INSTRUCTOR MANUAL for Advertising and Integrated Brand Promotion, 6e Thomas O'Guinn Chris Allen Rich by welldoneassistant

INSTRUCTOR MANUAL for Advertising and Integrated Brand Promotion, 6e Thomas O'Guinn Chris Allen Richard Semenik.

PART 1 Advertising and Integrated Brand Promotion in Business and Society The book is divided into 5 parts. At the beginning of each distinct part of the text, it is worth alerting the students to the focus of the chapters within the part. • Part 1 sets the tone for the study of advertising. The chapters in this part emphasize that advertising is much more than the old-style mass media messages of the past. • But advertising is now much more diverse and dynamic and is part of a process called integrated brand promotion (IBP). • IBP is the process of using all sorts of different promotional techniques and tools—from television ads to iPad broadcasts—that send messages about brands to consumers. • The rapid ascent of digital media— particularly social networking sites like Facebook, MySpace and Twitter, have radically changed the landscape for advertising and IBP. • Advertising and IBP communications are not just marketing messages. They are also part of a social communication process that has evolved over time with changes in culture, technology, and business strategies. • The “brand” plays a leading role in communications. o Consumers know brands because they hear about them and use them every day— Apple, Nike, Pantene, Starbucks, and literally hundreds of others. o Consumers also know (and learn) by using them and by seeing them being used in society. This first part of the book lays out the broad landscape of the advertising and IBP processes that expose us to brands and what they have to offer.

CHAPTER 1 The World of Advertising and Integrated Brand Promotion KEY TERMS mobile marketing advertising client, or sponsor integrated brand promotion (IBP) advertisement

advertising campaign audience target audience household consumers members of business organizations

members of a trade channel professionals trade journals government officials and employees

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global advertising international advertising national advertising regional advertising local advertising cooperative advertising, or co-op advertising marketing marketing mix brand brand extension (variant) brand loyalty brand equity

market segmentation differentiation positioning external position internal position economies of scale inelasticity of demand primary demand stimulation selective demand stimulation direct response advertising delayed response

advertising corporate advertising brand advertising institutional advertising gross domestic product (GDP) value symbolic value social meaning integrated marketing communications (IMC)

SUMMARY Know what advertising and integrated brand promotion are and what they can do. Because advertising has become so pervasive, it would be reasonable to expect that you might have your own working definition for this critical term. However, an informed perspective on advertising goes beyond what is obvious and can be seen on a daily basis. Advertising is distinctive and recognizable as a form of communication by its three essential elements: its paid sponsorship, its use of mass media, and its intent to persuade. An advertisement is a specific message that an advertiser has placed to persuade an audience. An advertising campaign is a series of ads and other promotional efforts with a common theme placed to persuade an audience over a specified period. Integrated brand promotion (IBP) is the use of many promotional tools, including advertising, in a coordinated manner to build and maintain brand awareness, identity, and preference. Discuss a basic model of advertising communication. Advertising cannot be effective unless some form of communication takes place between the advertiser and the audience. However, advertising is about mass communication. Many models might be used to help explain how advertising works or does not work as a communication platform. The model introduced in this chapter features basic considerations such as the message-production process versus the message-reception process, and this model says that consumers create their own meanings when they interpret advertisements. Describe the different ways of classifying audiences for advertising and IBP. While it is possible to provide a simple and clear definition of what advertising is, it is also true that advertising takes many forms and serves different purposes from one application to another. One way to appreciate the complexity and diversity of advertising is to classify it by audience category or by geographic focus. For example, advertising might be directed at households or government officials. Using another perspective, it can be global or local in its focus. Explain the key role of advertising and IBP business processes.

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Many different types of organizations use advertising to achieve their business purposes. For major multinational corporations, such as Procter & Gamble, and for smaller, more localized businesses, such as the San Diego Zoo, advertising is one part of a critical business process known as marketing. Advertising is one element of the marketing mix; the other key elements are the firm’s products, their prices, and the distribution network. Advertising must work in conjunction with these other marketing mix elements if the organization’s marketing objectives are to be achieved. It is important to recognize that of all the roles played by advertising in the marketing process, none is more important than contributing to building brand awareness and brand equity. Similarly, firms have turned to more diverse methods of communication beyond advertising that we have referred to as integrated brand promotion. That is, firms are using communication tools such as public relations, sponsorship, direct marketing, and sales promotion along with advertising to achieve communication goals. Understand the concept of integrated brand promotion (IBP) and the role advertising plays in the process. Integrated brand promotion (IBP) is the use of various promotional tools like event sponsorship, the Internet, public relations, and personal selling, along with advertising, in a coordinated manner to build and maintain brand awareness, identity, and preference. When marketers use advertising in conjunction with other promotional tools, they create an integrated brand promotion that highlights brand features and value. Note that the word coordinated is central to this definition. Over the past 30 years, the advertising and promotion industry has evolved to recognize that integration and coordination of promotional elements are key to effective communication and lasting brand identity.

CHAPTER OUTLINE INTRODUCTORY SCENARIO: So Just What Is Going On? This introductory scenario sets an important tone for student understanding of the changes taking place in advertising and IBP. And, it should strike some very responsive cords within the class! You will likely have students who have engaged in activities just like the scenario in the last 24 hours: •

Visited MySpace, Facebook, or “tweeted” on Twitter

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Read a blog

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Ordered something from a website (in this scenario, concert tickets)

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IM’ed their friends

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Sent to or received programming on their smartphone l or iPod, or even iPad

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Seen an ad embedded in a video game

Here are the issues to highlight from this scenario: •

Consumers, like your students, want to control their information flow and are turning

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away from mass media message reception which they cannot control

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Consumers trust information sources they believe are under their control more than mass mediated messages

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Firms have been using traditional mass media to communicate with consumers for decades and are struggling to find ways to incorporate messages into those more trusted media, particularly the digital and social media networks highlighted in the scenario.

The New World of Advertising and Integrated Brand Promotion At this point, it is important to provide a perspective on advertising and IPB.

PPT 1-2 here

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Consumer preferences and technology are reshaping the commercial communication environment

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The lines between information, entertainment and advertising/IBP are blurring and this phenomenon is referred to as “Madison and Vine.”

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The mass media are not dead, but they are being supported or supplanted by media choices facilitated by new technologies

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The current “wisdom” is that advertising and IBP will become more digital, interactive and social facilitated through “mobile marketing” efforts (i.e., reaching consumers with messages on their mobile devices)

II. Old Media/Digital Media—It’s All About the Brand • • • • •

PPT 1-3 here

Fundamentally though, regardless of media, firms use advertising and IPB to build brands in the marketplace. The use of Facebook or Twitter do not change the fundamental challenge— communicating effectively about the brand. Firms of all sizes benefit from using advertising and IBP tools. Advertising is one tool in an overall integrated brand promotion effort (along with events, sponsorships, sales promotions, public relations, etc.). Advertising and promotion do not guarantee success—8 out of 10 new products fail, Cadillac market share plummeted from 75 percent in the 1950s to about 9 percent by the end of the 1990s due to poor product design and positioning. Cadillac is reinventing the brand features, using new advertising and promotion now with some early success.

III. What Are Advertising and Integrated Brand Promotion? PPT 1-4 here It is important to start students out with a perspective and clear definitions of the fundamental terms in the advertising process:

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Despite the importance of advertising and IBP to firms, the average person has a hard time understanding and appreciating these processes: • Many people believe advertising deceives others—but not them, of course! • Many people think that those who work in advertising are morally bankrupt. • Advertising is often seen as hype, manipulation, or mind control. • At best, people may see advertising as informative, amusing, or occasionally hip. The truth about advertising is that the reality lies squarely between the extremes: • It can be hard-hitting and informative or boring and ineffective. • It can be creative and entertaining or simply annoying and intrusive. • Highlight that advertising is anything but unimportant. • It plays a pivotal role in world commerce. • It affects the way people experience and live their lives. • It affects language and culture. • It is a complex communication and business process. A. Advertising Defined: Advertising is a paid, mass-mediated attempt to persuade. • Paid means that a client or sponsor is involved. (PSAs are not ads technically) • Mass mediated means that the advertising is delivered through a communication medium like television, radio, newspapers, or new media like the Internet. • Attempt to persuade means that ads are designed to get somebody to believe and/or do something—such as like a brand and eventually buy that brand. B. Integrated Brand Promotion Defined: Integrated Brand Promotion (IBP) is the process of using a wide range of promotional tools working together to create widespread brand exposure. PPT 1-5 here • IBP is a process • IBP uses a wide ranges of tools including: o Advertising o Sales Promotion (coupons, premiums, contests, etc.) o Point of Purchase (in-store) materials o Direct Marketing (catalogs, infomercials, email) o Personal Selling o Internet advertising (display, banner, pop-up/pop-under) o Social networks/Blogs o Podcasting o Event sponsorship o Brand entertainment (product placement on TV shows, in movies) o Outdoor signage/billboards o Public relations o Influencer (peer-to-peer) communications o Corporate advertising C. Advertisements, Advertising Campaigns, and Integrated Brand Promotion PPT 1-6 here

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Advertisement: An advertisement refers to a specific message that an organization has placed to persuade an audience. Be sure to distinguish between widespread brand advertising, political advertising, and PSAs. Referring to text Exhibits 1.4 through 1.16 are helpful here.

