Chapter 1: What is Advertising?
Six (6) Core Components of Advertising
Channels to convey commercial messages:
TV, Website, Digital Ads, Print, Event Sponsorship,
Telemarketing
These are simply referred to as advertising but it is
actually marketing communication. Advertising is just
one type of marketing communication
Marketing is the activity, set of institutions, and
processes for creating, communicating, delivering, and
exchanging offerings that have value for customers,
clients, partners, and society at large.
It is a process wherein a sequence of actions or methods
aimed at satisfying customer needs profitably
Ultimately, the goal of marketing is to earn profit for the
firm in exchange for products/services with customers
who need them
Marketing Communications - The various efforts and
tools companies use to communicate with customers
and prospects, including newspaper ads, event
sponsorship, publicity, telemarketing, digital ads, and
coupons, to mention just a few.
Advertising
According to Albert Lasker “Father of Modern
Advertising”, defined advertising as salesmanship in
print, driven by a reason why
- A paid, mediated form of communication from an
identifiable source, designed to persuade the receiver to
take some action, now or in the future
- As per the Oxford dictionary, advertising is the activity
or profession of producing advertisements for
commercial products or services
1. Type of Communication: a structured form of
communication that is composed of both verbal and
nonverbal elements
2. Directed to Targeted Audiences: Consumers who are
already familiar with the brand, potential customers
3. It is Paid: Unlike other marketing communication,
advertising involves payment to promote a brands
product or service
4. Mediated: It reaches customers through a channel of
communication (medium)
5. Intended to be Persuasive: The main messaging
component is intended to do something upon seeing
the ad
6. An Ad Identifies the Brand: Unlike product
placements wherein the brand is not mentioned,
advertising’s purpose is to showcase the brand name
Timeline of Advertising
1. The Chinese invented paper and Europe had its first
paper mill by 1275. In the 1440s Johannes Gutenberg
invented a printing press with movable type in Germany.
The device was an important development in the history
of advertising, and indeed communication, and it
revolutionized the way people lived and worked
2. 1472 the first English ad appeared: a handbill tacked
on church doors in London announcing a prayer book
for sale
3. 1700s, the world’s population had grown to about
600 million people, and some major cities could support
larger volumes of advertising. This caused a shift in
advertising strategy
Marketing Strategy - the statement of how the
company is going to accomplish its marketing objectives.
Advertising Strategy - the advertising objective declares
what the advertiser wants to achieve with respect to
consumer awareness, attitude, and preference.
Advertising strategy describes how to get there. It
consists of two sub strategies: the creative strategy and
the media strategy.
Four Fundamental Assumptions of Free-market  How does it change or even debase the art and
Economics culture of our society?

1. Self-interest. People and organizations pursue their Economic impact of advertising

own self-interest. People always want more—for less.
Companies are formed to offer products and services
that help people acquire things of value
2. Complete information. The more information buyers
and sellers have about what products are available, at
what quality, and at what prices, the more efficient the
competition. The outcome is better quality products and
lower prices for all.
3. Many buyers and sellers. A wide range of sellers
ensures that if one company does not meet customer
needs, another will capitalize on the situation by
producing a more market-responsive product.
The moment a company advertise, it sets off a chain
reaction that impacts the economy.
Effect on the value of products
Brand Image: advertising affects how people perceive a
brand’s products. It conveys a positive image even if
products are of the same quality or taste
Awareness: by doing advertising, a product becomes
better-known vs competitors.
Education: it helps brand deliver a new
purpose/function for their product.

4. Absence of externalities (social costs). Sometimes Negative advertising

the sale or consumption of products results in benefits  Deceptive advertising
or harm to people who are not involved in the  Subliminal advertising
transaction and who didn’t pay for the product. In these  Offensive advertising
cases, government may use taxation and/or regulation
to compensate for or eliminate the externalities. Social Responsibility and Ethics in Advertising

Functions and effects of advertising as a marketing tool Advertisements should have social impact and must be
done in an ethical manner.
○ To identify products and differentiate them from
others. The organizations in advertising

○ To communicate information about the product, its 1. Advertisers (The Brand)

features, and its place of sale.
- The group behind the advertisements
○ To induce consumers to try new products and to - In charge of payment to produce an ad for their
suggest reuse. brand

○ To stimulate the distribution of a product. 2. Advertising Agency

○ To increase product. - Independent organizations of creative people

and businesspeople
○ To build value, brand preference, and loyalty. - developing and preparing advertising plans,
○ To lower the overall cost of sales. advertisements, and other promotional tools for
advertisers
Celebrities in Advertising - The agencies also arrange for or contract for
Celebrities help make ads believable, enhance ad recall, purchases of space and time in various media.
increase brand recognition, and ultimately influence 3. Supplier
consumers to choose an endorsed brand. However,
selecting the right celebrity is the key. - Photographers
- Videographers
Controversies about advertising - Printers
Economic - Graphic Artists

 Does advertising cause higher prices? 4. Media

 Does it discourage competition? - Sells spots via:
 Can it influence overall consumer demand? - Radio
What effects does it have on consumer choice - TV
and on the overall business cycle? - Print
- Digital
Societal

 Does advertising make us more materialistic?

