Intro to Advertising - Ch. 1-4 PDF

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Dr. Tae Rang Choi...

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Intro to Advertising Chapter 1: The Evolution of Advertising  Integrated marketing communications: a strategic business process used to plan, develop, execute and evaluate coordinated, measurable, persuasive brand communication programs with consumers,  IMC Approach o An approach to achieving the objectives of a marketing campaign through a wellcoordinated use of different promotional methods intended to reinforce each other o Coordination and integration of messages from a variety of sources  Marketing communications o Efforts and tools used to communicate with customers o Includes tv commercials, websites, social media messages, product placement in tv shows, coupons, sales letters, event sponsorship, telemarketing called, and emails  Advertising o Advertising is extensive, powerful, and influential type of marketing communication o “a paid, mediated form of communication from an identifiable source, designed to persuade the receiver to take some action, now or in the future”  Characteristics of Advertising o Directed at groups of target audiences (receivers) who are attractive to the advertiser  Consumers: people who buy products for their personal use  Businesses o Paid  Most advertising paid for by identified sponsors  Public service announcements  Advertisements that serve the public interest, for a nonprofit organization, carried by the media at no charge o Medium  A communication vehicle that transfers a message from the sender to the receiver  Mass media: print or broadcast media that reach very large audiences. Examples include radio, television, newspaper, magazines, and billboards  Word-of-mouth (WOM): passing of information in an informal, unpaid, person-to-person manner  Electric word-of-mouth (eWOM): WOM done through electric media vehicles o Persuasion

Advertising is intended to be persuasive – to ultimately move the audience to do something  It promotes a product of some sort, a good, service, or idea o Identified sponsor  Advertisements identify their sponsors Advertising o In 1963, American Marketing Association proposed the definition:  “advertising is any paid form of non-personal presentation and promotion of ideas, goods, and services by an identified sponsor o In 2019, American Marketing Association proposed re-definition:  “the placement of announcements and persuasive messages in time or space purchased in any of the mass media by business firms, non-profit organizations, government agencies, and individuals who seek to inform and/or persuade members of a particular target market or audience about their products, services, organizations, or ideas” Activities of Business Organization o Operation o Finance/administration o Marketing Marketing o “the activity, set of institutions, and processes for creating, communicating delivering, and exchange offerings that have values for the following:  Customers  Clients  Partners  Society at large o Marketing is a process – a sequence of activities – aimed at profitably Marketing mix o Elements that are added, subtracted, or modified by a company to create a desired marketing strategy:  Product  Price  Place  Promotion o People, purpose, passion – newly added Advertising and Marketing Process o Marketing strategy  Who the targets of advertising should be  In what markets the advertising should appear  What goals the advertising should accomplish o Advertising strategy  Refines the target audience 

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Defines what response the advertiser is seeking, especially what the audience should:  Notice  Think  Feel o Principles of Free-Market Economics  In economics, a free market is a system is which the prices for goods and service are determined by the open market and by consumers  Self-interest: people always want more for less  Competition between self-interested sellers’ advertising to selfinterested buyers lead to the following: o Greater diversity or products o High incentive to develop new products  Complete information o The more information buyer and sellers have leads to the following:  More efficient competition  Better quality products  Lower prices for all  Many buyers and sellers:  Many sellers ensure competition to meet customer needs by producing more market-responsive products  Many buyers ensure that sellers can find customers interested in their unique, fairly priced products  Absence of externalities (Social cost)  Externalities: benefit or harm by the sale or consumption of products to people who are not involved in the transaction  Taxation and regulation: used to compensate for or eliminate the externalities o Functions and Effects of Advertising as a Marketing Tool  To identify products and differentiate them from others  To communicate information about the product, its features, and its place of sale  Try new products  To increase product use  To stimulate the distribution  To build value  To lower the overall cost o Preindustrial Age  Period between the beginning of written history and the nineteenth century  Invention of paper and printing press – rise of written advertising  1275 – first European paper 

 1440 – printing press invented  1472 – first English advertisement  1600 – first newspapers  1729 – first illustrations in American ads  Benjamin Franklin – father of ad o Industrial Age  Period from mid-1700s through end of World War 1, when production was the major concern of manufactures o The Evolution of Advertising  Preindustrial age  Invention of paper and printing press – rise of written advertising  Benjamin Franklin – the father of advertising art  Industrial age  Production was the major concerns of manufactures  1869: Ayer and Sons became first modern ad agency  1911: first “truth in advertising” codes by AAF  Photography fostered credibility and creativity  1920s: era of salesmanship  Radio become the primary means of mass communication and a powerful new advertising media  Development of new brands of consumer packages goods  Product differentiation: portraying a brand as different from and better than the competition through advertising and packaging  Great Depression – October 29, 1929  Drop in ad spending  Golden age  Introduction of television o Growth of tv advertising o Postwar prosperity  Ex: 1945 commercial about band-aids  Rosser Reeves of the Ted Bates Agency introduced marketing strategies: o Unique Selling Proposition (USP): distinctive benefits that make a product different than any other  What consumers want, what you do well, what competitors do well o Market segmentation: identifying unique groups whose needs could be met by specialized products o Positioning: association of a particular brand’s features/benefits with a particular set of consumer needs, creating a unique impression in the minds of the consumers  Postindustrial age