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Advertising Campaign: A series of coordinated advertisements and other promotional efforts that communicate a single theme or idea. (PPT 1-6 highlights the Altoids campaign ads in Text Exhibits 1.7-1.10)

D. A Focus on Advertising It is extremely important to clarify for students that advertising is an enormously important part of IBP and will be the central focus until Part Five of the text when other IBP tools will be discussed specifically. IV. Advertising as a Communications Process

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Advertising is fundamental to life itself as a form of human communication, and advertising is also a commercial form of communication. To understand advertising, you must understand something about communication in general. A. A Model of Mass-Mediated Communication A simple model of mass-mediated communication is presented in Exhibit 1.11. This contemporary model shows that communication has two major components: production and reception with these components mediated by consumers’ accommodation and negotiation of the communication content. Rather than focus on every detail of this model, it is more useful to focus on the major process aspects: •

Production: Content of a mass communication is produced by institutions—corporations, ad agencies, government—and appears as a message in mass media.

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Reception: The audience interprets an ad according to social networks—family, friends, and peers. Interpretation creates meaning for an ad. It is important to recognize that the content that the advertiser puts into a message is not necessarily the same as the meaning an audience takes from a message.

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Accommodation and Negotiation: Production and reception are partially independent but subject to mediation and interpretation—producers of the message cannot control reception or interpretation. No ad contains a single meaning for all audience members, as the Diet Coke break example in the text shows. Exhibit 1.12 highlights this point.

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Highlight that each individual receives and interprets communication according to unique values and experiences

V. The Audiences for Advertising

PPT 1-8 here

An audience is a group of individuals who receives and interprets messages from advertisers through mass media. A target audience is a particular group of consumers singled out for a specific message carried in advertising. A. Audience Categories

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• • • •

Household consumers: Individuals who buy and use products for personal use. They are the largest audience for advertising—over 116 million households and more than 300 million people with total retail spending by households in the United States at about $5.0 trillion. Members of business organizations: Firms that buy and use products to make or resell other products. Members of a trade channel: Retailers, wholesalers, and distributors are responsible for distributing and selling goods to business organizations and household consumers. Professionals: Any professional—like a doctor, lawyer, or teacher—who has special training or certification. Professionals merit special communications. Government officials and employees: Members of federal, state, or local governments warrant special communications because of the large volume of business they do with organizations.

B. Audience Geography PPT 1-9 here • Global advertising: Advertising that uses a common theme and presentation in all markets around the world. It is rare for a brand to have universal cultural appeal, but when it does, global advertising can be used. As the global issues box details, many firms such as Motorola are working on developing a global image today. • International advertising: An advertiser prepares and places different advertising (this is the key distinction from global advertising) in each different national market where a brand is sold—ask students to distinguish global from international PPT 1-10 here • National advertising: Advertising that reaches all geographic areas of a nation. National typically refers to U.S. advertising. • Regional advertising: Advertising concentrated in a particular geographic region of a nation. • Local advertising: Advertising directed at a single trading area, typically a city or state. A particular form of local advertising is known as cooperative or co-op advertising in which national advertisers share advertising expenses with local advertisers. Intel, Sony, and Chevrolet invest heavily in co-op advertising.

VI. Advertising as a Business Process A. The Role of Advertising in Marketing PPT 1-11 here Advertising is a business process, with an important role in a firm’s marketing and brand promotion effort. An integrated approach can be the key in the success of a brand. The role of advertising in marketing relates to four important decision-making areas in marketing: 1. The Role of Advertising in the Marketing Mix

PPT 1-12 here

Marketing is 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.

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The marketing mix refers to the four primary areas of decision making in marketing— product, price, promotion, and distribution (or place). Advertising, as part of promotion, plays an important role in bringing the marketing mix decision to life in the market. Advertising can communicate the value created for consumers by the product, price, and distribution strategies of the organization. (Reference Exhibit 1.18 here) 2. The Role of Advertising in Brand Management

PPT 1-13 here

A brand is a name, term, sign, symbol, or any other feature that identifies one seller’s good or service as distinct from those of other sellers. Advertising plays a critical role in brand development and integrated brand management (IBM). In many ways, a brand is a firm’s most precious asset. The most valuable brand in the world is Coca-Cola, which is valued at $65.32 billion (from Exhibit 1.19). Effective advertising is a competitive advantage for a brand. Advertising affects brand development and management in five important ways: •

Information and persuasion: Advertising informs and persuades target audiences about the values a brand has to offer.

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Introduction of a new brand or brand extensions (variants): A brand extension is an adaptation of an existing brand to a new product area. Advertising is essential to inform consumers about the extension. In addition, advertising aids in obtaining cooperation in the trade channel with wholesalers and retailers.

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Building and maintaining brand loyalty among consumers: •

Brand loyalty occurs when a consumer repeatedly purchases the same brand to the exclusion of competitor’s brands. Brand loyalty can result from habit, attachment, reminder by advertising, incentive from promotions, or tailored communication in direct marketing.

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Brand equity is developed when a firm creates and maintains positive associations with the brand in the minds of consumers.

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Creating an image and meaning for the brand: Advertising can communicate how a brand meets certain needs and desires and therefore plays an important role in attracting consumers to brands they find useful and satisfying.

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Building and maintaining brand loyalty within the trade channel: Advertising and integrated promotions can influence brand preferences in wholesalers and retailers. Marketers can provide training, point-of-purchase advertising displays, and traffic-building events as well as discount pricing and premiums (gifts).

3. Advertising’s Role in Market Segmentation, Differentiation, and Positioning. PPT 1-14 here Advertising is critical to segmentation, differentiation, and positioning strategies: •

Market segmentation: Breaking down a large, diverse market into segments that are more homogeneous.

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Differentiation: Creating a perceived difference between an organization’s brand and that of the competition in the mind of an audience.

Chapter 1/The World of Advertising and Integrated Brand Promotion

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Positioning: Designing a product or service so that it can occupy a distinct place in the target audience’s mind. —External position: Competitive niche the brand will occupy. —Internal position: Position of a brand within the firm’s own line of products.

4. Advertising’s Role in Contributing to Revenue and Profit Generation PPT 1-15 here This is a VERY important discussion that is somewhat complex for students. Advertising is not just about spending money. Both top-line revenue and bottom-line profit can be positively affected. •

Advertising communicates the value of the brand created by the marketing mix and contributes to revenue generation—people like the brand, people buy the brand.

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Profits are affected by economies of scale: high-volume sales result in high-volume production, which lowers the unit cost of each item sold. Advertising demand stimulation contributes to high-volume production.

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Profits are affected by brand loyalty: consumer preference for and repeat purchase of a brand to the exclusion of competitors’ brands. Brand loyalty results in inelasticity of demand, whereby consumers are willing to pay more for the brand they prefer (or accommodate price increases). Advertising affects both brand loyalty and inelasticity.

Advertising can be used to create customer satisfaction. •

Advertising can influence social meaning, trends and norms, and cultural identification.

B. Types of Advertising •

PPT 1-16 here

Primary demand stimulation: Stimulating demand for an entire product category is a type of advertising most appropriately used by trade associations. •

A key and very essential point here: Primary demand stimulation is only a possibility in new product categories—currently this would be products like PDAs or TiVo type DVRs. There is no evidence—scientific or anecdotal—that advertising can affect primary demand in mature product categories. In fact, there are decades of economic and marketing research to the contrary. Both the “Got Milk?” campaign and the California Almond Growers campaign are examples of failures to create primary demand in mature product categories. It is important to dispel this myth about the power of advertising among students.

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Selective demand stimulation: Promoting the value of a particular brand compared to competition. The true power of advertising lies here. PPT 1-17 here

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Direct response advertising: Advertising that asks an audience to take immediate action.

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Delayed response advertising: Advertising that uses imagery and emphasizes brand

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features to build demand and loyalty over the long term. •

Corporate advertising vs. brand advertising: Corporate advertising does not focus on a single brand but promotes the company as a whole. Brand advertising focuses on a single brand and specific features and values of that brand.

