaluate advertising from a societal, ethical, and economic perspective. Advertising is a very powerful institution in this country and has been the target of considerable criticism regarding its social and economic impact. Much of the criticism of advertising concerns the specific techniques and methods used by advertisers, as well as advertising‘s effect on societal values, tastes, lifestyles, and behavior. We examine these various criticisms of advertising along with the responses of advertisers to these attacks. It is important to recognize that there are usually two sides to each of these issues and we try to recognize the arguments of the critics as well as of the advertising industry. For example, one of the classic debates over the social impact of advertising concerns the issue of whether advertising is responsible for creating undesirable consumer values, such as materialism, or whether advertising merely reflects or mirrors the values of society rather than molding or shaping them. Arguments can be made on both sides of this issue, and it makes an interesting topic for student discussion. A very good exchange of arguments regarding this issue can be found in articles by Richard W. Pollay, ―The Distorted Mirror: Reflections on the Unintended Consequences of Advertising,‖ Journal of Marketing, April 1986 and Morris B. Holbrook, ―Mirror, Mirror on the Wall, What‘s Unfair in the Reflections on Advertising,‖ Journal of Marketing, July 1987 and a rejoinder by Pollay, ―On the Value of Reflections in ‗The Distorted Mirror,‖ which also appeared in the July 1987 issue of JM. Stephen Fox‘s book The Mirror Makers: A History of American Advertising and Its Creators (New York: Morrow 1984) also provides an excellent discussion of arguments concerning the impact of advertising on society. Numerous controversial issues regarding advertising are raised in this chapter and can be used as a basis for discussion or debate. These include the issues of targeting promotional programs to schools; advertising to children; advertising‘s portrayal of women as well as various ethnic and social groups; the ability of large advertisers to exert influence on, or even control over, the media; and the economic impact of advertising. You may want to have your students visit websites or advertising watchdog organizations such as Commercial Alert (www.commercialalert.org) to learn more about how this group works to keep advertising and other commercial activities within their proper sphere.

Answers to Discussion Questions 1. There is some disagreement regarding Balenciaga’s controversial ads discussed in the lead-in to this chapter. Do you think Balenciaga ran the ads intentionally or just made an unintended mistake? Explain why you took the position you did. (LO 21-1) In Balenciaga‘s 2022 holiday campaign, young girls were pictured on the website‘s gift shop holding teddy bears that were wearing what appeared to be bondage-style harnesses, chains, and other BDSM-style gear. The ads did not go over well with the public, leading to backlash on Twitter, extensive press coverage, and outright outrage from industry persons. Balenciaga immediately apologized and announced that it had removed the ads from all of its platforms. They also took down all of the pictures from social media. Many observers think that Balenciaga‘s actions were not a mistake at all, but a planned strategy. They cite previous examples where the company was responsible for controversial ads including the remaking of IKEA‘s 99 cent shopping bag as a luxury item, placing heels on Crocs, and sending models who looked like refugees down a runway carrying trash bags made of expensive leather, among others. Critics argue that the company creates the ads for shock value and thrives on the publicity that is generated by their outlandishness. The brand contends that the public must grapple with the meaning of ―taste.‖

The jury is still out whether Balenciaga made a mistake or intentionally created this controversy. However, if the strategy is intentional, it is a risky one. Not all publicity is good publicity, and sometimes the costs outweigh the benefits! Students may be on either side of this issue. 2. Many people believe that the U.S. government’s control over advertising is increasing and that this control is contrary to the right to free speech. Explain why those taking this perspective believe this is the case and cite examples to support their position. Offer your thoughts on whether there has been an increase in government control. (LO 21-2). While there is general agreement that advertising is an important social influence agent, opinions as to the value of its contribution are often negative. Advertising is criticized for encouraging materialism, manipulating consumers to buy things they do not really need, perpetuating stereotypes, and controlling the media. However, some say these concerns are unimportant in the face of free speech protections. Advertisers should have a reasonable basis for making a claim about product performance and may be required to provide evidence to support their claims. However, deception can occur more subtly as a result of how consumers perceive the ad and its impact on their beliefs. The difficulty of determining just what constitutes deception, along with the fact that advertisers have the right to use puffery and make subjective claims about their products, tends to complicate the issue. But a concern of many critics is the extent to which advertisers are deliberately untruthful or misleading. Freedom of speech or expression, as defined by the First Amendment to the U.S. Constitution, is the most basic federal law governing advertising in the United States. For many years, freedom of speech protection did not include advertising and other forms of speech that promote a commercial transaction. However, the courts have extended First Amendment protection to commercial speech, which is speech that promotes a commercial transaction. There have been a number of landmark cases where the federal courts have issued rulings supporting the coverage of commercial speech by the First Amendment (see a more thorough discussion in Chapter 20.) But it is difficult to determine exactly where regulation should end. The numerous rules, regulations, policies, and guidelines marketers comply with do not cover every advertising and promotional situation. Moreover, what one individual views as distasteful or unethical may be acceptable to another. Students will have a variety of views on this topic. 3. As diversity in advertising appears to be on the increase, there are those who support this movement and those who believe that it is not in the best interest of companies. Focusing your attention specifically on the business aspects of increasing diversity in ads, take a position on whether you believe this is a good strategy to undertake. Support your position. (LO 21-4). A commercial called ―Just Checking‖ featuring an interracial family with a little girl expressing concern for her father‘s health was aired in 2013 by Cheerios, the iconic brand which has been around since 1945. The response to the commercial, which was viewed over 2 million times on YouTube, received such racist and vitriolic feedback that General Mills had to disable the comments section of the posting. However, Cheerios stuck by the ad, commenting that ―There are many kinds of families, and Cheerios celebrates them all.‖ What is the current status of perceptions of these ads now? There have been a number of recent studies exploring this issue in both the academic and business communities. Larry Chiagouris, a marketing professor at Pace University in New York, considers it to be a smart move. He says that it is smart for brands to let customers know that they are listening and responsive to their needs. Chiagouris makes the point that the ads are not just targeted to interracial couples, but also to those whose values may be aligned with acceptance of interracial relationships. Subodh Bhat, a professor at San Francisco State, agrees, noting that consumers are no longer just interested in which product is 1-371 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

