Overview of Advertising ManagementOverview of Advertising Management CHAPTER 7 CHAPTER 7... Understand the magnitude of advertising and the percentage of sales revenue companies invest i
Trang 1Overview of Advertising Management
Overview of Advertising Management
CHAPTER 7
CHAPTER 7
Trang 21 Understand the magnitude of advertising and the
percentage of sales revenue companies invest in this marcom tool
2 Appreciate that advertising can be extraordinarily
effective but that there is risk and uncertainty when
investing in this practice
3 Recognize the various functions that advertising
performs
4 Explore the advertising management process from
the perspective of clients and their agencies
percentage of sales revenue companies invest in this marcom tool
effective but that there is risk and uncertainty when
investing in this practice
performs
the perspective of clients and their agencies
Chapter Objectives
After reading this chapter you should be able to:
Chapter Objectives
After reading this chapter you should be able to:
© 2010 South-Western, a part of Cengage Learning All rights reserved 7–2
Trang 35 Understand the functions agencies perform and how
they are compensated
6 Explore the issue of when investing in advertising is
warranted and when disinvesting is justified
7 Examine advertising elasticity as a means for
understanding the contention that “strong advertising
is a deposit in the brand equity bank.”
they are compensated
warranted and when disinvesting is justified
understanding the contention that “strong advertising
is a deposit in the brand equity bank.”
Chapter Objectives (cont’d)
After reading this chapter you should be able to:
Chapter Objectives (cont’d)
After reading this chapter you should be able to:
Trang 4© 2010 South-Western, a part of Cengage Learning All rights reserved 7–4
Is Advertising Rocket Science?
• “The truth is that
advertising is harder
than rocket science
It’s news when a
rocket launch fails
It’s news when an
ad campaign launch
succeeds.”
Trang 5• Advertising Defined
identifiable source, designed to persuade the receiver
to take some action, now or in the future
• Types of Advertising
Trang 6© 2010 South-Western, a part of Cengage Learning All rights reserved 7–6
Example of the Use of Humor in B2B Advertising
Figure 7.1
Trang 7The Magnitude of Advertising
United States:
$294 billion
($1,000 per person) Global:
$360 billion
Trang 8© 2010 South-Western, a part of Cengage Learning All rights reserved 7–8
Top 20 Spenders in U.S Advertising, 2006 ($ million)
Table 7.1
Trang 9The Magnitude of Advertising (cont’d)
• Advertising-to-Sales Ratios
low of 1.3 % to a high of 29.9 %
average of 3.1% across most B2C and B2B
categories
companies to have higher ratios
ratios
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Advertising-to-Sales Ratios for Select Product Categories
Table 7.2a
Trang 11Advertising-to-Sales Ratios for Select Product Categories
Table 7.2b
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Advertising-to-Sales Ratios for Select Product Categories
Table 7.2c
Trang 13The Magnitude of Advertising (cont’d)
• Advertising Effects Are Uncertain
an investment
variable cost
financial pressures call for cost-cutting measures
underlying successful advertising
Trang 14© 2010 South-Western, a part of Cengage Learning All rights reserved 7–14
Advertising Functions
Influencing
Informing
Assisting Other Company Efforts Adding Value
Reminding and Increasing Salience
Trang 15Advertising Functions
• Informing
expansion advertising)
• Influencing
products and services:
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Advertising Functions (cont’d)
• Reminding and Increasing Salience
Enriching the memory trace for a brand so
that the brand comes to mind in relevant
choice situations
Increasing customers’ interest in mature
brands and the likelihood of choosing brands that might have otherwise not been chosen.
Influence brand switching by reminding
consumers that the brand is available and that
it possesses favorable attributes.
Trang 17Advertising Functions: Adding Value
Innovating Improving Quality Altering Perceptions
Adding Value Increases DCF
Trang 18© 2010 South-Western, a part of Cengage Learning All rights reserved 7–18
Advertising Functions (cont’d)
• Using Advertising to Assist
Other Company Efforts
sweepstakes
introducing the product and
legitimizing salespeople’s claims
price deals
Trang 19The Advertising Management Process
Figure 7.2
Trang 20© 2010 South-Western, a part of Cengage Learning All rights reserved 7–20
The Role of Advertising Agencies
Advertising Function
Alternatives
Trang 21Top-10 U.S Advertising Agencies in Ad Revenue, 2006
Table 7.3
Trang 22© 2010 South-Western, a part of Cengage Learning All rights reserved 7–22
Advertising Function Alternatives
• In-House Advertising Operation
advertising staff and absorbing
the operation costs
does a large amount of continual
advertising
Trang 23Advertising Function Alternatives
• Purchase Services À la Carte
Use services only when they are needed
Availability of high-caliber creative talent
Potential cost efficiencies
Lack cost accountability
Financial instability of smaller boutiques
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Advertising Function Alternatives
• Full-Service Advertising Agency
Access to in-depth knowledge and skills
Obtaining negotiating leverage with the media
Coordinating advertising and marketing efforts
Some control of advertising function is lost
Larger clients are favored over small clients
Occasionally inefficient in media buying
Trang 25Advertising Agency Organization
Creative
Services
• Develop advertising copy and campaigns
• Copywriters, production people, and creative directors
Media Services
• Selecting the best advertising media
• Media planners develop overall media strategy
• Media buyers procure the selected media
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Agency Compensation
Commissions
from Media
Labor-based Fee System
Outcome- or Performance-based
Programs
Agency Compensation Methods
Trang 27Ad-Investment Considerations
• Are the Dollars Invested in Advertising
Warranted?
Trang 28© 2010 South-Western, a part of Cengage Learning All rights reserved 7–28
Ad-Investment Considerations: Which
Position Is More Acceptable?
• The Case for Investing
sales volume, enabling higher selling prices, and thus increasing revenue beyond the incremental
advertising expense
• The Case for Disinvesting
when a brand is performing well or during economic recession in the belief that an expense reduction, with all else held constant, will result in increased profits
Trang 29Advertising versus Pricing Elasticity
• Elasticity
is to changes in marketing variables such as price
and advertising
• Calculating elasticity coefficients for price (EP)
and advertising (EA):
Percentage change in price
Percentage change in advertising
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Advertising and Price Elasticity Combinations
Consumers have well-established brand
preferences such as during the decline stage
of a product’s life cycle or in niche markets
Maintain the status quo for present price and advertising levels because demand is neither very price elastic or advertising elastic
Market is new products, luxury goods, and
products characterized by symbolism and
imagery
Build image via increased advertising because demand is more advertising elastic than price elastic
Market is a mature consumer goods market
where consumers have complete information
about most brands in the category and brand
switching is frequent
Grow volume via price discounting because brands are little differentiated causing the market
to be more price than advertising elastic
Market has brands in the product category
that are inherently differentiable and products
that are seasonal
Increase advertising and/or discount prices because the market is both price elastic and advertising elastic
Trang 31Ad Spending, Advertising Elasticity, and
Share of Market
• Share of Voice
other brands in the category
• Advertising Strength: Share of Market
advertising spending in comparison to the total level
of advertising by all firms in its category
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The Effect of Advertising Elasticity
on Brands Share of Market
Table 7.4