1. The Economic Effects of Advertising

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a. Advertising’s Effect on Gross Domestic Product. As advertising stimulates the economy and helps ensure the success of new products, consumer spending rises and affects gross domestic product (GDP), which is a measure of the total value of goods and services produced within an economic system. b. Advertising’s Effect on Competition. Advertising can stimulate greater competition as firms strive to develop innovative products to advertise. Large advertising expenditures, though, can act as barriers to entry in a market. c. Advertising’s Effect on Prices. Advertising expenditures average only about 2-4 percent of sales across all industries (refer to Exhibit 1.33 here), and demand stimulation (which affects economies of scale) can lower the unit cost of production. There is no consistent and predictable relationship among advertising, spending, and sales. Different products and different market conditions dictate that firms spend different amounts of money on advertising. 2. Advertising’s Effect on Value. Value refers to consumer perception that a product or service delivers satisfaction beyond the cost incurred to acquire the product or service. •

Symbolic value is the meaning a brand has in a nonliteral way.

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Social meaning refers to what a product or service means in a social context. PPT 1-19 here

VII. From Advertising to Integrated Marketing Communications to Integrated Brand Promotion PPT 1-20 here We must recognize and appreciate that advertising is only one of many promotional tools a marketer can use to communicate about a brand. Integrated marketing communications (IMC) is an old notion about the process of using promotional tools in a unified way so that a synergistic communications effect is created. In an era of targeted communications and new media, organizations are relying on a broad range of communications tools. This mixing of various promotional tools has been a hot topic for the last 30 years. Today, however, Integrated Brand Promotions (IBP) is the focus of promotional efforts for firms. IBP involves the use of various promotional tools, including advertising, in a coordinated manner to build and maintain brand awareness, identity, and preference. The coordination is key to maintaining a clear brand image in the mind of consumers. IBP emphasizes that coordinated messages must have brand-building effects, not just communications effects.

SOLUTIONS TO END OF CHAPTER QUESTIONS 1. As consumers exercise ever greater individual control over when and how they receive

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information, how are advertisers adapting their messages? What is the role, if any, for traditional media outlets in this new environment? Will mobile marketing efforts including directing advertising to smartphones, be accepted by consumers? After decades of focusing on traditional media sources such as television, radio, and newspapers to reach consumers, the rapid growth of the Internet and other evolving technologies have forced advertisers to find new ways to reach consumers. Some examples include the use of consumerinterest blogs and social media, embedded advertising in video games, and event sponsorship. The traditional media outlets still play a dominant role, but it is one that is expected to continue to shift as those industries struggle against circulation and viewership declines. The issue of whether consumers accept advertising to smartphones remains to be seen. To date, there seems to be some verbal resistance, but not substantive resistance. 2. What does it mean when we say that advertising is intended to persuade? How do different ads persuade in different ways? An attempt at persuasion is one of the defining characteristics of all advertising. Advertising is a form of (persuasive) communication designed with the goal of getting customers to seek out and/or buy a specific product or service. Given this general goal, ads can be persuasive in many different ways. For example, ads are persuasive when they provide relevant information that convinces the consumer of a brand’s unique benefits. Ads are also persuasive when they generate brand interest that leads the consumer to search for more information about a particular product or service. 3. Explain the differences among regional advertising, local advertising, and cooperative advertising. What would you look for in an ad to identify it as a cooperative ad? Regional advertising refers to a concentrated ad campaign in a particular geographic region (e.g., New England). Local advertising is even more focused and often targets a specific metropolitan area. Cooperative advertising is a joint venture involving more than one firm. Manufacturers and their retailers often pursue cooperative advertising. This form of advertising is easily identified by the joint presence of a manufacturer’s brand and a retailer’s store location in the ad. 4. How do the goals of direct response versus delayed response advertising differ? How would you explain marketers’ growing interest in direct response advertising? Direct response advertising always features an immediate call for action from the consumer. Delayed response advertising is designed to shape brand preferences in such a way that at some future time the consumer’s brand choices will be affected. In recent years, marketers have become especially interested in assessing the productivity of advertising spending. Because direct response advertising is designed to yield immediate action, it is much easier to quantify the impact and gauge relative productivity of direct response advertising. This feature explains its growing popularity. 5. Differentiate between global advertising and international advertising. Do you think consumers in foreign markets will react favorably to GM’s new pop band-fueled Cadillac commercials as do American consumers? Why or why not? Global advertising uses a common theme and presentation in all markets around the world. A brand must have universal cultural appeal to use global advertising. In international advertising, an advertiser prepares and places different advertising in each different national

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market where a brand is sold. Cadillac ads featuring Led Zeppelin would not likely evoke the same nostalgic feelings in consumers overseas as they do for American car buyers. Rock and roll is still very much an American phenomenon—especially rock music from the 1970s. 6. How does advertising effect brand management and development? If building brand loyalty is one goal, can you identify several examples of businesses that have successfully used advertising campaigns to create strong brand equity? Advertising can effect brand development and management across these five critical areas: providing information to and persuading consumers, introducing new brands or brand extensions, building and maintaining consumer brand loyalty, building and maintaining trade brand loyalty, and create a brand’s image and meaning. Businesses are considered to have established strong brand equity when they are able to create and sustain positive brand association in the minds of consumers over time. Some common household examples could include Kleenex, Ivory soap, Campbell’s soup, or Smuckers jelly. 7. If a firm developed a new line of athletic shoes, priced them competitively, and distributed them in appropriate retail shops, would there be any need for advertising? Is advertising really needed for a good product that is priced right? Most of today’s “monster brands” had humble beginnings that included little or no budget for advertising and promotion. Without advertising, the marketer depends entirely on favorable word-of-mouth about his or her brand. This typically means slow acceptance of the new product or service. Moreover, if the new brand must compete with existing brands making effective use of advertising, the new brand will be at a severe disadvantage without any budget for advertising or some other form of promotion. 8. Many companies now spend millions of dollars to sponsor and have their names associated with events like NASCAR races or rock concerts. Do these event sponsorships fit the definition for advertising and IBP given in this chapter? These event sponsorships absolutely fit the definition of IBP given in the chapter. Take Budweiser as an example. Bud’s sponsorship of rock concerts and sporting events certainly comes at a significant cost. These events provide Budweiser with access to a large audience and Budweiser pays for this exposure as a way to build preference for its brands. AnheuserBusch sponsors these events with a clear intent to persuade a mass audience. Hence, event sponsorship is a paid, mass-mediated attempt to persuade. Although it may be valuable to think of event sponsorship as a special form of advertising, it much more closely fits the definition of IBP. 9. How does the process of market segmentation lead an organization to spend its advertising dollars more efficiently and more effectively? Market segmentation has important implications for advertising efficiencies and effectiveness. Careful selection of a target market will help in choosing media vehicles that are more likely to reach just the target. This promotes advertising efficiencies. In addition, with a specific target in mind, it is much easier to create messages that will engage the message receiver. This contributes substantially to advertising effectiveness. 10. What is the concept of integrated brand promotion (IBP)? How are IBP and advertising related? And how is IBP distinct from the advertising industry’s prior emphasis on Integrated Marketing Communications, or IMC?

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IBP is the use of various promotional tools (coupons, events, contests, premiums, etc.), including advertising, in a coordinated manner to build and maintain brand awareness, identity, and preference. The coordination is key to maintain a clear brand image in the minds of consumers. Advertising is a component of the coordinated promotion effort to develop strong brands. Instead of focusing narrowly on the importance of coordinated communications and messages, as in IMC, integrated brand promotion instead emphasizes broader efforts to build brand awareness and preference.

SOLUTIONS TO EXPERIENTIAL EXERCISES 1. Box-office sensations like Avatar, Harry Potter and the Deathly Hallows, and Spider-Man 3 don’t happen by accident. To achieve big screen success, movie advertisers develop integrated brand promotion (IBP) campaigns that communicate unified messages to target audiences using diverse media. Select a film now showing in theaters and identify the various ways the movie is being promoted. What types of advertising and promotion are employed in the campaign? Do the different advertisements have a consistent look, feel, and message? Do the different media vehicles target different demographic groups? Suggest one additional media option that marketers might use to reach the film’s target audience. Answers will differ based on students’ movie selections, but the film industry creates memorable IBP campaigns that convey a unified image, meaning, and identity for a new release. For the recent sci-fi epic Avatar, Twentieth Century Fox used the following advertising and promotion: TV ads, the AVTR.com website, movie-themed Coca-Cola Zero cans, a four-minute trailer shown during a Dallas Cowboys football game, exclusive pre-screenings offered to print media, product placement in the Fox Network series Bones, action figures by Mattel Toys, a reusable Avatar scrapbook for kids, and a Ubisoft video game for Xbox 360 and other game consoles. 2. After perfecting the pizza delivery model in the 1980s, Domino’s lost touch with its customers to the point that the brand was ridiculed as little more than cardboard and ketchup. To fix the brand, executives commissioned a reinvention of the Domino’s pizza and launched a “Pizza Turnaround” campaign to renew customer loyalties. Using the Internet for research, write a brief report on the Domino’s “Pizza Turnaround.” Describe the campaign’s role in managing the Domino’s brand. What was the message strategy of the campaign? Do you think the ads were effective at restoring the brand’s image? How might company leaders use the tools of advertising and promotion to keep consumers buying the new and improved Domino’s pizza? The Domino’s “Pizza Turnaround” campaign was unique in its admission that the product was bland and in need of replacement. Ads borrowed words from the pizza’s harshest critics to make the point. The campaign also used consumer recommendations to direct the overhaul of the core product and its ingredients. The campaign was largely successful, at lease in the short term: Domino’s doubled its revenues in 2010 following the release of the new pizza pie. Answers will vary on how Domino’s could use advertising and promotion to foster brand loyalty for its new pizza; however advertising has the ability to associate brands with hot trends, and promotion can offer incentives that stimulate repeat purchases.