better but now want more information about the company‘s values. They also want to feel good about the company‘s values. An extensive study of consumers‘ views on diversity in advertising conducted by the research company Kantar led to a number of conclusions: (1) Not embracing diversity in advertising will negatively impact business growth, (2) positive representation of unrepresented individuals accelerates sales lift and long-term brand equity, (3) powerful stories that evoke an emotional response can be effective if the theme is relatable and authentic even if just one race is shown, and (4) the future is moving to a more diverse world, and marketers have the power to create a greater sense of community through diverse and inclusive advertising. Some studies indicate that not everyone agrees with these sentiments. But supporting increased diversity in advertising appears to be a strong business practice. It demonstrates awareness of all groups in the marketplace, as well as the growing importance of marketing to smaller target groups or non-mainstream audiences. 4. Are women portrayed differently in advertising now than they were 10 years ago? Explain why you feel this way, providing examples to support your position. (LO 21-3) While sexism and stereotyping certainly exist, advertising‘s portrayal of women is improving in many areas. Many advertisers have begun to recognize the importance of portraying women realistically. The increase in the number of working women has resulted not only in women having more influence in family decision making but also in more single-female households, which means more independent purchasers. They note that as women have crossed the boundary from the domestic sphere to the professional arena, expectations and representations of women have changed as well. For example, a number of magazines, such as Ms., now incorporate and appeal to sociocultural shifts in women‘s lives. Many advertisers are now depicting women in a diversity of roles that reflect their changing place in society. In many ads, the stereotypic character traits attributed to women have shifted from weak and dependent to strong and autonomous. One reason for these changes is the emergence of females in key agency roles. Women advertising executives are likely to be more sensitive to the portrayal of their own gender and to strengthen the role of women beyond stereotypical housewives or a position of subservience to men.

5. The Partnership to End Addiction at Drug Free.org is the new name for the organization originally titled The Partnership for a Drug Free America. The coalition of companies and ad agencies have worked together for decades to fight the war on drugs by creating ads and offering their services for the cause. Do you believe they are having an impact? Explain your position. (LO 21-4) The Partnership to End Addiction at Drugfree.org (formerly the Partnership for a Drug Free America) has created a website and uses social media, as well as print and TV ads, to drive awareness and action around teen substance abuse. The Partnership is funded primarily by donations from individuals, corporations, foundations, and the public sector. The organization has also partnered with the U.S. Office of National Drug Control Policy (O N D C P), and the joint campaign ―Above the Influence.‖ Above the Influence (ATI) won an Effie Award given for sustainability for its long-term effectiveness. Youth who are aware of anti-drug advertising are consistently more likely to have stronger anti-drug beliefs compared to those unaware of campaign advertising. This is a strong argument for the ads‘ effectiveness. 6. The war on cigarette smoking by teens has now been replaced by the war on vaping— particularly flavored vaping products. There are those who say that it is the responsibility of the 1-372 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

government to protect teens, while others feel that teens must make their own decisions. Take a position on this issue and argue in support of that position. (LO 21-3) Lately there has been strong public criticism of companies marketing vapes to children and teens because the e-cigarettes come in a variety of flavors, many of which people say appeal to children and teens. Critics argue that children, particularly young ones, are especially vulnerable to advertising because they lack the experience and knowledge to understand and critically evaluate the purpose of persuasive advertising appeals. At the other extreme are those who argue that advertising is a part of life and children must learn to deal with it in the consumer socialization process of acquiring the skills needed to function in the marketplace. They say existing restrictions are adequate for controlling children‘s advertising and that marketplace knowledge plays an important role in adolescents‘ skepticism toward advertising. They contend that greater knowledge of the marketplace appears to give teens a basis by which to evaluate ads and enables them to recognize the persuasion techniques used by advertisers. Teens are extremely impressionable, and many say this vape argument is not dissimilar to the tobacco issues of former decades. Teens can easily be impacted by ads and may not be thinking about the long-term health effects of their current health behaviors. For these reasons, the government should continue to regulate the promotion of these products to impressionable teens and younger children. 7. There is little doubt that the use of sexy advertising like that employed by Calvin Klein and Carl’s Jr. has declined over the past few years. Is this a result of #MeToo, or just advertisers changing attitudes toward the effectiveness of this form of advertising? Support your position. (LO 21-2) The Me Too Movement was a movement against sexual assault and sexual harassment that gained traction internationally around 2017. Consumers call the stereotypical portrayals of women that have been around for many decades and that often still surface regressive. Several researchers have suggested that recent changes in advertising away from these more stereotypical and overtly sexual portrayals can be attributed to the Me Too movement. While more changes to advertising came about in the prior two years since this movement, other societal trends have led to more progressive ads. For example, increases in two-way communication through digital media have made consumers more vocal and thus brands more conscious. Additionally, sex no longer has the selling power it used to. Addedly, brands have become extremely aware of the potential negative impacts from representing a group in a negative way. Many brands fear backlash on social media and thus are much more careful of the messages they disseminate. While #MeToo likely had a significant impact on advertising, there are certainly other factors that have also contributed to its maturation. 8. Does advertising make college students drink or drink more, or not? Explain both sides of this issue and provide your decision. (LO 21-1) The role of advertising in society is controversial and has sometimes resulted in attempts to restrict or ban advertising and other forms of promotion to certain groups or for certain products. College students are one such group. Many alcohol-related problems such as binge-drinking and high levels of consumption are prevalent on college campuses and have resulted in more serious issues such as sexual abuse, assault, and death. Many have advocated for a ban on alcohol-related advertising and promotion to college students. Many colleges and universities have imposed restrictions on the marketing of alcoholic beverages to their students. Companies marketing alcoholic beverages such as beer and liquor recognize the need to reduce alcohol abuse and drunk driving, particularly among young people, as do government agencies. Many of these companies have developed programs and ads designed to address this problem. However, many advertisements for alcohol feature young 1-373 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

looking models in situations that are very familiar or attractive to college students. They show social acceptance and desirable lifestyles which likely encourage college students to engage in drinking more often. 9. Many people believe that there should be severe restrictions placed on advertising to children under the age of 13. Others believe that children must learn to discriminate truth from lies and that it is part of the learning process. Discuss both sides of this issue. (LO 21-3) Many have raised concerns regarding advertising to children over the past several decades and concerns continue as children can now be reached by advertisers in more platforms than ever before. Concern have been expressed about marketers‘ use of promotional vehicles and techniques such as radio ads, point-of-purchase displays, premiums in packages, product placements, and commercial characters as the basis for TV shows in reaching children. Critics also argue that children, particularly young ones, are especially vulnerable to advertising because they lack the experience and knowledge to understand and critically evaluate the purpose of persuasive advertising appeals. On the other hand, some argue that advertising is a part of life and children must learn to deal with it in the consumer socialization process of acquiring the skills needed to function in the marketplace. They say existing restrictions are adequate for controlling children‘s advertising and that marketplace knowledge plays an important role in adolescents‘ skepticism toward advertising. They contend that greater knowledge of the marketplace appears to give teens a basis by which to evaluate ads and enables them to recognize the persuasion techniques used by advertisers. Advertising to children will likely remain a controversial topic. Some groups feel that the government is responsible for protecting children from the potentially harmful effects of advertising and other forms of promotion, while others argue that parents are ultimately responsible for doing so. 10. Various studies have indicated that younger consumers are less likely to watch TV, listen to the radio, or read magazines and newspapers. If this is true, one might expect a reduction in sales of heavily advertised products. Is this happening? If so, provide examples. If not, explain why this is not happening, again providing examples. (LO 21-4) While younger consumers may not be consuming or exposed to these more traditional forms of advertising, advertisers have found other ways to reach young consumers. Estimates are that children between the ages of 7 and 16 in the United States spend approximately 3.0 hours a week online on the average, with those 15 to 16 spending 4.8. The Internet has now become one of the primary ways through which consumers are now reaching children and teens. Reports have accused marketers of taking advantage of an ever-fragmenting media landscape of cable channels and the Internet to target children. There is also growing concern over how marketers are using social media to communicate with and sell to children. Sales of heavily advertised products have not decreased among younger consumers. While they no longer get information through those more traditional platforms, many argue that children and youth can be reached through games, ads, brand pages, and social networking sites, and as a result, marketers have increased their efforts to reach these groups and that these efforts may be even more fruitful than TV given the stronger attraction to online activities.

