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Chapter 2
Roles of Advertising

Chapter Objectives

After reading this chapter you will understand:

1. Primary goals and objectives of advertising

2. Changing roles of advertising within the marketing communication mix
3. Value of advertising and measuring return-on-investment (ROI)
4. Various categories of advertising
5. Advertising and building brand equity
6. Advertising of ideas and non-profit organizations

Chapter Overview

Advertising has undergone dramatic changes during the last decade. Technological change
and demands from clients for more accountability have altered practices of the advertising
industry. Advertising’s primary role, however, continues to be to convey truthful information
about products, services, or ideas to a targeted audience. Media will increasingly target
market niches and individual buyers.

Lecture Outline

1. Advertising and the Changing Communication Environment

A. In recent years, a major concern of marketers has been the convergence, or coming
together of related components of the mass-communications system. These
components appear in three distinctly related areas:
1) Technological convergence—the incorporation of computer technology with
broadcast media and home reception.
2) Business convergence—usually referred to as consolidation, it is the dominant
trend of companies merging and includes advertising agencies and media
companies.
3) Content convergence—companies try to stretch their advertising or program
content in new directions to help amortize sizable investments.

B. Convergence is very apparent in advertising communication. Finding a cost-efficient

plan for reaching increasingly in-control and demanding consumers is the major
challenge of contemporary advertising. The forces of convergence and consolidation
dominate every advertising, promotion, and marketing decision.
C. Advertisers have a dual problem – an ever-expanding number of media options and the
need to develop advertising messages that consumers will invite to share their time.
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D. Citizen media describes the relationship between advertisers and consumers where
communication users exert more control than do communication providers.
Participatory media such as blogs is another step in citizen media.
E. The year 2000 marks when the communication revolution first became commercially
viable.
F. Advertisers vote with their dollars, and no better evidence exists of the importance of
new technology than the shift in financial support by major advertisers away from
traditional media to new and, especially, interactive technology.

***** NOTES: Use Exhibit 2.1 Here*****

2. Advertising as a Communication Tool

A. Advertising is a communication tool. Advertising objectives must be viewed from a

communication perspective. The fundamental principle of good advertising is that it
must be built around the overall marketing plan and execute the communication
elements of a more far-reaching marketing program.

*****NOTES: Use Exhibit 2.2 Here*****

B. Advertising objectives must complement the marketing plan. The following are the
primary factors in the typical marketing plan:
1) Overall goal(s) of the plan. Marketing goals are usually expressed in financial
terms; such as percentage increases in sales.
2) Marketing objectives. Marketing objectives should be clearly stated and
measurable.
3) Marketing strategy. Steps to achieve goals and objects are outlined, in the form of
a general overview.
4) Situational analysis. An environmental analysis including product benefits, sales
and industry projections, and the competitive situation.
5) Problems and opportunities. Major problems and opportunities facing a brand are
addressed.
6) Financial plan. An outline of expected profit or loss over a designated time frame.
7) Research. This section outlines the data needed for marketing planning, where
they can be obtained, their cost, and time frame for availability.
C. Following the marketing plan as a blueprint, the advertising plan is drawn up to
accomplish the following communication tasks:
1) Prospect identification. Identify prime company prospects, including demographic
and psychographic data.
2) Consumer motivations. Analyze the underlying consumer needs, wants, and
aspirations relative to the purchase of product/service categories and specific
brands.
3) Advertising execution. Develop creative advertising messages that effectively set
brands apart from the competition.
4) The advertising budget and allocation. The share of the marketing program
designated for advertising will be included in the marketing plan. Allocation of
the advertising budget will be part of the advertising plan.
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3. Advertising and Profitability

A. The value of a particular marketing function is often expressed as return-on-

investment (ROI). A number of studies indicate a strong correlation between brand
awareness, market share, and profits.

*****NOTES: Use Exhibit 2.3 Here*****

Clients are increasingly demanding that media and advertising agencies measure
advertising success on the basis of effective communication rather than on audience
exposure.

B. While there is general agreement on the need to estimate audience involvement, there
is a lack of consensus on how to define and/or measure it.
C. The demand for accountability and a focus on ROI are already becoming part of the
media/advertiser relationship.
D. Despite these attempts to change the method of buying and measuring the audience of
various media, we are far from a consistent model for determining audience value
across the hundreds of communication vehicles currently used by advertisers. Despite
some misgivings on the part of media and advertising agencies, it is the client that will
ultimately prevail in the application of ROI management.