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3. Cellular telephones and wireless computing products are nearly ubiquitous now in American life. In some ways, any one phone or service provider is seen not so much as a brand but as an unmarked commodity. But there are important exceptions. Consider the intense media attention and consumer interest that surrounded the release of Apple’s iPhone and AT&T’s exclusive contract to provide cellular service to the new phone. Providing examples from current campaigns, describe how advertising has affected value related to cellular services or products. Contrast that with the iPhone release. How did advertising and integrated brand promotion influence symbolic value and social meaning related to the new product? Advertising influences the symbolic value that consumers attach to a given brand or product, conveying distinct messages about social-class connections or status. In the case of cellular telephone purchases, one provider might promote the value notion that a consumer is getting a good deal by providing a basic phone at little or no cost in exchange for a year- or two-year service contract. Then what explains the instant popularity of the $500 iPhone? Students should recognize here the lesson that every object takes on meaning from society and popular culture. When consumers perceive greater social value in a brand, they are more likely to pay a premium for that brand or product. 4. Working in small groups, imagine that you have been hired to create an advertising strategy for the release of a new line of basketball shoes produced by the athletic apparel maker Under Armour. The Maryland-based business has seen rapid growth in recent years, but it is not considered to be the same kind of globally-recognized brand as Nike or Addidas. Beyond the central advertising campaign for the new shoe line, what tools would your team recommend employing to achieve integrated brand promotion? Explain how you would coordinate those efforts to ensure maximum effectiveness. Students should demonstrate a full understanding of the various tools available for integrated brand promotion, from event sponsorship to direct marketing to billboards and blogs. The team reports also should reflect an understanding of the role advertising plays within IBP and the importance of ensuring that whatever techniques are employed, they work smoothly together to create a consistent and compelling message.

Chapter 2/The Structure of the Advertising and Promotion Industry: Advertisers, Agencies, Media, and Support Organizations

CHAPTER 2 The Structure of the Advertising and Promotion Industry: Advertisers, Agencies, Media, and Support Organizations KEY TERMS social media blog crowdsourcing advertiser client trade reseller advertising agency full-service agency creative boutique digital/interactive agency in-house agency media specialists promotion agency

direct response agency direct marketing agency database agency fulfillment center infomercial consumer sales promotion trade-market sales promotion event-planning agency designer logo public relations firm account services

account planner creative services production services media planning and buying services commission system markup charge fee system pay-for-results external facilitator consultants production facilitator

Chapter 2/The Structure of the Advertising and Promotion Industry: Advertisers, Agencies, Media, and Support Organizations

SUMMARY Discuss important trends transforming the advertising and promotion industry. Recent years have proven to be a period of dramatic change for the advertising and promotion industry. The trend affecting advertisers, agencies and the media the most is that consumers are now in greater control of the information they receive about brands. Collectively, individuals are gravitation toward sharing and creating information through websites, blogs, social media, wikis and video sites like YouTube. The simplest example is when consumers log onto the Internet and visit sites they choose to visit for either information or shopping. Social media has emerged as the most significant form of consumer control over information creation and communication most recently. Facebook has over 450 million users worldwide, sharing 3.5 billion pieces of content with each other every week. Twitter has more than 50 million users who post 8 billion tweets a year. As consumers search for more control over their information flow, advertisers, agencies and media organizations are struggling to adapt to consumer desires. Next, the proliferation of media from cable television to satellite radio to the Internet has created new advertising options. Giant media conglomerates are expected to control a majority of these television, radio, and Internet properties. Media proliferation has, in turn, led to increasing media clutter and fragmentation, reducing the effectiveness of advertisements. As a result, advertisers are using more IBP tools like sales promotions, event sponsorships, and public relations to supplement and enhance the primary advertising effort. Crowdsourcing is the next big trend affecting the industry. The idea behind crowdsourcing is to get consumers more involved with and committed to a brand in a way that passive, intrusive advertising simply cannot. Consumers help “build the brand” with recommendations for features, advertising, or events. They can also communicate about the brand to audiences in ways that seems natural and credible – something corporate launched advertising struggles with. Finally, mobile marketing/mobile media may turn out to be the biggest trend that affects the industry. Technology has resulted in significant opportunity for advertisers to reach consumers with messages directed to consumers’ mobile devices – primarily smartphones, tables like the Apple iPad, e-readers like the Amazon Kindle – but person navigation devices (PNDs) can also accommodate messages in the wireless world. Describe the advertising and promotion industry’s size, structure, and participants. Many different types of organizations make up the industry. To truly appreciate what advertising is all about, one must understand who does what and in what order in the creation and delivery of an advertising or IBP campaign. The process begins with an organization that has a message it wishes to communicate to a target audience. This is the advertiser. Next, advertising and promotion agencies are typically hired to launch and manage a campaign, but other external facilitators are often brought in to perform specialized functions, such as assisting in the production of promotional materials or managing databases for efficient direct marketing campaigns. New to the industry in recent years are digital/interactive agencies which specialize in mobile marketing and social media campaigns. External facilitators also include consultants with whom advertisers and their agencies may confer regarding advertising and IBP strategy decisions. All advertising and promotional campaigns must use some type of media to reach target markets. Advertisers and their agencies must therefore also work with companies that have media time or space.

Chapter 2/The Structure of the Advertising and Promotion Industry: Advertisers, Agencies, Media, and Support Organizations

Discuss the role played by advertising and promotion agencies, the services provided by these agencies, and how they are compensated. Advertising and promotion agencies come in many varieties and offer diverse services to clients with respect to planning, preparing, and executing advertising and IBP campaigns. These services include market research and marketing planning, the actual creation and production of ad materials, the buying of media time or space for placement of the ads, and traffic management to keep production on schedule. Some advertising agencies appeal to clients by offering a full array of services under one roof; others such as creative boutiques develop a particular expertise and win clients with their specialized skills. Promotion agencies specialize in one or more of the other forms of promotion beyond advertising. New media agencies are proliferating to serve the Internet and other new media needs of advertisers. The four most prevalent ways to compensate an agency for services rendered are commissions, markups, fee systems, and the new pay-for-results programs. Identify key external facilitators who assist in planning and executing advertising and integrated brand promotion campaigns. Marketing and advertising research firms assist advertisers and their agencies in understanding the market environment. Consultants of all sorts from marketing strategy through event planning and retail display are another form of external facilitator. Perhaps the most widely used facilitators are in the area of production of promotional materials. In advertising, a wide range of outside facilitators is used in the production of both broadcast and print advertising. In promotions, designers and planners are called on to assist in creation and execution of promotional mix tools. Software firms fill a new role in the structure of the industry. These firms provide expertise in tracking and analyzing consumer usage of new media technology. Discuss the role played by media organizations in executing effective advertising and integrated brand promotion campaigns programs. Media organizations are the essential link in delivering advertising and IBP communications to target audiences. There are traditional media organizations such as television, radio, newspaper, and magazines. Interactive media options include not just the Internet and wireless access to consumers through smartphones and iPads, but also, CD-ROMs, electronic kiosks, and e-readers. Media conglomerates such as AT&T, Time Warner, and News Corp. control several different aspects of the communications system, from cable broadcast to Internet communications and emerging high-speed broadband communications technologies.