Additional Discussion Questions (not in text) 11. Discuss the arguments for and against advertiser influence and/or control over the media. How might a newspaper or magazine avoid being influenced by advertisers? (LO 21-4) There are a number of reasons why critics argue that advertisers have influence over the media and that the advertising and financial side of the publishing business controls or influences the editorial

content of magazines and newspapers. The main factor in support of this position is that the media are either totally or highly dependent upon advertising revenue. Television and radio networks and stations receive nearly all their revenue from advertising, while newspapers and magazines receive nearly 70 percent of their total revenue from the ads they sell. Smaller, less financially secure media are the most prone to influence and pressure from advertisers, particularly companies who account for a large amount of the medium‘s advertising revenue. Thus, they may be reluctant to print an unfavorable story about a company or industry that accounts for a large percentage of their advertising revenue. There is concern that some magazines and newspapers may be lowering ―The Wall‖ which separates their news and business departments in their search for new ways to increase readership and revenue as competition from the Internet and other media increases and their audience or circulation numbers decline. The lowering of the Wall has serious implications for the media as journalists argue there must be not be any pressure from the advertising and financial side of the business so they are free to cover any story and be objective in their reporting. They argue that decisions on the writing, editing, and publishing of stories should be made on their journalistic merit rather than whether they will attract or repel advertisers. There are several arguments against advertisers‘ ability to control the editorial content of media such as television stations, magazines, and newspapers. First, it is in the best self-interest of the media that they not be influenced too much by advertisers. To retain public confidence, they must report the news fairly and accurately and not be perceived as biased or attempting to avoid controversial issues. Many TV stations, magazines, and newspapers also note the vast amount of topics they cover and the investigative reporting they often do on companies as evidence of their objectivity. They also note that the advertiser needs the media more than they need an individual advertiser, particularly when the medium has a large audience or reaches a specific market segment. Many television stations, newspapers, and magazines have a very broad base of advertising support and can afford to lose an advertiser who might attempt to exert too much influence or control over them. 12. Discuss the role of ethics in advertising and promotion. How do ethical considerations differ from legal considerations in developing an integrated marketing communications program? (LO 21-1) While many laws and regulations determine what advertisers can and cannot do, not every issue is covered by a rule or guideline. Ethics involve the use of moral principles and values in evaluating a decision or action. Ethical considerations are very important in advertising as the use of a particular type of ad or the targeting of a specific group may be legal but may not be ethical. Ethical issues must be considered in making advertising and promotion decisions as a lapse in ethical standards or judgment can result in actions that are highly visible and often very damaging to a company‘s image or reputation. Ethical considerations differ from legal considerations in that ethics involves individual or group moral principles or values and can be very subjective while legal considerations are generally much more objective. Legal considerations can be enforced through the regulatory process while ethical problems can only be remedied by voluntary actions of those who are responsible for the unethical actions. 13. With which position do you agree? ―Advertising determines American consumers’ tastes and values and is responsible for creating a materialistic society.‖ ―Advertising is a reflection of society and mirrors its tastes and values.‖ (LO 21-2) This question presents the classic dilemma of whether advertising is responsible for creating materialistic values in consumers or whether it merely reflects or mirrors the values of society rather than molding or shaping them. Those who agree with the first position argue that advertising

encourages materialistic values by seeking to create needs rather than merely showing how a product or service fulfills them; surrounding consumers with images of the good life and suggesting that the acquisition of material possessions leads to contentment and happiness and adds to the joy of living; and suggesting that material possessions are symbols of status, success and accomplishment and/or will lead to greater social acceptance, popularity, sexual appeal, and so on. Those supporting the second position argue that consumers‘ values are defined by the society in which they live, and value systems are the result of extensive long-time socialization or acculturation. They argue that advertisers develop ads in response to prevailing values and are thus reflecting tastes and values rather than molding or shaping them. 14. Discuss how advertising can affect product costs and the prices consumers pay for products and services. (LO 21-4) Arguments that advertising increases the costs of products and services include the fact that the large sums of money spent on advertising constitute a business expense that must be covered and thus is passed on to consumers in the form of higher prices. Advertising can also result in higher prices by increasing product differentiation and adding to the perceived value of the product in the mind of the consumer. Brands that have achieved high levels of differentiation or perceived value can command a premium price. Proponents of advertising argue that it can actually result in lower costs of products and services by helping firms achieve economies of scale in production, distribution, and marketing by stimulating demand among mass markets. Advertising can also lead to lower prices by making a market more competitive, which usually leads to greater price competition. Studies of several industries have shown that advertising results in lower consumer prices. Some critics argue that advertising has a negative impact on consumer choice, as large advertisers use their power to limit consumers‘ options to a few heavily advertised brands. They argue that advertising is used to achieve differentiation and brand loyalty, which occurs at the expense of smaller brands. Defenders of advertising argue that it does not create brand monopolies and reduce opportunities for new companies and/or brands to enter the market. The opportunity to advertise gives companies the incentive to introduce new brands and improve existing ones. Advertising is viewed as playing a critical role in informing consumers about new products and making it possible for new companies to enter the market. Thus, it helps expand consumer choice rather than limiting it. 15. Groups such as Commercial Alert are concerned about the intrusion of advertising and other types of marketing messages into all aspects of consumers’ lives. Discuss some of the reasons consumer watchdog groups are critical of advertising and other types of marketing practices. (LO 21-2) Many marketers are obliterating the line between marketing communications and entertainment by creating and delivering ads and other messages that appear to be part of popular culture. Branded content refers to the practice of creating various forms of entertainment into which brands can be integrated such as music, movies, short films, video games, and music videos. The practice goes beyond traditional product placement as it seeks to make brand a more integral part of the entertainment. Many companies are making their brands part of reality TV shows. These practices are becoming popular among marketers for several reasons. Many companies feel that traditional TV commercials are losing their effectiveness and are looking for new ways to reach consumers. They are also realizing that with advances in technology, such as digital video recorders, audiences are able to skip over ads, and they must make find more entertaining genres of advertising in order to capture and hold the attention of consumers. Critics are concerned over the use these techniques as they view them as stealth messages and argue that consumers are often unaware of their persuasive intent. Groups such as Commercial Alert are 1-376 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