*****NOTES: Use Exhibit 2.4

4. Integrated Marketing

A. Marketing consists of four primary elements: product, price distribution, and

communication. These are the marketing mix. The communication component is
further divided into four primary categories:
1) Personal selling. Personal communication is the most effective means of
persuading someone. It is also the most expensive and thus impractical at the
initial stages of mass selling. As a primary technique, it is used most often in
business-to-business marketing. Personal selling techniques are becoming
important factors in many selling tactics across a number of platforms such as
direct response and the Internet.
2) Sales promotion. Extra incentives are used periodically to generate sales through
pricing discounts, sweepstakes, point-of-purchase displays, etc. Commonly seen
by consumers, these incentives are even more widely used through the marketing
distribution channels as an inducement to carry a particular brand and to secure
favorable shelf space. But over-emphasis on price can hurt profits and long-term
brand equity and loyalty.
3) Public relations. In the last decade, public relations has become one of the
fastest-growing sectors of marketing communications. A primary benefit is that it
is perceived as having higher audience credibility than advertising. Public
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relations is now fully integrated into the marketing communications plans of most
major companies.

*****NOTES: Use Exhibit 2.5 Here*****

a) Contemporary marketers have adopted many of the techniques of the

two-step flow (media providing information to opinion leaders who, in
turn, influence the general public) and other public-relations practices
to develop similar programs of influencing the purchase of brands.
More recent techniques include buzz, guerilla marketing, and word-of-
mouth marketing. The key to their success is to engage marketplace
influencers.
b) The key to successful public relations is to view it as a complement
rather than a competitor to advertising. Public relations and especially
word-of-mouth advertising tend to work best at the introductory stage
of building brand awareness with advertising taking over to build long-
term brand loyalty.

c) Unlike advertising, a public-relations message is ultimately controlled

by the media. The media make decisions concerning when, where, and
if a particular product story will be carried.
4) Advertising. Paid, persuasive (not neutral or unbiased) messages delivered
through the mass media are referred to as advertising communications.
Advertising is undergoing dramatic changes as it adapts to new technologies.

B. During the early development of modern marketing and advertising, these

components were viewed separately and lacked coordination by many companies;
often resulting in confusing and sometime contradictory messages. In recent years,
companies have begun to move toward a consolidation of all areas of the marketing
function, especially marketing communications.
C. The complexity of contemporary marketing communication plans has resulted in a
demand for programs that “speak with one voice” and to consolidate all areas of the
marketing communication function.
D. Referred to as integrated marketing communication (IMC), emphasis has turned to
assuring effectiveness of the “total” marketing communication plan. All marketing
disciplines must work together to give a unified message to consumers. IMC also has
had significant implications for the way advertising agencies deal with clients.
E. In coming years, some form of IMC will be even more the norm in the marketing
plans of virtually every company. Demands for marketing efficiency combined with
new marketing communication channels and an increasingly diverse audience will
combine to force greater integration and coordination of all aspects of the marketing
function, especially those involved in the communication process.

*****NOTES: Use Exhibit 2.6 Here*****

F. Although the benefits of IMC are apparent, the implementation of the strategy can be
extremely difficult.
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5. Advertising: An Institutional Approach

A. Society establishes institutions to bring order to vital activities. An institutional

consideration of advertising permits us to see that it is a logical – some would say
necessary – requirement for a capitalistic economic system.
B. Advertising is viewed from two related perspectives: (1) its economic role and (2) its
social and cultural role in communicating not only product information but also social
values.
C. The cultural role is often referred to as its inadvertent role. With the exception of
advertising overtly intended to foster some idea or initiative, many of advertising’s
social consequences are often unintended by sponsors. One of the major criticisms of
contemporary advertising is its effect on the behavior of children. Advertisers must
be aware of both economic and social aspects of their advertising; the public has
proven itself to be unforgiving when it perceives that certain advertising is exploitive
(whether intended or not).
D. Most economists agree that advertising has a utilitarian function in the marketing
system – to disseminate product information that allows consumers to know that
products exist, to give consumers information about competing brands, and to permit
consumers to make intelligent choices among product options. However, the effects
of advertising, beyond these strictly functional characteristics are viewed with
suspicion in many quarters.
E. It is sometimes argued that advertising creates artificial wants among consumers,
because purchases are often made based upon psychological and social factors as well
as utilitarian considerations. But, in fact, advertising actually mirrors the mores and
behavior of society at any point in time.
F. The roles of advertising fall into three categories:
1) What advertising does for consumers. Consumer behavior is need driven. A
purchase is the culmination of a process that begins with the recognition that some
problem can be solved by a particular product or service. Advertising’s role in
this process is to provide information as efficiently and economically as possible
to potential buyers. Closely related to the function of consumer information is the
belief that advertising promotes greater choice for the consumer. An age of
specialized media targeted to narrow audiences has facilitated the delivery of
specialized product information and given consumers greater choices. Customer
feedback is critical to tailoring efforts.