CHAPTER OUTLINE PPT 2-1 here A note before starting the Lecture Outline: This chapter contains some key information about the new era for advertising (and its role in integrated brand promotion, or IBP). While the industry has been characterized by rapid change for the last two decades—primarily driven by

Chapter 2/The Structure of the Advertising and Promotion Industry: Advertisers, Agencies, Media, and Support Organizations

technological change as introduced in Chapter 1—the current era of change is highly significant. The reason? More than ever before, advertising agencies are being challenged by both advertisers and consumer. Advertisers are demanding more effective communications and measurable results. Consumers now have more alternatives for acquiring information—PDAs, smartphones, the Internet (particularly blogs and social media networks), and TiVo devices—and more control over those alternatives. Throughout this chapter and carrying over into Chapter 3, the issue of control will be highlighted. Advertisers’ response and the even greater importance of the brand are considered. INTRODUCTORY SCENARIO: The Great Digital Divide Advertising agencies have historically struggled to satisfy clients. During the late 1990s, the new innovative dotcom agencies challenged the traditional power base. Then came the dotbomb and it appeared big multinational agencies would reassert themselves. They did for a short time with big mergers. First, because of more media options and more control of those options, consumers started to be harder and harder to reach. With devices like the PC, iPod, smartphones and TiVo, consumers can pick when and how they want information, no longer merely subject to the commercial “breaks” of traditional media, resulting in a plunge in traditional media placements and revenue. So the big power struggle now is how to reach these more elusive consumers who are turning to Facebook, Twitter, and individual blogs to control their communications environments. In response, firms like Coca-Cola are trying to find ways to insert the brand into consumers’ routine life experiences. (Ask students what Coke is doing in this regard—they should cite the American Idol Coke cup strategy.) In addition to the big firms trying to adapt, big media agencies are adapting as well. Big “old media” companies like NBC universal are wooing advertisers with more digital media options. Even MTV is considered an “old” media company and is now offering new media distribution through broadband. Finally, the ascent of new media is dramatically characterized by Internet advertising exceeding $30 billion annually (not counting peer-topeer communication vehicles.) BUT, highlight for students that all Internet advertising is still less than 10 percent of dollars spent on media At the outset, it is important to have students understand that the advertising industry is highly complex due to its great breadth and the fact that communications per se is a complex process. You might get some lively discussion of the future of “old” media versus “controlled” media—it is worth letting the discussion rage! The role of this chapter is to lay out the challenges coming from consumers and how that has created change in the industry. The chapter then fulfills the very important task of laying out the current structure and players in the industry and showing how trends are affecting change. I. Trends Affecting the Advertising and Promotion Industry The basic changes in the industry stem from:

PPT 2-2

A. Consumer Control: From Social Media, to Blogs to TiVo. Consumers are discovering and desiring more ways to control the flow of information they receive. Social media, blogs and TiVo devices are three prime examples. Advertisers are trying to respond with more and better creative execution and technological advances of their own (e.g., those little “runners” at the bottom of the TV screen that can’t be “TiVo-ed” out).

Chapter 2/The Structure of the Advertising and Promotion Industry: Advertisers, Agencies, Media, and Support Organizations

B. Media Proliferation, Consolidation and “Multiplatform” Media Organizations. It seems contradictory, but media proliferation and consolidation are taking place simultaneously. Big media companies are merging, but with new technologies (podcasting and Web options) new media organizations are proliferation as well. Some legal changes like the FCC relaxing old ownership rules have spurred consolidation. And big Internet companies, like InterActiveCorp are buying up smaller operators. C. Media Clutter and Fragmentation Means More IBP. With so many options available in the media, it is hard for marketers to break through the clutter. In addition, with proliferation comes fragmentation. With this clutter, big advertisers are looking to target more effectively and efficiently. J&J moved hundreds of millions of dollars away from mass media to more targeted digital media including the Internet and blogs D. Crowdsourcing. Firms allowing experts, enthusiasts, and particularly consumers to “build the brand” with recommendations for brand features or message content posted on sites like YouTube. •

Refer to Ford and Starbucks as prime examples.

E. Mobile Marketing/Mobile Media. Huge potential exits here for marketers to direct messages to consumers via consumers’ smart devices. The challenge will be to make the messages relevant and acceptable to consumers. PPT 2-3 here II. The Scope and Structure of the Advertising Industry

PPT 2-4 here

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A quick examination of Exhibit 2.4 will help students appreciate the scope of the industry. Spending is approaching $300 billion annually in the United States with worldwide advertising exceeding $600 billion.

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It is important to put the gross spending levels in perspective, such as the fact that Verizon spends only about 3 percent of sales on advertising, which results in about $3.7 billion a year in ad spending. Exhibit 2.5 shows the increase in advertising across the 20th and into the 21st century—note the expected global downturn in spending that has been anticipated is not really happening.

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Spending on IBP tools is huge and growing—note from text Exhibit 2.6 the huge investment is digital marketing which already has surpassed product sampling and coupons by a wide margin PPT 2-5 here

The remainder of the chapter clearly and efficiently describes for students the structure of the advertising and promotion industry. Text Exhibit 2.7 can be the guiding framework for the discussion. Understanding structure is important because the talent and expertise needed to create effective advertising and IBP solutions to the new challenges are spread across several levels of the communication process and are represented in several different industries. Advertisers may employ the services of advertising and promotion agencies and may or may

Chapter 2/The Structure of the Advertising and Promotion Industry: Advertisers, Agencies, Media, and Support Organizations

not contract for specialized services with various external facilitators. A. Advertisers

PPT 2-6 here

1. Manufacturers and Service Firms. Large national manufacturers of consumer and business products and services are the most prominent users of advertising, spending hundreds of millions or even billions of dollars annually. •

Procter & Gamble, MCI, Chrysler, Colgate-Palmolive, Xerox, and General Electric are examples. These firms can operate in global, national, regional, or local markets. They can target either household consumers or businesses as their primary audience.

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Be sure to alert students that there are small companies that may spend only a few thousand dollars are in this category as well (e.g., the local toy store or deli).

2. Trade Resellers. The term trade reseller is simply a term for all organizations in the channel of distribution. •

As text Exhibit 2.7 shows, trade resellers can be retailers, wholesalers, or distributors. Retailers can sell in global markets (The Gap), national markets (Sears), or regional markets (Dillard’s) but focus primarily on household consumers.

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Wholesalers and distributors, like American Lock & Supply (which supplies contractors with door locks and hardware), are a completely different breed. They focus on business buyers and have little need for mass media. Instead, they focus their advertising on direct mail or highly targeted trade publications.

3. Federal, State, and Local Governments. Although it may seem odd to students to list the government as an advertiser, the U.S. government often among the largest spenders on advertising in the U.S., with expenditures exceeding $1.0 billion in annually. •

The most visible government campaigns are U.S. government advertising for the armed forces recruiting and social issues. The government also spends a great deal on direct marketing by mailing government publications to businesses and consumers.

4. Social and Not-for-Profit Organizations. Advertising by social and not-for-profit organizations at the national, state, and local level is common—Red Cross, American Cancer Society, the local Humane Society are examples. This advertising is used to stimulate demand for services and to disseminate information. PPT 2-7 here 5. Key Discussion: The Role of the Advertiser in IBP

PPT 2-8 here

Before considering the type of agencies advertisers can rely on and the services they provide, it is critical for students to understand that the advertiser must come to the agency partnership fully prepared to provide the foundation of information with which an agency needs to work. Too many advertisers (often but not always small firms) turn to the agency for both their strategy and communications needs. This is a big mistake— only the advertiser can provide and should provide the strategic direction for the firm.

Chapter 2/The Structure of the Advertising and Promotion Industry: Advertisers, Agencies, Media, and Support Organizations

So advertisers should come to the planning meeting with agencies prepared to: •

Describe the value that the firm’s brand provides to users.

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Describe the brand’s position in the market relative to competitive brands.

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Describe the firm’s objectives for the brand in the near term and long term (e.g., brand extensions, international market launches, etc.).

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Identify the target market(s) that are most likely to respond favorable to the brand.

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Identify and manage the supply chain/distribution system that will most effectively reach the target markets.

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Be committed to using advertising and other promotional tools as part of the organization’s overall marketing strategy to grow the brand.

B. Advertising and Promotion Agencies

PPT 2-9 here

Advertisers have a full complement of agencies that specialize in various aspects of advertising and promotion. 1. Advertising Agencies. Advertising agencies provide expertise to help advertisers prepare advertising programs. An advertising agency is an independent organization of professionals who provide creative and business services to clients related to planning, preparing, and placing advertisements. Exhibit 2.8 shows the 2006 worldwide gross income of the ten largest advertising agencies. The top U.S.-based agencies had combined worldwide income of $28.2 billion in 2006. The types of professionals in agencies who can help advertisers in the planning, preparation, and placement of advertising and other promotional activities include the following: PPT 2-10 here Account planners Account executives Art directors Creative directors Copywriters Graphic designers Radio and television producers Researchers Artists Technical staff—printing, film editing, and so forth Marketing specialists Media buyers Web developers Interactive media planners Public relations specialists Sales promotion and event planners

Chapter 2/The Structure of the Advertising and Promotion Industry: Advertisers, Agencies, Media, and Support Organizations

Direct-marketing specialists PPT 2-11 here a. Full-Service Agencies.