concerned over the use of branded content as they feel that movies and television shows are being corrupted by commercialization that goes beyond mere product placement and now includes the altering of scripts to integrated advertising and branding messages into films and television shows. Consumer groups are also concerned over the impact that advertainment and branded content will have on children who cannot identify or properly process advertising messages that are embedded into movies and TV shows. Critics also argue that consumers should have places in their lives that are free from advertising and marketing messages rather than being constantly persuaded by marketers. 16. Discuss how attitudes toward the use of sex in advertising differ between men and women. Discuss the implications of these attitudinal differences for marketers who are developing ads for each sex. (LO 21-1) One major study of men and women revealed that general opinions about sex in advertising revealed that it is a very polarizing issue. While almost half of men indicated that they like sexual ads, very few women felt this way. Nearly two-thirds of the men indicated that sexual ads have high stopping power and get their attention while only a quarter of the women thought the same. Women were also more likely to feel that there is too much sex in advertising, that sexual ads promote a deterioration of moral and social values, and that ads with sexual themes are demeaning of the female models that appear in them. Only a small percentage of both men and women indicated that ads with sexual themes make them purchase a product. However, a higher percentage of men than women indicated that ads with sexual themes make them look at them and remember a brand. The results of this survey indicate that men are much more receptive to the use of sexual appeals than are women. Men are much more likely than women to notice an ad that has a sexual theme and remember the brand. They also like sexual ads more and are less likely to view them as demeaning to women. These finding suggest that ads with sexual appeals may be an effective way to get the attention of males and to register a brand name. However, the findings do not suggest that a sexual themed ad will be effective in getting either sex to purchase a product. For women, the results suggest that sexual appeals may not be as effective as they are less likely to notice the ad, even less likely to remember the brand and purchase interventions are extremely low. Moreover, the results show that women do not like ads with sexual themes and find them demeaning to women. Of course it would be interesting to analyze these findings by age to determine if younger women were more open to sexual themed ads than older women. 17. Economists argue that advertising can be a barrier to entry for many companies that simply cannot come up with the money required to initiate an effective advertising campaign. At the same time, SPANX has succeeded without spending any money to promote the product. Explain how a company like SPANX can be successful with little or no advertising. (LO 21-4) The Advertising = Market Power perspective reflects traditional economic thinking and views advertising as a way of changing consumers‘ tastes, lowering their sensitivity to price, and building brand loyalty among buyers of advertised brands. This results in higher profits and market power for large advertisers, reduces competition in the market, and leads to higher prices and fewer choice alternatives for consumers. High prices and excessive profits give advertisers even more incentive to advertise their products and output is restricted compared with conditions of perfect competition. Proponents of this model are generally negative in their perspective regarding the economic impact of advertising. The Advertising = Information perspective views advertising as providing consumers with useful information, increasing their price sensitivity which moves them toward lower-priced products, and increasing competition in the market. Advertising is viewed as a means of communicating with consumers and telling them about a product and its major features and benefits. More informed and

knowledgeable consumers will put pressure on companies to provide high quality products at lower prices, and efficient firms remain in the market, whereas inefficient firms leave as new entrants appear. Proponents of this model assume that the economic effects of advertising are favorable and view it as contributing to more efficient and competitive markets. In general, many marketers believe that companies with large advertising budgets have an advantage of those who do not. But along comes a SPANX who succeeds with no ad budget, seemingly defying this perspective. SPANX is now advertising though they do not spend much even today. While SPANX represents the exception rather than the rule, it does appear that companies are more able to become successful in this day and age with less ad spending. Some of this can be attributed to the power of social media, some to the effective use of public relations, and some to effectively using product placements—all of which SPANX did well. At the same time, the SPANX speaks to another component of the Marketing 4P‘s—product. The fact is that the product met the needs of the consumer, and when women found out about it, they looked for it and bought it—any form of communications worked.

IMC Exercise Have students find several ads that they feel are examples of negative social consequences of advertising discussed in the text such as the following: 74) Ads that are offensive or in poor taste because of the product or service they advertise, the type of appeal they use, or the manner of presentation used. 75) Ads that use one of the shock advertising techniques discussed in the chapter. 76) Ads that may have an adverse effect on consumer values by encouraging materialism. 77) Ads that encourage consumers to purchase a product that they really do not need. 78) Ads that stereotype women, men, or ethnic groups such as African Americans, Hispanics, AsianAmericans, or some other group, such as the elderly. Explain why you feel these ads are examples of negative advertising. How do you think the advertisers might justify the use of the ads you have chosen?

CHAPTER 22 PERSONAL SELLING Chapter Overview While certainly an integral part of the promotional mix, personal selling is generally the responsibility of the sales department rather than the advertising or promotional departments. Given this fact, personal selling receives less attention in this text than in some others. This does not mean, however, that we consider this function to be of less importance. Rather, we feel that selling roles and responsibilities may be better covered in other courses. Personal selling involves selling through a person-to-person communications process. The importance placed on this element of the promotional mix will vary from firm to firm and/or industry to industry. In this chapter we examine the role of personal selling in the promotional mix, the costs involved, and the responsibilities associated with this promotional mix 1-378 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

element. We also examine the advantages and disadvantages associated with personal selling, how the personal selling effort can be combined with other promotional tools and criteria for evaluating personal selling contributions to the promotional program.

Learning Objectives 1.

Describe the role of personal selling in the IMC program.

Compare the advantages and disadvantages of personal selling as a promotional tool.

Explain how to combine personal selling with other elements in an IMC program.

Discuss how to measure the effectiveness of the personal-selling effort.

Chapter and Lecture Outline I.

THE SCOPE OF PERSONAL SELLING

An increased emphasis on customer relationship management (CRM), which includes monitoring social media, is just one of the many ways that changes in the marketplace are forcing marketers to reconsider the role of personal selling in the marketing program. Personal selling involves selling through a person-to-person communications process and offers the marketer a number of advantages not offered by other advertising and promotional media. Personal selling will take on a more or less important role depending upon the characteristics of the firm and the marketplace in which it is competing. While personal selling is the responsibility of the sales department, the efforts of the sales force should be coordinated with those of the advertising and promotions department. To achieve maximum success of the marketing program, the two departments need to work together to achieve marketing goals. Professor Notes:

II.