2) What advertising does for business. Advertising is one element in a fundamental

marketing process known as exchange theory. Exchange theory suggests that the
long-term success of a business relies upon a positive and mutually beneficial
relationship with its customers. Customers must, however, perceive that they
receive value in their purchases. Advertising is a tool to assist businesses in
quickly grabbing the attention of the consuming public in order to help offset the
enormous costs associated with the production and sale of new and existing
products and/or brands.
3) What advertising does for society. In the current environment of social change
and diversity, advertisers are hard-pressed to present effective sales messages that
are at the same time compelling to the audience and noncontroversial to all
segments of the population. Three challenges stand out:
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a) Monitoring changes so that a company is aware of what is happening in

society.
b) Creating products and services compatible with changing values.
c) Designing marketing messages that reflect and build on the values target
markets and individual customers hold.

The intended purpose of advertising is to contribute to the profitable sale of

products and a continuing economic expansion that presumably is a benefit for
society as a whole. In addition to its economic role, advertising benefits society
by providing revenues to support a diverse and independent press system
protected from government and special interest control. In carrying out these
goals, advertising must be aware of its responsibility as a mirror and monitor of
society. Advertisers have a new and different responsibility to society in the way
they sell their products and services. New technology and sophisticated research
methods have only increased the importance of issues such as consumer privacy
and the potentially intrusive nature of advertising.
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6. Advertising to Diverse Publics

A. Advertising, regardless of its intended recipients, communicates a message to various

groups (business-to-business) and individuals who interpret the message in the
context of their own self-interest.
B. Advertisers must take into account the perceptions these various publics will have of
the message communicated by businesses. That message can be delivered to any one
of the following publics:
1) The distribution channel. Companies attempt to persuade retail distribution
outlets (particularly growing national chains) that they are offering brands with
high-consumer demand, plus significant advertising dollar support. Large
retailers often demand this support before they agree to stock a brand.
2) Employees. With the goal of building employee loyalty and teamwork, consumer
advertising will frequently focus upon quality workmanship and even feature
company employees in their message.
3) Current and potential customers. Advertising is often the most efficient means to
build brand awareness among new customers and enhance brand loyalty among
current buyers.
4) Stockholders. The majority of ordinary customers hold ownership in many of the
companies they patronize. Advertising serves to build strong brand awareness and
a positive reputation, which in turn, keeps stock prices high.
5) The community at large. Corporations want to be viewed as good neighbors in the
localities housing their production facilities. Public opinion must be positively
maintained in order to properly deal with inevitable local disputes regarding taxes,
noise levels, pollution, zoning ordinances, etc.

C. Advertising functions within a matrix of political, legal, economic, and cultural

environments. The entire range of publics must be considered when planning an
advertising campaign.

7. The Components of Advertising Strategy

A. Advertising should be designed to reach those consumers who are interested in the
particular product features and benefits that a brand offers. The most successful
brands are those with features and benefits unique within a product category and,
consequently, those that hold a differentiated position in the minds of consumers.
Advertising’s job is to turn these product benefits into an attention-getting story that
appeals to prospective buyers.
B. This section will discuss some of the primary elements of successful advertising.
C. Brand name. An established brand name that customers recognize and respect is one
of the most valued assets of a company. One of the principal uses of advertising is to
enhance brand familiarity awareness in the minds of consumers by emphasizing
consumer benefits of a product.

1) High brand recognition is especially important for products with little inherent
product differentiation (e.g., soft drinks and cigarettes) and that are easily
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duplicated by competitors from a functional standpoint. What competitors cannot

duplicate are the years of successful brand building that the parent companies
have invested in their brands

*****NOTES: Use Exhibit 2.7 Here*****

2) In the global market, companies are finding that overcoming entrenched local
brands is very difficult as they expand into new markets. Hoping to jump-start the
process, many foreign companies have bought U.S. brands or even entire
companies. As new companies enter the global marketplace, brands will take on
even more importance as a competitive tool to differentiate one product from
another.
D. Brand extensions. The present fiercely competitive environment has caused
companies with high-profile brands to move into “brand extension” as a means to
efficiently and profitably introduce new products.
1) Caution, cannibalization. Since 2000, Coke and Pepsi together introduced
approximately 20 new beverages. Although newly introduced products are quickly
adopted by consumers under the umbrella of a strong brand name and can boost
sales, there are also dangers present that the sale of new products can erode the
sales of the core branded product.
2) Cost of product failures. In addition to cannibalizing existing brands, the failure of
a newly introduced product can adversely impact the image of the parent brand
and entire product line. And consumers can become confused by the introduction
of too many products.
3) Market saturation. When successful brands stagnate and show no growth, product
line extension is often viewed as the only way to expand. Loyal consumers,
however, may begin to question brand values and benefits if the scope of a brand
becomes too large.
4) Risks can be considerable. Mixing market niches can be a tricky business.
Virtually all luxury carmakers have expanded into less expensive lines. But how
are loyal upscale buyers going to view the prestige and value of brands like
Mercedes, BMW, and Cadillac over the long-term? Companies face the problem
of how to move brands into a different position (in the consumers’ minds) without
harming the core brand.
5) Leaving the parent logo “off” a new product. Defying conventional marketing
logic, companies sometimes wish to distance a niche product from the parent
brand to build a unique position in a non-conventional market. Nike entered the
lower-priced shoe market to broaden its market and enhance overall profits with a
$40 running shoe for Wal-Mart that is marketed under the “Starter” brand with no
observable connection to Nike.
6) Advantages and Disadvantages of brand-extension strategy:
 Advantages of a brand-extension strategy
a) Saving money by not needing to build awareness for a new and unknown brand
name.
b) Adding equity to an existing brand name with a successful extension.
 Disadvantages of a brand-extension strategy
a) Damaging a core brand in the minds of loyal consumers with a failed introduction.
b) Losing marketing focus on your existing brand and/or diluting marketing efforts
and budget across several brands.
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E. Closing thoughts on branding. Although there is no one strategy right for every
company, there is common agreement on one thing. Building brand equity is one of
the most important elements of advertising for any company.