PPT 2-12 here

A full-service agency includes an array of advertising professionals to meet all the promotional needs of clients. Often, such an agency will also offer a global reach to the client. Young & Rubicam and McCann–Erickson Worldwide are examples of full-service agencies with global capabilities. b. Creative Boutiques. A creative boutique emphasizes copywriting and artistic services to its clients. Other aspects of advertising planning and placement are handled internally by the advertiser or contracted out to other external facilitators. c. Digital/Interactive Agencies. Interactive agencies help advertisers prepare communications for new media like the Internet, interactive kiosks, CD-ROMs, and interactive television. Sometimes referred to as cyberagencies, these new ad agencies have specialized talent and expertise that many traditional full-service agencies do not have. One of the best is Red Sky Interactive. They have prepared the corporate websites for Nike, Levi Strauss, Absolut Vodka, and Altoids. d. In-House Agencies. An in-house agency is often referred to as the advertising department of a firm. This option has the advantage of greater coordination and control in all phases of the advertising process. Another advantage is that the firm can keep as profits the commissions an external agency would earn. e. Media specialists. Independent organizations that specializes in buying media time and space and offer media planning advice. The proliferation of media options has made this type of organization more important. 2. Promotion Agencies focus on promotion efforts that full-service advertising agencies do not specialize in. Promotion agencies handle everything from sampling to event promotions. a. Direct Marketing and Database Agencies (also called direct response agencies). These agencies provide a variety of direct marketing services. They design direct marketing campaigns, assist constructing customer databases, and in many cases maintain fulfillment centers. In addition, many direct marketing agencies can prepare infomercials. b. Sales Promotion Agencies. These specialists design ads and operate contests, sweepstakes, special displays, or coupon campaigns for advertisers. Some firms specialize in consumer sales promotions or trade sales promotions. c. Event-Planning Agencies. Event-planning agencies and organizers are experts in finding locations, securing dates, and putting together a team of people to manage an event. The event-planning agency will also often take on the task of advertising the event. Event sponsorship can also be targeted to household or the trade market. d. Design Firms. Designers and graphics specialists help to create logos and other visual representations for the brand. They also design the supportive communications

Chapter 2/The Structure of the Advertising and Promotion Industry: Advertisers, Agencies, Media, and Support Organizations

such as banners, newsletters, phone-cards, and in-store displays. e. Public Relations Firms. Public relations firms manage an organization’s relationships with the media, the local community, competitors, industry associations, and government organizations. 3. Full Agency Services

PPT 2-13 here

Although not every full-service agency offers every service, the services that can be found in full-service agencies are discussed in the following sections. Text Exhibit 2.12 details the common structure of a full-service agency a. Account Services. Account services entail identifying the benefits a product or service provides, its potential target audiences, and the best competitive positioning, and then developing a complete advertising plan. In some cases, an agency will also provide basic marketing and consumer behavior research. Another primary task in account services is to keep the various agency teams—creative, production, media— on schedule and within budget. b. Marketing Research Services. The research services usually entail the agency locating studies that have a bearing on the client’s advertising and explaining these studies to the client. Account planner positions have been added in many agencies to coordinate the research and planning effort on accounts. c. Creative and Production Services. In simple terms, creative services prepare the client’s message and advertising materials. Production services include producers (and sometimes directors) who take the creative ideas and turn them into radio, television, and print advertisements d. Media-Planning and Buying Services. This service is where placement of the advertising effort is handled. The central challenge is to determine how a client’s message can most effectively and efficiently reach the target audience. This service helps clients sort through the blizzard of new media options like CD-ROM, videocassettes, interactive media, and the Internet. e. Administrative Services. Agencies have personnel departments, accounting departments, and sales staffs. Most important to clients is the traffic department, which has the responsibility of monitoring projects to be sure that deadlines are met. Traffic managers make sure the creative group and media services are coordinated so that deadlines for getting ads into media are met. 4. Agency Compensation, Promotion, and Redesign

PPT 2-14 here

a. Commission. The commission system is the traditional method of agency compensation and is based on the amount of money the advertiser spends on media. •

Under this method, 15 percent of the total amount billed is retained by the advertising agency as compensation for all costs in creating advertising for the client.

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The only variation is that the rate typically changes to 16 2/3 percent for outdoor media.

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Text Exhibit 2.14 provides students with a simple example.

Chapter 2/The Structure of the Advertising and Promotion Industry: Advertisers, Agencies, Media, and Support Organizations

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Be sure to raise the issue that many agencies have challenged this traditional structure and negotiated different percentages for commission.

b. Markup Charges. Markup charges add a percentage to a variety of services the agency purchases from outside suppliers. In many cases, an agency will turn to outside contractors for art, illustration, photography, printing, research, and production. The agency then, in agreement with the client, adds a markup charge to these services. •

Traditional markup has been 17.65 percent to 20 percent.

c. Fee System. A fee system is much like that used by consultants or attorneys, whereby the advertiser and the agency agree on an hourly rate or project fee for different services provided. d. Pay for Results. In this type of program, the agency’s fee is based on the achievement of agreed upon results. Many large companies like Procter & Gamble are moving toward this model; they are using a percentage-of-sales model. •

A difficulty here is coordinating the pay for “results” when multiple agencies are involved in the same campaign—who is responsible for the “results”?

C. External Facilitators

PPT 2-15 here

External facilitators are organizations or individuals that provide specialized services to advertisers and agencies. 1. Marketing and Advertising Research Firms. Research firms like Burke International perform original research for advertisers. Other research firms like SRI International routinely collect data (from grocery store scanners, for example) and make these data available for a fee. There are also firms that specialize in message testing to determine if consumers find advertising messages appealing and understandable 2. Consultants. Advertisers seek out marketing consultants for assistance in the planning stage. Creative and communications consultants provide insight on issues related to message strategy and message themes. •

Media experts help an advertiser determine the proper media mix and efficient media placement.

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The newest type of consultant is a database consultant, who works with both advertisers and advertising agencies in developing and managing databases for direct marketing campaigns or “narrow-casting” broadcast advertising.

3. Production Facilitators. Production is an area where advertisers and their agencies rely most on external facilitators. •

For broadcast production, directors, production managers, songwriters, camera operators, audio and lighting technicians, and performers are all essential. Production houses can provide the physical facilities, including sets, stages, equipment, and

Chapter 2/The Structure of the Advertising and Promotion Industry: Advertisers, Agencies, Media, and Support Organizations

crews, needed for broadcast production. Similarly, in preparing print advertising, graphic artists, photographers, models, directors, and producers may be hired from outside the advertising agency or firm to provide the specialized skills and facilities needed in preparing advertisements. •

In postproduction, further expertise is needed before the ad is placed in a medium. Postproduction processes in broadcast advertising include film developing and transferring, editing, special effects, sound mixing, and color matching.

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In print advertising, film developing and photo enhancement are typically carried out by external organizations.

4. Software firms. In an era when technology continues to evolve, a new category of facilitators has emerged. Software firms help companies with a range of activities ranging from tracking Web-surfing behavior to managing relationships with trade partners. PPT 2-16 here D. Media Organizations

PPT 2-17 here

Media represent the next level in the industry structure shown in text Exhibit 2.17. The media available for placing advertising, such as broadcast and print media are well known to students simply because they’re exposed to them daily. Exhibit 2.17, however, organizes this information into five specific categories. •

Broadcast: Major television networks like NBC, ABC or Fox, as well as national magazines like U.S. News & World Report or People, provide advertisers with time and space at considerable expense. Also included are satellite TV and radio

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Interactive Media

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Support Media Other media options are more useful for reaching narrowly defined target audiences.

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Media Conglomerates. Note the inclusion in this list of “media conglomerates.” This category is included because organizations like Time Warner and Disney own and operate companies in broadcast, print, and interactive media.

E. Target Audiences

PPT 2-18 here

This represents the last element of the structure of the industry. Target audiences were covered in Chapter 1. As a recap for students, the main target audiences are: household consumers, business organizations, members of a trade channel, professionals, and government.

SOLUTIONS TO END OF CHAPTER QUESTIONS

Chapter 2/The Structure of the Advertising and Promotion Industry: Advertisers, Agencies, Media, and Support Organizations

1. Briefly describe the major trends affecting the advertising and promotion industry. Which of these do you think is the most important and impactful? Why? The major trends are: •

Consumer control

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Media proliferation, consolidation, and multiplatform media organizations

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Media clutter and fragmentation

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Crowdsourcing

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Mobile marketing and mobile media

Students could literally argue for any one of these trends as being the most important. While consumer control is the most problematic for marketers, .media clutter is a huge problem too. Crowdsourcing is a big opportunity, but comes with problems of its own. Finally, mobile marketing allows new ways of reaching consumers and will be particularly potent at the point of purchase if consumers do not rebel. 2. Do you think the increasing independence and control consumers gain through new technologies like TiVo, iPads, and smartphones will make advertising and product branding more or less important? Explain. One might assume that as consumers gain more control over the messages they receive from advertisers, advertising’s role as a means of information and persuasion becomes less relevant. The irony is that the control consumers are starting to exert will make product branding even more important as consumers choose how and where they want to be exposed to persuasive messages. It will be a challenge for advertising agencies to insert themselves and their clients’ brands into this new consumer-controlled environment, but they will find innovative ways to make the connection. 3. In the structure of the advertising and promotion industry, what role do promotion agencies play? Promotion agencies assist in the development of IBP materials and campaigns other than advertising. Often, full-service advertising agencies concentrate on advertising and offer only a few IBP services. As such, promotion agencies are called in to fill the gap. 4. The U.S. government spends millions of dollars each year trying to recruit young men and women into the armed services. What forms of advertising and IBP communications would be best suited to this recruiting effort? The U.S. government is clearly engaged in a persuasive effort. Mass-mediated advertising combined with direct marketing, event sponsorship, and Web-based promotions would likely have a positive impact on the target audience. 5. Huge advertisers like Procter & Gamble and Verizon spend billions of dollars on advertising every year. Put these billions of dollars into perspective. Is it really that much money? What information from Chapter 1 is relevant to the perspective on how much advertisers spend?