THE ROLE OF PERSONAL SELLING IN THE IMC PROGRAM

The dyadic communication (between two people or groups) process allows for direct feedback, tailoring of the message and increased attention getting capabilities. At the same time, as noted, the efforts of the personal sales force must be supported and integrated into the overall promotional program. This section of the chapter discusses the integration of these elements. JJJJJJ. Determining the Role of Personal Selling—The marketing manager needs to consider the role that personal selling will assume relative to other promotional mix elements, and the specific responsibilities that personal selling will assume. To determine what this role should be, four specific questions must be asked. These questions, as well as how marketers attempt to answer them, are discussed in this portion of the chapter: 56. What specific information must be exchanged between the firm and potential customers? 57. What are the alternative ways of carrying out these communications objectives? 58. How effective is each alternative in carrying out the needed exchange? 59. How cost-effective is each alternative? KKKKKK. The Nature of Personal Selling—Figure 22-2 shows the stages in the evolution of selling from transaction focused, to relationship focused, to partnering. 60. The new role of personal selling—The business world is going through a rapid transition as (1) individuals and corporations gain more knowledge and economic power, (2) value is replacing efficiency, and (3) industry boundaries are changing—for example, competitors are joining forces to achieve more buying power. Along with retaining their traditional roles, salespeople will have to acquire new roles to remain effective. That is, in addition to being information providers, influencers through proximity (i.e., through personal contact), and demonstrators, salespeople will engage in:

Surveying—Educating themselves more about their customers‘ businesses and regularly assessing these businesses and their customers to achieve a position of knowledgeable authority.

ii) Mapmaking—Outlining both an account strategy and a solutions strategy (for the customer). This means laying out a plan, discussing it with a customer, and revising it as changes require. iii) Guiding—Bringing incremental value to the customer by identifying problems and opportunities, offering alternative options and solutions, and providing solutions with tangible value. iv) Fire starting—Engaging customers and driving them to commit to a solution. 61. Relationship marketing—The idea behind relationship marketing is the salesperson serves as a partner to the client, engaging in problem solving, need satisfaction, etc. The concept is to develop a long-term mutually profitable relationship. Adoption of a relationship marketing and CRM approach will require sales managers to develop nontraditional sales strategies. Companies will need to move to a more strategic, less tactical approach, using emerging technologies to support this effort. 62. The costs of personal selling—Personal selling is a very expensive means of communicating with the consumer. Estimates now are that it costs as much as $308 per call, and that it may take an average of five calls to close a sale for a total of $1,540. These costs are even higher when you realize that one sales call is not likely to be enough to close a sale. As a result, personal selling is generally considered one of the most expensive of the promotional mix elements. 63. Personal selling responsibilities—Personal selling involves a wide range of responsibilities. The eight steps in the personal selling process are outlined in Figure 22-5 and include: v) Prospecting—Locating prospective customers. Salespeople must follow up on leads (those who may become customers) and prospects (those who need the product or service). They must also determine whether these prospects are qualified prospects— that is, able to make the buying decision and pay for the product. vi) Preapproach—Determining customers‘ needs and wants that are not being satisfied and collecting as much relevant information as possible prior to the sales presentation. vii) Approach—Recommending a way to satisfy these needs and/or wants by focusing on the features, advantages, and benefits of the product or service to the buyer. viii) Sales presentation—Demonstrating the capabilities of the firm and its products for providing this satisfaction; presenting vocally and persuasively, and answering questions. ix) Closing the sale and taking the order—The key ingredient in any sales presentation is the close—getting the prospects‘ commitment. x) Following up and servicing the account—The responsibilities of the sales force do not end once the sale has been made. It is much easier to keep existing customers than to attract new ones. Maintaining customer loyalty, generating repeat sales, and getting the opportunity to cross sell—that is, sell additional products and services to the same

customer—are some of the advantages of keeping customers satisfied through follow-up activities. The text also discusses the cost of obtaining a sales lead (Figure 22-6), strategies for new lead generation tactics (Figure 22-7), and traits of successful salespeople (Figure 22-8). Professor Notes:

III

ADVANTAGES AND DISADVANTAGES OF PERSONAL SELLING

Advantages include: 

Allowing for two-way interaction—The ability to interact with the receiver allows the sender to determine the impact of the message.



Tailoring of the message—Because of the direct interaction, messages can be tailored to the receiver



Lack of distractions—In many personal-selling situations, a one-to-one presentation is conducted. The likelihood of distractions is minimized and the buyer is generally paying close attention to the sales message.



Involvement in the decision process—Through consultative selling and relationship marketing, the seller becomes more of a partner in the buying decision process, acting in conjunction with the buyer to solve problems. This leads the buyer to rely more on the salesperson and his or her products and services.



Source of research information—In a well-integrated marketing/sales department, the sales force can be the ―eyes and ears‖ of the firm. Sales reps can collect information on competitor‘s products and services, promotions, pricing, and so on firsthand.

Disadvantages include: 

Inconsistent messages—Salespeople may alter the message in a way that changes the intent of the message.



Sales force/management conflict—Often because of failure to communicate, corporate politics, and a myriad of other reasons, the sales force and marketing may not be working as a team.



High cost—When the cost per sales call continues to climb, the marketer may find other forms of communication a more cost-effective alternative.

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Poor reach—Due mainly to time and personnel constraints, personal selling cannot reach as many members of the target audience as other elements.



Potential ethical problems—Because the manager does not have complete control over the messages the salespeople communicate and because income and advancement are often directly tied to sales, sometimes sales reps bend the rules.

Professor Notes:

IV.

COMBINING PERSONAL SELLING WITH OTHER PROMOTIONAL TOOLS

As stated earlier, personal selling must be integrated into the promotional mix to achieve success. Personal selling efforts should support, and be supported by, other promotional mix elements. Combining Personal Selling and Advertising—A complementary relationship should exist in which advertising is used to support personal selling efforts and vice versa. The text demonstrates how both parties could benefit from such a relationship. Combining Personal Selling and Public Relations—Personal salespersons must often perform public relations activities. For example, public appearances, speaking engagements, etc. are all beneficial to the organization, and can be carried out by the sales staff. In return, public relations sponsored by the firm support the image of the salesperson. Several examples of this complementary relationship are provided in the text. Combining Personal Selling and Direct Marketing—One way marketers have found to reduce the costs of personal selling is by supporting this function with direct marketing. Letters and/or phone calls may be designed to solicit leads, screen potential customers, close sales, or as a follow-up to the salespersons efforts. The net result is a more effective, and cost conscious program. As shown in the chapter, there has been a rapid growth in the use of the telemarketing/sales combination. In addition to selling and supporting the sales efforts, the telemarketing staff also provides a public relations dimension. Communicating with buyers more often creates goodwill, improving customer satisfaction and loyalty while enhancing the CRM effort Combining Personal Selling and Sales Promotion—Sales promotions targeted at resellers (discussed earlier) benefit the sales force as well. Likewise, many sales promotions (such as contests, motivational programs, etc.) are targeted directly at the sales staff. Combining Personal Selling with the Internet—Many of the roles of personal selling are now done on the Internet. For some companies, the Internet has all but replaced order takers. For others, many of the activities performed by the sales force are now done online, including conducting online meetings, sales meetings, and delivering customer presentations (webinars). Many managers have increased usage of the Internet to fulfill the more mundane tasks of order fulfillment and providing information. This, in turn, will allow the sales force to be more effective in closing orders, prospecting, problem solving, and cross selling and focusing more attention on high-value and/or new customers. Professor Notes:

EVALUATING THE PERSONAL-SELLING EFFORT

The chapter shows a variety of criteria that can be used to evaluate personal selling contributions. While these criteria are generally offered as an evaluation of the sales force itself, an evaluation should be made regarding contributions to the promotional program objectives also. Figure 22-12 summarizes quantitative and qualitative measures used to evaluate the sales force. Criteria for Evaluating Personal Selling—Criteria that may be used in this regard are: 1-383 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

Provision of marketing intelligence—The ability of the sales force to feed back information regarding competitive programs, customer reactions, market trends, and other factors that may be important in the development of the promotional program.