8. A Good Product That Meets a Perceived Need

A. The fundamental job of most businesses is to develop products that meet the need of
some consumer segment.

*****NOTES: Use Exhibit 2.8 Here*****

Introducing successful products is difficult – only one in seven product ideas that
enter the developmental process are successful and nearly half of the dollars allocated
to new product introductions go to products that either fail or are abandoned. For
examples, visit the closeout chain Big Lots.

B. Creating successful new products begins with the premise that companies are not
offering a physical object but, rather, the means of solving a problem. The marketer’s
fundamental task is not so much to understand the customer, as it is to understand
what jobs customers need to do.
C. When evaluating the marketing potential for innovative products or product line
extensions, firms often have to determine the social and psychological tendencies of
their prospects before moving ahead. For example, Kodak’s historical domination of
the home photography market by appealing to women and emphasizing the emotional
appeals rather than product technology. Continuing to emphasize the female market
as the family “keeper of memories” has contributed to Kodak’s recent success in
digital cameras. Successful products are those that are perceived by consumers as
being best for a task, not necessarily those that are considered the winner according to
some objective standard.
D. One of the fundamental problems of product development is the fragmentation of both
products and audiences. In their quest to gain market share and meet the demands of
every market niche, companies have presented consumers with an array of oftentimes
confusing alternatives.
E. Attempting to determine the needs of consumers and actually doing so are two
different things. Consumers may know their problems but not be able to enunciate
the type of products that would solve these problems.
F. It is not unusual for products to face changing preferences in the marketplace. The
problem for marketing and advertising is how to adapt to these shifts in consumer
attitude without alienating current customers.
1) Starbucks – can it keep its upscale image and at the same time move to drive-
through pick-up windows? Drive-through service offers the potential of
increasing its breakfast business, but some customers think it cheapens the brand
image and reduces it to just another fast-food outlet. The Starbucks example
demonstrates that a brand is more than the physical characteristics of a product.
Rather, it is a complex combination of product, price, distribution methods, and
communication, which creates a sociological, psychological, and physical
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experience for users.2. Mercedes-Benz – found that rebuilding consumers’ trust

in a brand is much harder than gaining it in the first place. To win back customers
lost due to some quality-control problems in the early 2000s, Mercedes launched
an extensive advertising campaign..
G. Product success depends upon reliable research.
1) All advertising and promotional messages depend upon relevant information to
create appealing messages.
2) Establishing a priority of consumer wants, however, is often difficult to identify.
3) Conjoint analysis. This technique assists in identifying consumer priorities by
asking consumers to weight the importance of many elements or benefits, of
products and services; such as pricing, ingredients, packaging, and technical
specifications. Taken together, such elements determine consumer preference and
help to avoid costly mistakes of emphasizing wrong product benefits in
advertising appeals.
H. Successful advertising begins with product development and marketing from the
consumer’s perspective. Many companies, such as Proctor & Gamble, are adopting a
bottom-up, consumer-centric model of product development and maintenance as
opposed to the top-down model of providing customers with products companies
hoped they would buy.

9. Sales, Revenue, and Profit Potential

A. Marketing’s contribution to profitability is achieved through a complex balance

among sales, market share, promotional expenditures, and cost efficiency. While only
the most unsophisticated marketing executives would emphasize sales and revenue
goals to the detriment of profits, a number of strategies are used to attain profitability.
Established companies use four major approaches to achieve long-term revenues and
profits.
1) Developing and expanding new-product niches to reach current customers. Using
“gap analysis,” JCPenney looked for gaps in the style preferences of customers
and then developed private-branded clothing to fill those gaps in order to set itself
apart from its competitors. Today, it is among the most profitable clothing
retailers, and it has established a reputation for exclusivity with its in-house
brands. Wal-Mart is attempting to move its upscale customers to think of the
chain as a place to buy fashion clothing with advertisements in Vogue featuring
real customers in much more stylish setting than previous advertisements.
2) Emphasizing profits over sales volume. Ford Motor Company announced a new
plan that drastically cut production to match demand. Ford is redesigning and
introducing a number of new models with a strategy of giving emphasis to
revenue and profitability over sales and market share, underscoring the fact that
gross revenue and sales volume can be a misleading gauge of a company’s
success.
3) Emphasizing short-term market share rather than profitability. Faced with
significant increases in advertising and promotion from arch rival Proctor &
Gamble, Colgate-Palmolive made the decision that it had to reduce profit levels in
coming years in order to protect market share in a number of product categories,
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underscoring the need to take a long-term perspective in developing a marketing