Chapter 2/The Structure of the Advertising and Promotion Industry: Advertisers, Agencies, Media, and Support Organizations

First, even though billions of dollars represents huge spending on an absolute basis, the percentage of sales may be only 2-6 percent. Second, Chapter 1 highlights that advertising fulfills many important roles from persuasion, to brand image development, to market segmentation, differentiation, and positioning. Finally, Chapter 1 also highlights that advertising can contribute to economies of scale and inelasticity of demand which can have a positive effect on profits. 6. What is the advertiser’s role in IBP? The advertiser must be able to do the following prior to enlisting the services of an agency: (1) fully understand and describe the value that the firm’s brand provides to users; (2) fully understand and describe the brand’s position in the market relative to competitive brands; (3) describe the firm’s objectives for the brand in the near term and long term (e.g., brand extensions, international market launches, etc.); (4) identify the target markets that are most likely to respond to the brand; (5) identify and manage the supply chain/distribution system that will most effectively reach the target markets; (6) be committed to using advertising and other promotional tools as part of the organization’s overall marketing strategy to grow the brand. Advertisers that can do these will be prepared for a productive partnership with an agency. 7. As advertisers become more enamored of the idea of IBP, why would it make sense for an advertising agency to develop a reputation as a full-service provider? The traditional advertising agency’s expertise involves development of ad campaigns that are then placed in mass-media outlets like television, radio, newspapers, and magazines. The rising popularity of Integrated Brand Promotion (IBP) has seen marketers turn to other promotional vehicles like event sponsorship, sales promotions, direct marketing, and advertising on the Internet in an effort to break through the clutter to reach the targeted customer. Importantly, with the various tools that are being used, speaking to the customer with a “common voice” has become both more complicated and essential. Here we have the logic for the full-service agency. Speaking with a common voice should be easier if all the relevant expertise can be found “under one roof.” 8. Explain the viewpoint that a commission-based compensation system may actually give an ad agency an incentive to do the wrong things for its clients In a commission-based compensation system, the agency is paid a percentage of the media space or time that it places for a client. This system can have two unwanted effects. First, if compensation is dictated by ad placements in traditional mass media, this may discourage the agency from recommending nontraditional (e.g., event sponsorship or product placements) outlets. Second, working under the commission system, the agency would be taking money out of its own pocket if it ever recommended that the client cut its advertising expenditures. In fact, there will be times when cutting one’s advertising budget is the right thing to do. Agencies working on commission have a hard time seeing any virtue in a budget-cutting recommendation. 9. What makes the production of promotional materials the area where advertisers and their agencies are most likely to call on external facilitators for expertise and assistance?

Chapter 2/The Structure of the Advertising and Promotion Industry: Advertisers, Agencies, Media, and Support Organizations

Advertising agencies are paid to develop creative concepts. Often, bringing these concepts to life in finished advertisements or IBP materials demands highly specialized skills. Lighting technicians, camera operators, songwriters, models, and sound mixers are some of the specialists needed in the production of advertising. With IBP materials, coupon production and distribution, event planning and management, or product placement require specialized expertise. No ad agency or client could afford to maintain all this specialized expertise on staff; so external facilitators will be hired to assist with ad production. 10. Give an example of how the skills of a public relations firm might be employed to reinforce the message that a sponsor is trying to communicate through other forms of promotion. New product introduction is likely to be accompanied by some level of advertising support; new product introductions are also an excellent time to engage a public relations firm. A new product should have some features or attributes that are newsworthy. Here is where the tools of public relations—press releases, feature story development, or spokesperson placements— may play a critical role in supporting the advertising campaign. If the news media deem the new product launch newsworthy, there can be a tremendous synergy between the messages carried in advertising and the six o’clock news for breaking through to the target audience.

SOLUTIONS TO EXPERIENTIAL EXERCISES 1. In response to the Haitian earthquake that brought devastation to over one million people near Port-au-Prince, large corporations stepped up to provide medicines, shelter, food, and other forms of disaster relief. The primary coordinator of the effort was the Business Civic Leadership Center, a not-for-profit agency that partnered with Office Depot to create a National Disaster Help Desk. The sponsorship helped generate nearly $150 million in aid from Teva Pharmaceuticals, GE, and other well-known businesses. Choose a not-for-profit agency that champions a social cause, and research the ways in which it uses advertising and promotion to accomplish humanitarian goals. How do ads by the nonprofit organization differ from those of profit-oriented businesses? How are they similar? Answers will vary based on students’ selections, but not-for-profit organizations use advertising to generate donations, raise awareness of causes, and shape public behavior. Many non-profits use ads to boost individual donations transacted at cause-related websites. In the case of the Business Civic Leadership Center, partnerships with large corporate donors enabled the nonprofit agency to achieve its social responsibility goals while allowing leading corporations to associate their brands with international charity efforts.

2. After two decades of advertising in Super Bowl matchups, PepsiCo opted out of the Big Game in 2010 and redirected funds into a social networking campaign called “Refresh Everything.” The campaign, which harnessed the power of Facebook and blogs to offer financial grants for customer-led community projects, generated hundreds of thousands of Facebook friends and awarded millions to proposal winners. Devise an advertising campaign that uses interactive social media to attract audiences to a popular brand. Create a relevant crowdsourcing activity for the campaign. What award will your campaign offer to consumer participants? What types of agencies and support organizations will be involved in coordinating the campaign? In what ways might social media help your message break through media clutter?

Chapter 2/The Structure of the Advertising and Promotion Industry: Advertisers, Agencies, Media, and Support Organizations

Answers will vary based on students’ ideas. However, social campaigns often assign tasks to groups of consumers, enthusiasts, or experts—a technique known as crowdsourcing. The idea is to get consumers interacting with brands in highly engaging situations. These campaigns often ask consumers to build the brand by making recommendations, and by getting friends to join in. Big rewards attract consumers and retain them for months. Social media campaigns may require input from interactive agencies and creative boutiques. Research has shown that the word-ofmouth buzz generated in social contexts results in long lasting impressions. Some advertisers view social media as a cure to media clutter, primarily because of its potential for building virtual communities.

3. This chapter highlights some of the challenges facing advertisers and agencies as consumers have gained greater control of information sources – blocking telemarketing calls, for instance, and carefully guarding the privacy of cell phone numbers and other contact information. Working in the same groups, brainstorm ways that advertisers still could reach out to consumers and invite them to learn more about your brand or product. As your team develops ideas, also explain how you would address these questions: a. What ethical issues might arise in your approach to consumers? How would you navigate privacy concerns? b. Are there any legal risks or potential challenges? c. Are there any legal risks or potential challenges to your approach? This team exercise will not only provide students with a chance to brainstorm ideas for a realistic campaign, but in so doing, they will become keenly aware of the difficult landscape advertisers face in trying to navigate increased consumer sensitivity to privacy issues. Team answers should address the possibility of future do-not-mail legislation, anti-spam regulations, and efforts to keep marketers from contacting consumers through cell phone text messages. 4. Identify the four primary compensation methods discussed in this chapter and discuss which system would best be able to hold both clients and agencies to ethical and responsible business practices? What risks exist in each method? Apart from the threat of regulatory inquiries or criminal investigations, discuss why it is important for agency billing systems to be fully transparent and accountable? Students should demonstrate an understanding of the four primary methods of agency compensation – commissions, markup charges, fee systems, pay-for-results – as well as a sensitivity to the ethical issues surrounding billing, compensation and client relationships.

Chapter 3/The Evolution of Promoting and Advertising Brands

CHAPTER 3 The History of Advertising and Brand Promotion KEY TERMS Industrial Revolution principle of limited liability branding dailies consumer culture Pure Food and Drug Act Great Depression Great Recession

subliminal advertising creative revolution Action for Children’s Television (ACT) Federal Trade Commission (FTC) National Advertising Review Board

interactive media consumer generated content (CGC) e-business branded entertainment

SUMMARY Tell the story of advertising’s birth. Although some might contend that the practice of advertising began thousands of years ago, it is more meaningful to connect advertising as we know it today with the emergence of capitalistic economic systems. In such systems, business organizations must compete for survival in a free market setting. In this setting, it is natural that a firm would embrace a tool that assists it in persuading potential customers to choose its products over those offered by others. Of course, advertising is such a tool. The explosion in production capacity that marked the Industrial Revolution gave demand-stimulation tools added importance. Mass moves of consumers to cities and modern times helped create, along with advertising, consumer culture. Describe the past and current relationship between advertisers, retailers, and consumers. Advertising and branding play a key role in the ongoing power struggle between manufacturers and their retailers. U.S manufacturers began branding their products in the late 1800s. Advertising could thus be used to build awareness of and desire for the various offerings of a particular manufacturer. Retailers have power in the marketplace deriving from the fact that they are closer to the customer. When manufacturers can use advertising to build customer loyalty to their brands, they take part of that power back. Lately, big retailers have been reclaiming that power. Of course, in a capitalistic system, power and profitability are usually related.