Follow-up activities—The use and dissemination of promotional brochures and correspondence with new and existing customers, providing feedback on the effectiveness of various promotional programs.

Program implementations—The number of promotional programs implemented; the number of shelf and/or counter displays used, and so forth; the implementation and assessment of cooperative advertising programs.

Attainment of communications objectives—The number of accounts to whom presentations were made (awareness, evaluation), the number of trial offers accepted, and the like.

Professor Notes:

Teaching Suggestions A key determinant of how this chapter will be taught is the orientation that the instructor wishes to assume. Some instructors like to emphasize personal selling more than we have done here. Others care only to address it as a promotional mix element, and demonstrate how this element should be integrated into the overall promotional plan. For those wishing to assume the former orientation, we suggest supplementing this chapter with materials from other texts. A variety of materials can be obtained to use as illustrations of those discussed in the text. Personal salespeople always seem to be willing to share their promotional aids, and others can be picked up in local stores. In addition, many students who graduate with marketing degrees get sales jobs. Having them back as guest lecturers to discuss their activities and supporting programs is always received quite favorably by students.

Answers to Discussion Questions 190. Personal salespeople are no longer evaluated strictly on how much they sell. The chapter discusses other criteria now used and evidence suggests that some of these may be increasing in importance. Discuss some of these criteria and explain why they might or might not be useful for evaluating the sales force. (LO 22-4). Like all other elements of the promotional mix, personal selling must be evaluated on the basis of its contribution to the overall promotional effort. Because the sales force is under the supervision of the sales manager, evaluations used to be based strictly on sales criteria. Sales were analyzed by total sales volume, territories, product line, customer type, or sales representative attitudes. In today‘s market, other criteria can also be applied in evaluating personal selling: Provision of marketing intelligence—the ability of the sales force to feed back information regarding competitive programs, customer reactions, market trends, and other factors that may be important in the development of the promotional program. Follow-up activities—the use and dissemination of promotional brochures and correspondence with new and existing customers, providing feedback on the effectiveness of various promotional programs. Program implementations—the number of promotional programs implemented; the number of shelf and/or counter displays used, and so forth; the implementation and assessment of cooperative advertising programs. Attainment of communications objectives—the number of accounts to whom presentations were made (awareness, evaluation), the number of trial offers accepted, and the like. 191. The Internet has had a profound impact on what constituted the traditional sales force. Give examples of some of the changes that have come about as the Internet has received more and more acceptance. Explain whether these changes might be considered good or bad. (LO 221) While the personal sales function has been rapidly changing since the advent of the Internet, recent environmental factors have also significantly increased this evolution, forcing both sales and marketing departments to make a number of changes. The impact of COVID-19 and a variety of technological changes have forced companies to adapt to a new world in which they do business. The way customers buy now has significantly changed.

Research indicates that a full 94 percent of B2B buyers now engage in omnichannel buying in which they purchase face-to-face, online, and remotely as opposed to the long-established and traditional sales interaction. E-commerce is now the most commonly used channel for buyers, even though face-to-face personal selling still leads to the closest relationship. These changes have changed the working relationships between all three parties (buyers, sales, and marketing). It‘s almost like there is no selling; it‘s more like relationship building. While relationship building is important in the business-to-consumer market, it has become critical in the business-to-business market. Salespeople have forever strived to build and maintain relationships with their customers and that has not changed; it is how they are doing it. Now they must interact more as partners than as sellers and buyers. Clearly, there is a new virtual selling environment. The answer for this digital disruption is to focus and engage with customers. Understanding customer needs and helping to solve them will lead to success for both parties and establish an even closer relationship. 192. Some consumers consider this to be the ―dark era‖ of marketing. They cite decreases in service, increasing prices, product shortages and delays, and other factors as contributors to this ―dark era.‖ What is happening in the sales area? How can personal selling contribute to improving the current situation? Provide examples. (LO 22-1) Personal selling differs from the other forms of communication in that messages flow from a sender (or group of senders) to a receiver (or group of receivers) directly (usually face to face). This direct and interpersonal communication lets the sender immediately receive and evaluate feedback from the receiver. This communication process, known as dyadic communication (between two people or groups), allows for more specific tailoring of the message and more personal communications than do many of the other media discussed. The message can be changed to address the receiver‘s specific needs and wants. Today, personal selling plays a critical role not just in industrial settings but in the consumer market as well. It decreases the distance between the company and the buyer (both B2B customers and individual consumers). In some sales situations, this ability to focus on specific problems is mandatory; a standard communication would not suffice. Consider an industrial buying situation in which the salesperson is an engineer. To promote the company‘s products and/or services, the salesperson must understand the client‘s specific needs. This may mean understanding the tensile strength of materials or being able to read blueprints or plans to understand the requirements. Or say a salesperson represents a medical products company. Part of the responsibility for making a sale may involve working directly with a physician or surgeon to solve a problem unique to this customer, as well as to provide in-depth product knowledge. Mass communications cannot accomplish these tasks. 193. Is personal selling dead or dying? There are those who believe that it will not be long before personal selling jobs cease to exist. Explain why they feel this way and offer a position as to whether you believe they are right or wrong. (LO 22-4) Like all other elements of the promotional mix, personal selling must now be evaluated on the basis of its contribution to the overall promotional effort. The costs of personal selling are often high, but the returns may be just as high. Some may feel that personal selling is dying because it can no longer be evaluated just on sales criteria. New criteria include promotional program support, follow-up activities with new and existing customers, program implementations, and attainment of communication objectives.