strategy.
4) Customer tracking – are all customers created equal? Some customers may be a
detriment to a company’s bottom line. Some companies have long discouraged
continued patronage from some of their buyers. For example, insurers cancel
policies for those that “use” the product too often and banks impose significantly
higher fees for customers who maintain low balances or write excessive checks.

B. The bottom line and advertising.

1) With growing emphasis on profit-based accountability, advertising agencies are
now being compensated relative to the effect of their promotional efforts on the
client’s profits.
2) Corporations too, are giving more scrutiny to marketing and promotional
functions and are increasingly being judged on the basis of return on investment.
3) Measurement of advertising effectiveness; a broader view.
a. Equal weight is now being given to measuring advertising’s ability to
“maintain” sales as well as to increase sales.
b. Keeping current customers is also given equal importance with finding new
ones.
c. Sales alone are not a measure of profitability. Some of America’s largest
companies, in sales volume over the past decade, have experienced the largest
financial losses.

10. Product Timing

A. Timing is a critical element in marketing and advertising planning and decisions.

B. Monitoring the product life cycle.
1) Advertising functions differently at different stages of the product life cycle.
a. Introduction and growth phase—focus is on gaining consumer awareness and
building a competitive edge.
b. Entering the mature phase—advertising strategy takes a longer view and
addresses the strengthening of brand equity and a longer horizon for sales
development.
2) Product introduction and the advertising that accompanies it are among the most
important decisions that determine the long-term success of a company. How
improvements are communicated and to what market segments can have a major
influence on their acceptance. The key is not just to spot new trends but, rather, to
creatively develop products and services to take advantage of them in the
marketplace.
a. No matter how good a product is, it can rarely be forced on consumers before
they are ready to accept it. Without the current spikes in gasoline prices and
more awareness of environmental issues by the public, it is doubtful that fuel-
efficient cars would have been accepted. Demonstrating that fuel conservation
is not a fad nor is it confined just to the car industry, we are seeing a number
of other products touting energy savings.
b. Marketers need to distinguish fads from trends. For example, low-carb eating
was going to revolutionize weight maintenance and create a new food
industry, but many people thought the diet too restrictive and food makers
have withdrawn low-carb products. The current trend to cater to dieters is
 P a g e | 12

“portion-control” products. Only time will tell if these products will resonate
with consumers.
c. Another example of trend spotting that marketers hope will lead to new-product
success is eating on the run. Products such as Tide to Go demonstrate the way
trends evolve into an array of products and the importance of timing in the
introduction of most new products.
3) Market timing may be a matter of doing something first rather than doing
something different. For example, Kimberly-Clark Corporation, maker of
Huggies disposable diapers, got a jump on the competition by developing a
relationship with expectant mothers shortly after they became pregnant. The idea
is to build a relationship so that Huggies will be top of mind as new moms buy
their first package of diapers.
4) Timing can also be tactical, involving sales related to specific events or occasions.
C. Timing concerns of agency media planners.
1) Television—when should commercials be run? Primetime? Daytime? Late night?
2) Newspaper—should advertisements be run on weekends or mid-week?
3) Magazine—are weekly or monthly publications more effective?
D. Changing the normal buying season for a product category. Advertising can induce
consumers to use a product year-round by informing them of alternative uses. But
advertisers must recognize the risk associated with promoting a consumption pattern
that is counter to established patterns and preferences.

11. Product Differentiation

A. Product differentiation is the circumstance in which a target audience regards a

product as different from others in the category. This difference may be based on
some tangible attribute of the physical product, or base on some intangible element
including a brand image created in part by advertising. Differentiation is meaningful
only if consumers perceive it as an important distinction.
B. In the absence of a strong brand identity built on meaningful differentiation, buyers
tend to view all brands in a category as interchangeable. These products are viewed
as commodities and purchase decisions tend to be based on price. Such brands cut
price to maintain market share and profitability suffers.
1) Volvo is a brand closely associated with “safety.” As a Volvo executive
commented, while its advertising may push other features, …” safety is always
going to be part of our message.”
C. Products with well-defined positions find that their differentiating characteristics also
can play major roles in brand extensions, if the differentiation is transferable to new
products.
1) Proctor & Gamble’s Febreze Fabric Refresher was introduced as a laundry
accessory to give clothes a fresh scent. Proctor & Gamble successfully extended
the brand into air freshener, demonstrating that brand equities can be broader than
a single product category.