Chapter 3/The Evolution of Promoting and Advertising Brands

Discuss several significant eras in the evolution of advertising in the United States, and relate important changes in advertising practice to more fundamental changes in society and culture. How did successful advertising leverage the social and cultural forces of their day? Social and economic trends, along with technological developments, are major determinants of the way advertising is practiced in any society. Before the Industrial Revolution, advertising’s presence in the United States was barely noticeable. With an explosion in economic growth around the turn of the century, modern advertising was born: The “P. T. Barnum era” and the 1920s established advertising as a major force in the U.S. economic system. With the Great Depression and World War II, cynicism and paranoia regarding advertising began to grow. This concern led to refinements in practice and more careful regulation of advertising in the 1960s and 1970s. Consumption was once again in vogue during the designer era of the 1980s. The new communication technologies that emerged in the 1990s era seem certain to effect significant changes in future practice. Finally, the interactive, wireless, and broadband technologies that are leading advertising into the 21st century hold great promise but a hard-to-predict future. Tell the story of consumer empowerment and branded entertainment, and understand how it works. Integrated, interactive, and wireless have become the advertising buzzwords of the early 21st century. These words represent notable developments that are reshaping advertising practice. This is so because the technologies present advertisers with new options like Web films or feature films that highlight brands—a process known as advertainment. In addition, consumers can use wi-fi systems, limited-area wireless access systems, to provide more mobility in their use of computers. Integrated brand promotion may continue to grow in importance as advertisers work with more varied media options to reach markets that are becoming even more fragmented. A variety of advertisers are using interactive media to reach consumers in the digital realm, while services like TiVo demonstrate a consumer backlash against the ubiquity of advertising. As for creative, the ads of the ’00s have become more self-aware and self-referential—they are ads that are very aware of being ads. Advertising in the next decade will continue to be a vibrant and challenging profession.

Identify forces that will continue to affect the evolution of advertising. History is practical. Consumers and their behavior and values will continue be affected by social and cultural change and thus represent advertising and IBP opportunities and challenges.

CHAPTER OUTLINE

Chapter 3/The Evolution of Promoting and Advertising Brands

INTRODUCTORY SCENARIO: LUX AD FROM 1935

PPT 3-1 here

This short scenario featuring the Lux soap advertisement in Exhibit 3.1 makes an essential point about advertising and the content of this chapter. Students will find the tone and emphasis of this ad anachronistic—and that is precisely the point. The points to highlight here (particularly since some students might find the ad offensive): •

Advertising evolves over time and with the culture.

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Advertising is a reflection of a particular social and technological instant in time. Some students will be a little slow on the “uptake” and challenge the political “incorrectness” of this ad. Point out that this is precisely the point—this ad was deemed “appropriate” in the 1930s but would be totally unacceptable in today’s cultural environment.

This chapter begins with the basic influences —social, economic, technological—that gave rise to the creation, delivery and purpose of advertising as a process in a culture and economy. Then, a unique breakdown of different eras of advertising is offered, beginning with the pre-industrialization era and concluding with the current environment. I.

The Rise of Advertising

PPT 3-2 here

An important point to make to students is that while some historical treatments of advertising claim that “as long as men and women have been communicating, there has been advertising,” this is a naive and false perspective. Although there may have been persuasive intent in ancient times and even a commercial context, there was no mass-mediated communication—a necessary condition from advertising as specified in Chapter 1. Note that this treatment is essential for students and unique to this text. Also point out that advertising as a social and economic process needs a particular sort of fertile ground to flourish. The four basic influences that gave rise to advertising as we know it are: A. The Rise of Capitalism For advertising to become prominent in a society, the society must rely on aspects of capitalism: organizations compete for resources, called capital, in a free market. Part of the competition for resources involves stimulating demand for organizations’ goods or services, and advertising, as a strategic process, can be used to do so. B. The Industrial Revolution •

The industrialization of societies leads to advertising’s emergence as a business and communication process. The Industrial Revolution began about 1750 in England. It spread to the United States and progressed slowly until the early 1800s, when the War of 1812 boosted domestic production.

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The Industrial Revolution took American society away from household self-sufficiency to marketplace dependency as a way of life. Industrialization was a basic force behind

Chapter 3/The Evolution of Promoting and Advertising Brands

the rapid increase in mass-produced goods that required stimulation of demand; something that advertising can be very good at. In addition, the railroad could facilitate large demand by expanding geographic markets. C. The Emergence of Modern Branding •

If a manufacturer can stimulate sizable demand for a brand, that manufacturer can develop power in the distribution channel and force wholesalers and retailers to sell that particular brand. Demand stimulation causes consumers to insist on the brand at the retail level; retailers and wholesalers have virtually no choice but to comply with consumer desires. Intel’s promotion of the Pentium chip is an excellent example.

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A factor that was critical to manufacturers’ pursuit of power was branding. Manufacturers had to develop brand names so that consumers could focus their attention on a clearly identified item particularly once the railroad starting delivering products long distances from manufacturers’ sites. Manufacturers began branding their products in the late 1800s, with Levi’s (1873), Maxwell House Coffee (1873), Budweiser (1876), Ivory (1879), and Coca-Cola (1876) among the first.

D. The Rise of Modern Mass Media •

With the invention of the telegraph in 1844, a communication revolution was set in motion.

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Most important to advertising was the rise of mass circulation magazines. The ads in these magazines began reaching a more diverse audience and national brands were projected into the national consciousness. •

Also, it is critical to realize that for the most part, mass media in the United States are supported by advertising. PPT 3-3 here

II. The Evolution of Advertising

PPT 3-4 here

Now we’ll turn our focus to the evolution of advertising in practice. Several periods can be identified that give us various perspectives on the process of advertising. A. The Preindustrialization Era (pre–1800) Advertising did not flourish before industrialization and the creation of concentrated urban markets, but it still existed in a variety of simpler forms: •

Handbills, which were printed on engraved wood or copper, were used to announce the availability of grocery products, household goods, druggists’ wares, and other commodities and services.

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Early printed advertisements appeared in newsbooks (the precursor to the newspaper). The messages were informational and appeared on the last pages of the tabloid.

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Pennsylvania Gazette was the first newspaper to separate ads with lines of white space and was the first to use illustrations in advertisements.

B. The Era of Industrialization (1800 to 1875)

Chapter 3/The Evolution of Promoting and Advertising Brands

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Advertisers in this era tried to cultivate markets for growing production as the population dramatically increased. A middle class, spawned by the economic windfall of regular wages from factory jobs, began to emerge.

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Newspaper circulation was fostered by the railroads.

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Advertising was not universally hailed as an honorable practice. Without formal regulation, advertising was considered an embarrassment by many segments of society. This image wasn’t helped by the advertising for patent medicines, the first products heavily advertised on a national scale that promised a cure for nearly everything.

C. The P. T. Barnum Era (1875 to 1918)

PPT 3-5 here

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During the years from about 1875 to 1918, advertising ushered in what is known as consumer culture, or a way of life centered around consumption.

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This was a time of advertising legends: Albert Lasker, head of Lord and Thomas in Chicago, possibly the most influential agency of its day; Francis W. Ayer, founder of N. W. Ayer; John E. Powers, the most important copywriter of the period; and Charles Austin Bates, another brilliant advertising copywriter.

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Until 1906, advertising went completely unregulated. In that year, Congress passed the Pure Food and Drug Act, which required manufacturers to list the active ingredients of their products on the labels.

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The ads of this period were bold, carnivalesque, garish, and often full of dense copy that hurled fairly incredible claims at prototype “modern” consumers—thus the “P. T. Barnum” description.

D. The 1920s (1918 to 1929) •

The 1920s were prosperous times. Americans enjoyed a previously unequaled standard of living. It was an age of hedonism, and the pleasure principle was appreciated, openly and often.

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Ads of the era exhorted consumers to have a good time and enjoy life. Consumption was not only respectable, but also expected. The average citizen had become a “consumer.”

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Ads from the 1920s emphasized themes of modernity, the division between public workspace (the male domain of the office) and the private, “feminine” space of the home. Science and technology were the new religions of the day, and ads stressed the latest scientific offerings.

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The style of the 1920s ads was much more visual and far less wordy. They showed slices of life or lessons in what historian Roland Marchand called the social tableau—lessons about how to fit in with the smart crowd. PPT 3-6 here

E. The Depression (1929 to 1941)

PPT 3-7 here