While not strictly based on sales numbers anymore, personal selling efforts will continue to be an essential element in supporting the organization‘s IMC efforts. 194. Personal selling as an element of the IMC program may take on different roles depending on the nature of the business. Give examples of situations where personal selling is more important than other program elements, and situations where it may be less so. Support your answers. (LO 22-3) Like the other program elements, personal selling is usually one component of the integrated marketing communications program. Rarely, if ever, is it used alone. Rather, this promotional tool both supports and is supported by other program elements. With specific market situations and communications objectives, the advantages of advertising make it more effective in the early stages of the response hierarchy (e.g., in creating awareness and interest), whereas personal selling is more likely to be used in the later stages (e.g., stimulating trial and getting the order). Thus, each may be more or less appropriate depending on the objectives sought. For example, consider a new product introduction. Given an adequate budget, the initial objective might be to reach as many people in the target market as quickly and cost-effectively as possible. Since the primary objective is awareness and a simple message will suffice, advertising will likely be the most appropriate medium. Now suppose specific benefits must be communicated that are not very obvious or easy to comprehend, and a product demonstration would be useful. Or consider a situation in which the objective is to ask for the sale and/or to establish a relationship. Here personal selling is a more appropriate tool than advertising. Companies have also found that integrating direct marketing, specifically telemarketing and direct mail, into their field sales operations makes their sales efforts more effective. As noted, the cost of a sales call and the cost associated with closing a sale are already very high and on the increase. Many marketers have reduced these costs by combining the use of the Internet, telemarketing, and sales efforts. A number of companies now offer consulting services to help organizations in the sales process, including assisting in the development and implementation of direct-marketing methods. The telemarketing department is used to screen leads and—after qualifying potential buyers on the basis of interest, credit ratings, and the like—pass them on to the sales force. The net result is a higher percentage of sales closings, less wasted time by the sales force, and a lower average cost per sale. Thus, as one moves consumers down through the hierarchy, the IMC mix will change. At lower levels, such as awareness and interest, advertising may play the dominant role. As one moves to evaluation, the Internet may play an increased role, and to stimulate trial or complete the sale (particularly in high involvement or business-to-business sales) personal selling may take on the dominant role. 195. Battling between the sales and marketing departments has existed for years and shows no sign of letting up. Even though both sides know that the battles are dysfunctional, there seems to be no end in sight. Explain some of the reasons for these departmental conflicts and what might be done to resolve the issue. (LO 22-1) For as long as anyone can remember, there has always been a schism between the marketing and sales departments in companies. In most companies the two exist in separate silos, and it seems that‘s the way they want to keep it. So long as they do, the ―blame game‖ will continue, with each side blaming the other for less than optimal performances.

Marketing thinks it‘s doing a fabulous job and blames the sales force for not bringing in new business. At the same time, sales thinks that marketing consists of arrogant desk jockeys who don‘t appreciate the specialized skills needed to make sales. The salespeople think the marketing people do not understand their customers, or what was involved in selling. At the same time, because some salespeople have more of a ―close the sales first‖ mentality, and they are evaluated based on different criteria, they often don‘t get the big picture of what marketing is trying to accomplish. Reasons these battles seem to continue: Lack of communication between the departments. Role confusion: department members are from different backgrounds. Unclear goals: the salesperson believes that their job is to sell, while marketers believe they have different objectives such as creating product awareness, supporting the sales force, etc. Too much competition between the departments for the same budget. Personality differences between department members. Conflicting strategies. This conflict is detrimental to the organization that both parties work for, and not in the best interests of anyone. Many believe that in the future marketing and sales will no longer be separate departments, but will merge into one (marketing.) As one manager says, ―Marketing is really the new sales function. . . . In three to five years marketing is going to be the de facto owner of the entire customer journey. We‘re also moving toward a world where marketing is the new customer service.‖ There are some indications that this merging process is already in progress. As noted in a report by Sales Board Inc., two major trends are occurring that are impacting the role of sales today: (1) traditional outside sales jobs are diminishing, and (2) nontraditional sales jobs are emerging. While they enjoyed explosive growth in the mid-20th century, today outside salespeople are selling less and maintaining relationships more. For marketing and sales to work together in the most effective and efficient manner both departments must (1) establish a culture of open and constant communication between teams, (2) clarify the roles and functions of each department, (3) create a unified sales and marketing strategy, and (4) incentivize collaboration. 196. Figure 22-12 lists some of the criteria used to evaluate the performances of the sales force. Many salespeople contend that they should only be judged by quantitative measures, such as meeting their sales goals. Explain whether you agree or disagree and why. (LO 22-4) This chapter opens by discussing the increasing importance of customer relationship management (CRM), which has had a major impact on how personal-selling activities are conducted. Salespeople are no longer expected to simply make the call and make the sale. They are also evaluated on a number of other qualitative criteria such as their selling skills and sales-related activities. The selling skills and sales-related activities outlined in Figure 22-12 really go hand-inhand with helping salespeople reach their quantitative sales metrics. For example, one of the qualitative sales-related activities for salespeople includes territory management, sales call preparation, scheduling, routing, and time utilization. Those types of activities would directly relate to and support quantitative selling outputs such as those outlined in the sales volume, customer accounts, and customer service metrics outlined in the quantitative portion of Figure 2212. For these reasons, salespeople should certainly be evaluated on both quantitative and qualitative metrics.

197. What is relationship marketing? How does relationship marketing differ from CRM? (LO 22-2) Relationship marketing is defined as a type of marketing that focuses on cultivating deeper, more meaningful relationships with customers to ensure long-term satisfaction and brand loyalty. Rather than focusing on a short-term sale, the sales rep tries to establish a long-term bond. And rather than just selling, the sales department works with marketing to use techniques like database marketing, message differentiation to different target markets, and tracking of promotional effects to improve the relationship. Relationship marketing, while similar and related to CRM, has a few distinct factors. While relationship marketing is a sales and marketing concept, CRM refers to the tools used to carry out the concept. Relationship marketing is implemented as a strategy and includes activities such as identifying long-term sales and retention goals, public relations, marketing, and advertising campaigns. The adoption of a relationship marketing and CRM approach will require sales managers to develop nontraditional sales strategies in which companies will need to move to a more strategic, less tactical approach, using emerging technologies to support this effort. 198. The chapter notes that the cost of obtaining a sales lead can range substantially. Why would the cost per lead differ in different industries. Provide examples. (LO22-1) One of the major responsibilities of personal selling involves prospecting or locating prospective customers. In this prospecting process, salespeople must follow up on leads (those who may become customers) and prospects (those who need the product or service). They must also determine whether these prospects are qualified prospects—that is, able to make the buying decision and pay for the product. However, changes in the business market have made it almost impossible to determine an ―average cost per sale‖ because the changing roles of salespersons, increased use of technology, and differences between industries have led to less reporting on these figures. There is also a tremendous difference between personal selling in an industrial setting where a single purchase can be worth millions of dollars, versus one in a consumer market. In evaluating the costs of personal selling, we must consider the nature of the call, the objectives sought, and whether other program elements could deliver the message as effectively. 199. Figure 22-8 lists a number of traits common to successful salespeople. Describe each of these traits and provide an example of a business transaction where it might be important. (LO 22-4) Ten traits of successful salespeople are provided in Figure 22-8. Salespeople must be knowledgeable. Customers will feel much more comfortable giving their business to a company in which the salespeople are knowledgeable about the product and the industry as a whole. Salespeople must be professional. They must ensure that each account is handled in an appropriate, respectful, and profitable way. Salespeople must also be thorough. Salespeople should work to make pre-call research part of their process, so they can offer solutions that speak directly to each prospect‘s specific needs. Salespeople should also be results-oriented by working to quantify the type of ROI their prospects can expect and provide some reference points so prospects can see how much money they stand to lose by not agreeing to do business with this salesperson. Salespeople should also be problem solvers; not simply offering a product or service, but solutions to problems.