D. Keeping an open mind when selecting a bundle of benefits to create meaningful

differentiation.
 P a g e | 13

1) Product differentiation often involves minor changes in either a product or the

position communicated by advertising.
a) Quiznos created a distinct position with toasted sandwiches. This also
highlights the problem of product differentiation based on features that can be
duplicated by competitors in a reasonably short period.
2) Too often when companies search for product differentiation they concentrate on
product functions.
a) Motorola decided that because consumers regarded service and function as
equal, it would compete on the basis of design. The RAZR cell phone,
intended to capture the youth market, shows that any part of the “benefit
package” is open to examination when searching for unique differentiations.

E. The key motivation in the product-differentiation strategy is to reduce the competition

for your brand. The more consumers see your products as meaningfully different from
competing brands, the less the competition. The key is that prospects see a brand as
differentiated in a manner that is important to solve their specific problems.

F. In conclusion, there are two important elements to building product differentiation.

1) We must remember that differentiation is a target marketing technique that
requires choosing to appeal to a specific market segment while often
simultaneously surrendering consumers looking for features not emphasized in
their brands to other manufacturers. . One’s brand position should be inclusive
enough to be profitable.
2) And, advertisers bare a responsibility to the general public to promote meaningful
product differences, not inconsequential product features. Successful products
demonstrate significant competitive advantages.

12. Price

A. Price is closely related to product differentiation. Price is most often dictated by

favorable consumer perceptions of the value of a product – a perception that is created
in part by advertising.
1) A primary function of advertising is to create, or enhance, a positive gap between
the price of a product and the value the average consumer assigns to the product.
The greater the value gap, the more insulated the product is from price
competition.

B. A major part of positioning a product in the market and in the minds of consumers is
setting the price.
1) Price is often equated with value and plays an important role in maintaining sales.

*****NOTES: Use Exhibit 2.9 Here*****

2) Price defines who your competitors are.

C. New technology is allowing marketers to be more flexible and precise in relating

price to specific market segments, seasonal selling, and particular items within a
product line.
 P a g e | 14

1) Many marketers have used a strategy known as yield management to even out
supply and demand. This process has become more sophisticated and reliable
with software programs.
2) At the retail level, research technology allows managers to analyze each store as
its own discrete market. Known as variable pricing strategy, it offers “each
customer a different price at a different point in time.”

D. A low-price strategy can be an important element in the marketing process.

Depending on the product type, pricing strategy can be both a means of market entry
for new products and a means of product differentiation for mature products.
Companies have found that low-price strategies must be augmented by a strong
consumer promise to be successful.
E. Price plays a major role in advertising. An advertising plan must not ignore the basic
price/value perceptions of its target audience. Pricing strategy, to a large degree,
determines marketing strategy and the success or failure of brands.

13. Variations in the Importance of Advertising

A. Because companies differ in terms of their marketing goals, competitive situation,

product line, and customer base, we would expect that advertising plans demonstrate
markedly different approaches from one company to another.

*****NOTES: Use Exhibit 2.10 Here*****

1) Even within the same industry, companies often demonstrate large discrepancies
in the use of advertising.

*****NOTES: Use Exhibit 2.11 Here*****

B. Most firms use advertising “in concert with” a mix of other promotional activities to
create a synergy to reach consumers.
C. The role that advertising plays in a company’s promotional strategy depends on a
number of factors including:
1) Corporate preference for various segments of marketing communication
channels. As a number of major companies experiment with marketing through
the Internet, event marketing, word-of-mouth advertising, and public relations, we
will continue to see a trend to supplement or replace dollars previously spent in
traditional advertising media.
2) High sales volume tends to lower advertising to sales ratios. Consumers need
only be reminded of the brand, not “sold” on it. And, for these most dominant
brands, the cost of attaining new customers through additional advertising might
be nonproductive.
3) Industries with a number of competing firms and/or extensive competition.
Despite being the acknowledged leader in the snack-food segment, PepsiCo’s
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Frito-Lay division announced a 50 percent increase in its advertising budget in

2005 in an effort to prevent loss of market share from new competition
4) Product categories with widespread competition and little perceived product
differentiation. Carmakers rank number one among all advertisers in total
advertising spending; telecommunication companies rank number two. This
reflects the degree of competition among major manufacturers as they try to
maintain or enhance market share.
5) Reversing sales or market share declines. Often, smaller brands in a category
must allocate a significantly higher percentage of sales to advertising to compete
with larger competitors.
D. Many variables must be considered when a business is deciding the role that
advertising will play. Companies, even those with similar product lines, not only use
different levels of advertising as part of their marketing communication mix but also
utilize vastly different advertising plans in terms of media used, scheduling of
advertising placements, and the messages communicated.
E. Variances also exist in order to keep a fresh approach to promotional
communications, which can get stale over a period of time among consumers.