A period of cataclysmic change Demarketing: advertising used to slow the demand for products, such as energy, tobacco, alcohol  Megamerger: big multinational companies and their advertising agencies buying other big companies  Global economic recession caused by layoffs in defense industries Global interactive age  Growth of media delivery systems o Narrowcasting: delivering programming to a specific group defined by demographics and/or program content; the opposite of broadcasting o Cable cutting: the practice of choosing to discontinue cable service and instead watch programming on demand over internet services The Effects of Advertising  Advertising serves social needs: o Encourages increased productivity o Primary income for many media  Facilitates freedom of the press  Promotes complete information o Public service announcements (PSA)  Promote growth and understanding of social issues and causes  Issues of truthfulness and ethics led to the following o Government regulation  Pure food and drug act (1906)  Federal trade commission act (1914) o Industry efforts at self-regulation  Association of nation advertisers  American advertising federation  Better business bureau o Attention has recently shifted to more subtle problems  

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Chapter 2  Advertisers face a variety of economic, social, ethical, and legal issues  Issues in Advertising o Highly visible activity – companies risk public criticism if the following are true  An advertisement is offensive or displeasing  Products do not measure up to the advertised promises  Underlying Principles of Free-Market Economics o Four fundamental assumptions  Self-interest  Many buyers and sellers

Complete information Absence of externalities: benefit or harm caused by sale or consumption of products Effect of Advertising on the Vale of Products o Gives brands added value  Added value  Increase in worth of a product or service provided by communicating benefits over and above those offered by the product itself  Creates a positive image that makes a product more desirable to consumers  Educated consumers about new uses for a product  Allows consumers to communicate who they are (or want to be) through the product they use Effect of Advertising on Prices o Small part of a product’s cost o Enables mass production, which lowers the cost per unit of a product o Regulated industries see no price associated with advertising o Retailing – advertising contributes to both higher and lower prices Effect of Advertising on Competition o Big advertisers have a limited effect on competition or small business  One advertiser is not large enough to dominate national advertising  Freedom to advertise encourages more sellers to enter the market  Nonadvertised store brands compete with nationally advertised brands Effect on Consumers and Businesses o In growing markets, advertising  Provides more “complete information”  Stimulates primary demand: consumer demand for a whole product category  Helps businesses compete for a share of the growing market o In declining markets, advertising  Mainly provides price information  Influences selective demand: consumer demand for the particular advantages Abundance Principle o In an economy that produces more goods than can be consumed, advertising serves two purposes: Social Impact of Advertising o Federal Trade Commission (FTC) act prohibits:  “unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce…” o Deceptive advertising  

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Puffery: exaggerated, subjective claims that cannot be proven true or false  Ex: Activia o Subliminal advertising myth  Subliminal advertising: advertisements with messages (often sexual) supposedly embedded in illustrations below the threshold of perception  No study date has proven that subliminal advertising works or even exists o Advertising and our values  Advertising promotes a materialistic way of life  Ads play on our emotions and promise greater status, social acceptance, and sex appeal  Only 17 percent of U.S. consumers see advertising as a source of information to help them decide what to buy o Stereotypes in advertising  Stereotype: a negative or limiting preconceived belief about a type of person or a group of people that does not consider individual differences o Offensive advertising  Offended consumers can boycott a product  Marketplace veto power: campaign will falter if the ads do not pull in audiences Social Impact of Advertising in Perspective o Encourages development and speeds the acceptance of new products and technologies o Fosters employment o Consumers have a wider variety of choices o Helps keep prices down through mass production o Promotes healthy competition between producers o Enables freedom of press Social Responsibility and Advertising Ethics o Ethical advertising: doing what the advertiser and advertisers peers believe is morally right in a given situation o Social responsibility: doing what society views as best for the welfare of people in general or for a specific community Advertisers’ Social Responsibility o Advertising roles  Influences a society’s stability and growth  Secures large armies  Creates entertainment events, drawing fans  Affects the outcome of political elections o Advertisers have a responsibility to maintain ethical standards Ethics of Advertising o Three levels of ethical responsibility  Traditional customs and principles of a society 