Salespeople should be relationship-oriented. They should work to build the type of relationship where loyal customers think of them as an extended member of their corporate family. Salespeople should of course be customer-focused. They should work as an advocate whom the buyer can trust to create a working relationship where everyone walks away a winner. Salespeople should also be responsive, taking personal accountability for handling customer requests, and following up with each customer personally to ensure they are satisfied with the outcome. Salespeople should also be good communicators. They could do this by determining which mode of communication the prospect prefers (e.g., e-mail, mobile phone, text) and using that as a way to stay in contact. Salespeople should be reliable. They should let customers know they can count on them to get the job done—and get it done better than anyone else.

Additional Discussion Questions (not in text) 200. Social media has been shown to play an important role in business to consumer markets, and now is being used for assisting personal selling effort in business to business markets. Explain how marketers are using social media in this regard. (LO 22-3) At first, it was thought that social media would be a powerful marketing tool for business to consumer (B2C) markets, but perhaps not as powerful for use in business to business markets (B2B). Marketers have now discovered that social media are important to B2B companies as well. Perhaps more now than in the past, relationships are critical in B2B dealings. Trust, communications, and reliability are critical in business dealings. In addition, market information regarding competitors‘ pricing, product offerings, and promotions need to be exchanged in a short period of time, and social media allow for this. Likewise, business news can be communicated much more rapidly than in the past. B2B marketers will watch the happenings in the B2C social media community and adapt many of the strategies to their own markets. 201. The cost of a personal sales call is very high relative to one exposure in other media, and continues to rise. Explain how effective utilization of the Internet can help bring these costs down. (LO 22-4) The salesperson of old is very different than today‘s. In the past, many salespeople made personal sales calls to attempt to find new customers, make the sales pitch, take orders, and close sales. In addition, servicing accounts often required a personal sales call. When telemarketing began to show its usefulness for marketing, some companies stayed away from this tool, while others embraced it as a way to cut costs, improve sales performance, etc.

The value of the Internet seems to have been discovered much more rapidly, particularly by the B2B marketer. Sales teams quickly realized how this medium could save them time and money, resulting in more effective and efficient salespersons. Rather than make expensive personal calls to find potential customers, the Internet allows for customers to find the company. Search allows the buyer to find companies with products and services they need, and initiate the contact requesting a sales call. This makes the salesperson much more effective as the customer has already expressed an interest. Product updates, recalls, etc. can also be updated on the Internet, as can instructions as to what needs to be done to amend the situation. Sales promotions, new product introductions and ads can now be provided on the Internet at a fraction of the cost of being communicated in person. Many companies now ask their customers to order and/or reorder online, saving the salesperson time that can be used to find new customers, and conduct more valuable activities that require personal visits. Webinars are now being successfully employed to keep customers up to date, informed and knowledgeable about what is going on in their industries. All of these tactics free up the salesperson to do what they do best—sell. 202. Describe how personal selling has become more involved with the use of other media in the IMC program. Explain how successful salespersons will use these media to their advantage. (LO 22-3) Let‘s start with advertising. Personal selling and advertising both offer their own advantages and disadvantages to the IMC program. While advertising may be more effective for reach and at lower stages of the response hierarchies, for closing the sale and/or providing in-depth information, personal selling may be more effective. Advertising is also more affordable on a cost per contact basis. Personal selling, on the other hand, while less cost efficient, is more effective for closing the sale, helping the customer understand the product and/or service offering and relationship building. Personal selling can also be more effective for cross selling. By combining personal selling with advertising, the marketer may more effectively and efficiently reach customers and or potential customers. As noted, advertising can be used at the early stages of the response process to achieve the objectives of reach, creating interest, etc. Personal selling can then be used once prospects have expressed an interest, been qualified and sent information. The one to one personal selling effort can then be used to close the sale. Studies have shown that advertising can be effective in creating brand image and awareness of products. Additional studies have shown that once the prospective buyer knows about the brand through advertising, it makes it easier for the salesperson to get an appointment and presentation. While advertising may not mean that the salesperson gets the sale, it at least gets them in the door to have the opportunity to do so. Another example is public relations. Companies have involved the sales force in a variety of public relations activities including: A number of examples are cited, and a few more can be added:

1. A number of insurance sales agents assisted flood victims in the Midwest, helping them get reorganized, file claims, etc. 2. Computer sales teams helped earthquake victims get re-established by assisting them in setting up new computer systems, installing networks, etc. 3. Media salespeople often engage in public relations activities ranging from fence painting to cleaning up neighborhoods to aiding local charities to better the media image. 4. Companies encourage their employees to become involved in community efforts through the Little League, joining organizations, and supporting charities. 5. Salespersons are encouraged to speak at schools, colleges, and/or other functions to provide knowledge about sales careers and the specific company. The chapter provides numerous additional examples of how selling can integrate public relations into their programs. The answers to other discussion questions show how other tools can be used. 203. CRM is not new to marketers. However, the text shows that the definition as well as the requirements of CRM have changed over the years. Explain the differences in the way companies employ CRM now versus previous years. (LO 22-1) Just a few decades ago, relationship marketing was defined as ―an organization‘s effort to develop a long-erm, cost-effective link with individual customers for mutual benefit.‖ Rather than focusing on a short-term sale, the sales rep tries to establish a long-term bond. And rather than just selling, the sales department works with marketing to use techniques like database marketing, message differentiation to different target markets, and tracking of promotional effects to improve the relationship. Forrester now offers an updated definition of customer relationship management (CRM) as ―the business processes and supporting technologies that support the key activities of targeting, acquiring, retaining, understanding and collaborating with customers.‖ Note how this definition has changed over the years. The newer version reflects how CRM has changed to focus on the balance of benefits to both buyer and seller. CRM tools have been used by a number of companies. These companies make extensive uses of their databases on purchase behavior and frequency and duration of customer interactions to estimate profitability at the individual account level.

IMC Exercise Have students make a sales presentation to the class for a product/service of their choice. In the presentation, promotional materials (ads, sales promotions, and advertising specialties) should be included to aid the presentation. Have the students discuss how other tools support the sales effort. Have other class members critique the presentation.