14. Advertising and the Marketing Channel

A. One of the most important aspects of marketing is the development of the marketing
channel.

*****NOTES: Use Exhibit 2.12 Here*****

Advertising plays a major role in moving products through various marketing

channels, from production, to distribution, to end-of-channel customers.
B. Traditional channels remained unchanged over most of the twentieth century. The
past decade, however, has seen many changes resulting from technological
innovations.
1) With the advent of the World Wide Web, travelers can now bypass travel agents
and go directly to airlines and hotels to make reservations.
2) Digital cameras are greatly impacting film processors.
3) The downloading of music is now significantly impacting the distribution and sale
of recording companies’ products.

The “traditional” marketing channel has largely been replaced by distribution and
marketing communication systems that are unique to each seller.
C. One of the most fundamental changes has been the control of both marketing and
communication channels by the consumer. As one electronic marketer commented,
“People are using the Internet not only to gather information about brands, but about
product selection and variations of products and pricing.”
1) The Internet’s use is even more dramatic among business-to-business buyers.
Research shows that the Web is an excellent means of reaching B2B decision
makers, but more important, it is the best way to influence purchases.
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*****NOTES: Use Exhibits 2.13 and 2.14 Here*****

D. Marketing strategy not only determines the role of advertising and its budget but also
plays a major part in decisions concerning media choices.
1) The use of coupons will dictate the use of print media.
2) Product demonstrations will call for the use of television or the Internet.
3) Complex messages may require magazine media.
4) Local messages will employ newspaper media.
E. Although consumer advertising is the most familiar to us, it is only one category of
marketing communication necessary at any number of distribution levels. Advertising
must both communicate and carry out marketing goals.
F. Evaluating advertising’s role in the marketing process. Marketers must continually
assess the success of the directness of communication to intended markets and
evaluate the time frame in which this is accomplished.
G. Intended level of response in the marketing channels.
1) Direct-action, short-term advertising—typically retail promotion focusing on
stimulating immediate consumer response.
2) Direct-action, long-term advertising—continual promotion over a longer period
of time for products with relatively long purchase cycles.
H. Indirect advertising – intended to affect sales only over the long term.
1) Appeals in promotion, which concentrate on the general attributes of the
manufacturer rather than specific product attributes.
2) Most institutional or public relations advertising. The exception would be
remedial public relations advertising designed to overcome some immediate
negative publicity.

15. Advertising to the Consumer

A. National advertising. The advertising by the owner of a trademarked product (brand)

or service through different distributors or stores.
1) Not limited to giant brands like Nike, Tide, and Chevrolet.
2) Sales message in national advertising is general in nature and lacks the specifics
found in retail promotion such as price, local availability, service, hours of
operation, and installation.
3) Geographic targeting began in the 1980s, first regionally, and then started
reaching more narrowly defined segments on a market-by-market basis.
4) Advances in computer technology are now allowing individual tailoring based
upon lifestyles and product usage.
B. Retail (local) advertising. Advertising by a merchant who sells directly to the
consumer.
1) Consolidation of the retail industry has had pronounced effects on the way retail
marketing is conducted.
a) Customers more and more are doing “one-stop shopping.”
b) Difficult to categorize retailers.
c) In 2005, Federated Department Store, Inc. announced it would adopt the
Macy’s name for all its regional department store chains. This brand
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consolidation allowed Federated to implement national advertising strategies

and provided the opportunity to move into national media and promote its in-
store exclusive brands on a national basis.
2) Move to national retailing has significant ramifications for newspapers and local
radio stations, experiencing advertising spending shifts as retailers move to
national promotional plans.
3) Retail consolidation has also changed the relationship between retailers and
manufacturers.
a. Manufacturers provide a number of product, merchandising, and promotional
services specific to each retailer to gain entry.
b. At the same time, manufacturers find themselves increasingly competing with
in-store brands.
C. End-product advertising. Some products are not purchased directly by consumers,
but are acquired by them by virtue of being an ingredient or component part of other
products.
1) End-product advertising began in the 1940s when DuPont began promoting its
Teflon non-stick coating on cookware.
2) After a five-year effort, Microsoft’s “Intel Inside” dominated the end-product
inclusion in computers hardware of nearly every major manufacturer.
3) Promotion of such products is termed end-product advertising (or branded
ingredient advertising).
4) When an end product is highly recognizable and adds value, its promotion also
builds consumer demand for the sale of the main product of which it is a part.
D. Direct-response advertising. Avenues for direct-consumer response to promotional
appeals have long been a part of this country’s history.
1) Ben Franklin is credited with creating America’s first direct sales catalog in 1744.
2) The modern era of direct selling was ushered in with the publication of the
Montgomery Ward catalog in 1872.
3) Techniques and media of direct-response advertising have changed dramatically,
but not the necessity to reach consumers with personal messages with offers
designed to meet their specific needs.
a. As advertisers have shifted dollars from traditional mass media to more
targeted vehicles, direct-response advertising has grown to more than $170
billion or almost half of all advertising expenditures.
b. New technology, such as the Internet and other interactive media, provides a
catalyst for future growth of direct response.
c. Advertisers in traditional media will increasingly adopt direct-response
techniques.