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 Attitudes, feelings, and beliefs that form a personal value  Singular ethical concepts Freedom of Speech o Some forms of commercial speech (speech that promotes a commercial transaction) are protected under the First Amendment Freedom of Commercial Speech o Advertising tobacco is heavily restricted due to externalities o In 1998, tobacco companies agreed to  Limit brand name promotion at events with young attendees  Eliminate the use of cartoon characters in ads o Advertising to children  Can lead to false beliefs or highly improbable product expectations  Should not be intentionally deceptive o Children’s Advertising Review Unit (CARU) Consumer Privacy o Consumer privacy is the second major regulatory issue facing advertisers (after freedom of commercial speech)  Privacy rights: an individual’s right to prohibit personal information from being divulged to the public o The FTC and the Network Advertising Initiative created “Fair Information Practice Principles” to respond to consumer privacy concerns Federal Trade Commission o Regulates acts of:  Deceptive advertising  Unfair advertising: causes a consumer to be unjustifiably injured or violates public policy  Comparative advertising: claims superiority to competitors in some aspect  Must be truthful  Must compare on an objectively measurable characteristic Investigating Suspected Violations o Substantiation: if an ad cites survey findings or scientific studies, the FTC may request this data from a suspected advertising violator o Endorsements and testimonials are when customers or celebrities endorse a product in advertising, Remedies for Unfair or Deceptive Advertising o Consent decree o Cease-and-desist order o Corrective advertising Federal Communications Commission (FCC) o Has jurisdiction over radio, television, telephone, satellite and cable tv industries, and the internet o Restricts the products advertised and the content of ads

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Food and Drug Administration (FDA) o Responsible for the safety of food, cosmetics, and medicine and therapeutic devices Patent and Trademark Office and the Library of Congress o Intellectual property: intellectual works legally protected by copyright, patent, or trademark  Patent: confers upon the creator of an invention the sole right to make, use, and sell that invention for a set period of time  Trademark: word, name, symbol, device, or any combination adopted and used by manufacturers or merchants to identify and distinguish their goods from those manufactured or sold by others  Copyright: protects an original work from being plagiarized, sold, or used by another without the individual’s express consent  Most expensive song: happy birthday Nongovernment Regulation o Better Business Bureau (BBB) o Advertising Self-Regulatory Council (ASRC) o National Advertising Division (NAD) o National Advertising Review Board (NARB) Advertising Principles of American Business of the American Advertising Federation o Guarantees and warranties o Price claims o Testimonials o Taste and decency Regulation by Consumer Groups o Consumerism: social action designed to dramatize the rights of the buying public o Customer advocate: individual or group that actively works to protect consumer rights International Advertising Regulation o Foreign governments regulate differently than the United States  Greater restrictions  Different legal environments

Chapter 3: The Business of Advertising  Organizations in Advertising o Advertisers  Companies that sponsor advertising for themselves and their products o Advertising Agencies  Develop and prepare advertising plans, advertisements, and other promotional tools for advertisers o Suppliers o Media  Local Advertising

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o Advertising by business within a city or county directed toward customers within the same geographic area o Types of local advertisers  Dealers or franchisees of national companies  Stores that sell a variety of branded merchandise  Specialty businesses and services  Governmental and nonprofit organizations o Advertising manager: performs all the administrative, planning, budgeting, and coordinating functions Types of local advertising o Product advertising: functional classification of advertising that promotes goods and services o Sale advertising: stimulates movement of a particular merchandise or increases store traffic by emphasizing price reduction o Institutional advertising: attempts to gain favorable attention for the business as a whole o Classified advertising Local Advertising o Integrated marketing communications (IMC): building and reinforcing mutually profitable relationships with the stakeholders and general public Creating Local Advertising o Local advertisers and social media  An effective method of connecting with a local community  Can target customers about shared local events o Sources for creative help  Reps from the local media, local ad agencies, freelancers and consultants  Creative boutiques and syndicated art services  Cooperative advertising programs of wholesalers, manufactures, and trade associations Cooperative (co-op) Advertising o Sharing of advertising costs by the manufacturer and the distributor or retailer, with manufacturer repaying part of dealer’s advertising costs based on sales o Two main purposes  Build the manufacturer’s brand image  Help distributors, dealer, or retailers increase sales Constraints of Cooperative Advertising o Retailers may need very high sales to qualify for co-op funds o Retailers and manufacturers may have different advertising objectives o Manufactures expect total control Regional and National Advertisers o Regional advertising: operate in one part of the country and market exclusively within that region  Azzip pizza

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o National advertising: advertise in several geographic regions or throughout the country  Texas Roadhouse o What are the top 5 franchises in the United States?  McDonald’s, Subway, KFC, Burger King, Pizza Hut How Large Companies Manage Their Advertising o Centralized organization o Decentralized system Transnational Advertisers o Multinational corporations: operate and invest throughout many countries and make decisions based on availabilities o Global marketers: use a standardized approach to marketing and advertising in all countries o Localized approach: adaptation of products, packages, and advertising campaigns to suit Media Around the World o International media: media serving several countries, without change, that is available to an international audience o Foreign media: local media of each country used for campaigns targeted to consumers or businesses within a single country The advertising Agency o Advertising agency: independent organization of creative people and business people that specialize in developing and preparing advertising plans, advertisements, and other promotional tools for advertisers Types of Agencies o Geographic scope  Local, regional, national, international o Range of services  Full-service advertising agency, general consumer agency, business-tobusiness agency o Specialized services  Creative boutiques, media-buying service (media agency), interactive agency Tasks Performed in an Agency o Account executive (AE): liaison between agency and the client o Management (account) supervisors: report to the agency’s director o Acc...