16. Advertising to Business and Professions

A. The average consumer does not see a large share of advertising effort, which is
directed to business, industry, professions, and all stages of the marketing distribution
channel.
B. Business-to-business advertising (B2B) is one of the fastest growing categories of
advertising.
C. Promotion in this category is unlike the traditional media approach to which the
ultimate consumer is accustomed.
D. Primary promotional B2B tools include business publications, personal selling,
telemarketing, and Internet sales.
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E. B2B advertisements tend to be factual, efficiency- and profit-oriented, rather than the
emotional appeals seen in consumer ads.
F. The buying process is different for B2B.
1) Purchase collaboration. Purchases are often made collectively by a committee or
group of decision makers; combining experience, perspectives, and business
needs.
2) Purchase specifications. Products are bought according to precise, technical
specifications. Both buyers and sellers need significant knowledge about the
product category.
3) Purchase cycles. Impulse buying is unheard of.
4) Purchase scale. The dollar volume of purchases is often substantial.

17. Categories of Business Advertising

A. Trade advertising. Not readily recognized by average consumers; used by

manufacturers to promote their products to wholesalers and retailers.
1) Promotional messages emphasize profitability and advertising support.
2) Products sold can be those for resale or those needed by stores for administration
and operations.
3) Trade advertising objectives.
a. Gain additional distribution and retail outlets.
b. Increase trade support, eliciting favorable shelf space and point-of-purchase
displays.
c. Announce consumer promotions to demonstrate advertising support.
B. Industrial advertising. Manufacturers are also consumers, purchasing machinery,
equipment, raw materials, and component parts. Companies selling to manufacturers
must target their sales messages to this market.
1) Advertising is placed in publications directly related to particular industries.
2) In addition, companies employ direct mail, telemarketing, and personal selling.
3) It is directed to a very small, specialized audience.
4) Purchases are usually made through a number of decision makers.
5) Industrial advertising informs companies of new products and builds brand
awareness.
6) Personal follow-up through sales representatives helps to close the sale.
C. Professional advertising. Advertising is directed to individuals or groups of
individuals in various professions such as medical, legal, and engineering.
1) The clientele of these professions purchase whatever products are recommended;
professionals greatly control consumer choice.
D. Corporate or Institutional advertising. Advertising done by an organization
speaking of its work views, and problems as a whole, to gain public goodwill and
support rather than to sell a specific product.
1) While institutional advertising remains a long-term image-building technique, in
recent years it has taken on a decided sales orientation in terms of the audiences
reached and intent of communication.
2) Several objectives of corporate advertising are suggested:
a. Establishing a public identity.
b. Explaining company’s diverse missions.
c. Boosting corporate identity and image.
d. Gaining awareness with target audiences for sales across a number of brands.
e. Associating a company’s brands with some distinctive corporate character.
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18. Non-Product Advertising

A. Idea advertising. Advertising used to promote an idea or cause rather than to sell a
product or service.
1) Not a new phenomenon. Number of public interest groups using advertising and
the sophistication of the communication techniques being employed is new.
2) Idea advertising is often controversial.
a) Many of the issues being addressed through promotional campaigns are
controversial in nature such as gun control, abortion, animal rights, and
environmental protection.
b) Critics think advertising messages are too short and superficial to fully debate
many of the issues.
c) Proponents argue that it is the most practical means to reach mass audiences.
3) The increasing sophistication of media’s ability to narrowly target audiences by
ideology will make this type of advertising more prevalent in the future.
B. Service advertising. America is increasingly becoming a service economy, with
consumers seeking a wide range of help from financial planning and advice to child
care. Services, although not tangible like products, still need good advertising to be
sold.
1) Strong institutional component. Similar to corporate advertising, providers of
services need to build consumer awareness over a prolonged period of time and
develop distinct differentiation among competitors.
2) Some basic principles of service advertising include:
a. Feature tangibles. Adding a personal dimension through testimonials and
stressing service benefits.
b. Feature employees. Building trust with customers by demonstrating the
quality of the firm’s employees; an added benefit is improvement of employee
morale.
c. Stress quality. Advertising messages should emphasize consistency and high
levels of competency.

19. Government Advertising

A. Advertising has been used by governmental agencies for generations and labeled as
“propaganda.”
B. The more recent growth in numbers of government services and programs has,
however, resulted in greater use of traditional advertising by government agencies.
C. Traditional advertising techniques are being applied by an array of national agencies
such as the volunteer armed forces, consumer protection agencies, and environmental
and health initiatives.
D. State governmental agencies, too, are finding the use of advertising to advise the
citizenry on beneficial services related to savings plans for higher education.