 Does it tempt us to buy things we don’t need?
 Does it affect us through subliminal processes?
Local Advertising
Advertising by businesses within a city or county
directed toward customers within the same geographic
area
Types of Local Advertising
1. Product advertising promotes a specific product or
service and stimulates short-term action while building
awareness of the business
2. Sale advertising is used to stimulate sales of
merchandise or increase store traffic, local merchants
frequently use sales, promo, discounts
3. Institutional advertising aims to promote an idea
about the company and build long-term goodwill. It
makes the public aware of what the business stands for
and attempts to build reputation and image
4. Classified advertising is employed to locate and
recruit new employees, offer services (such as those of
an employment agency or business opportunity broker),
or sell or lease new and used merchandise (such as cars,
real estate, and office equipment).
Types of Local Advertisers
1. Dealers or local franchisees of national companies
2. Stores that sell a variety or branded merchandise
3. Specialty businesses and services
4. Governmental and nonprofit organizations
Regional Advertisers: Companies that operate in one
part of the country and market exclusively to that region
National Advertisers: Companies that advertise in
several geographic regions or throughout the country.
Types of Media
International Media: Media serving several countries,
usually without change, that is available to an
international audience
Foreign Media: The local media of each country used by
advertisers for campaigns targeted to consumers or
businesses within a single country.
Types of Agencies
Local Agencies: Advertising agencies that specialize in
creating advertising for local businesses
Regional Agencies: Advertising that focuses on the
production and placement of advertising suitable for
regional campaigns
National Agencies: Advertising agencies that produce
and place the quality of advertising suitable for national
campaigns
International Agencies: Advertising agencies that have
offices or affiliates in major communication centers
around the world and can help their clients market
internationally or globally
Types of Agencies
1. Geographic Scope
Local Agencies: Advertising agencies that specialize in
creating advertising for local businesses
Regional Agencies: Advertising that focuses on the
production and placement of advertising suitable for
regional campaigns
National Agencies: Advertising agencies that produce
and place the quality of advertising suitable for national
campaigns
International Agencies: Advertising agencies that have
offices or affiliates in major communication centers
around the world and can help their clients market
internationally or globally
2. Range of Services
Full-Service Agencies: An agency equipped to serve its
clients in all areas of communication and promotion. Its
advertising services include planning, creating, and
producing advertisements as well as performing
research and media selection services. Non-advertising
functions include producing sales promotion materials,
publicity articles, annual reports, trade show exhibits,
and sales training materials.
General Consumer Agencies: An agency that represents
the widest variety of accounts, but it concentrates on
companies that make goods purchased chiefly by
consumers
B2B Agencies: Represents clients that market products
to other businesses
Creative Boutiques: Organizations of creative specialists
(such as art directors, designers, and copywriters) that
work for advertisers and occasionally advertising
agencies to develop creative concepts, advertising
messages, and specialized art. A boutique performs only
the creative work
Media-buying Service: An organization that specializes
in purchasing and packaging radio and television time
Interactive Agencies: An advertising agency that
specializes in the creation of ads for a digital medium.
What does Agencies do?
1. Account Management
2. Research and Account Planning
3. Media Planning and Buying
4. Creative Concepts
5. Advertising Production
6. Traffic Management
7. Additional Services
8. Agency Administration
How does Agencies earn? A company prospers only if it can attract and keep
customers who are willing to buy the firm’s goods and
1. Media Commissions
services. That’s where advertising comes in!
2. Mark-ups
3. Fees The ultimate purpose of marketing is to create
exchanges that satisfy the perceived needs and wants of
How does Agencies get their clients?
individuals and organizations.
1. Referrals
One of the important elements of that definition is the
2. Presentations
special relationship between a customer’s needs and a
3. Network and Community Relations
product’s need-satisfying potential or better known as
4. Soliciting and Advertising for New Business
product utility.
Factors that affects client-agency relationship
Product utility - a product’s ability to satisfy both
4 Cs functional needs and symbolic or psychological wants.
A product’s problem-solving potential may include form,
1. Chemistry task, possession, time, or place utility
2. Communication
3. Conduct (Performance) Advertising’s main function is to communicate this
4. Changes utility. Thus, some ads promote how well a product
works (function); others tout glamour, sex appeal, or
Suppliers status (symbolism).
1. Art Studios Six Types of Functional Utility
2. Printers and Related Specialists
3. Film and Video Houses 1. Form Utility
4. Research Companies
- A type of utility that is present when a company
6 Categories of Media creates a tangible good
- Bicycle that fits a consumer’s needs
1. Print - Shoe that fits and is comfortable,
2. Electronic - Pickup truck that tows large loads and can carry
3. Digital a big payload
4. Out-of-Home
5. Direct Mail 2. Task Utility
6. Other Media
- Originates in others doing something for us
Chapter 4 (Service)
- Accountants who prepares our income tax
Target Market: A group of potential customers that you returns
identify to sell products or services to - Mechanics who fixes our cars
Each group can be divided into smaller segments. 3. Possession Utility
Segments are typically grouped by age, location, income
and lifestyle. Once you’ve defined your target audience, - Provides the ability to customers to purchase a
you’ll find it easier to determine where and how to product
market your business. - Includes distribution, pricing strategies, shelf
availability, purchase agreements, and delivery
Why have a target market?
4. Time Utility
Because no product or service pleases everybody,
marketers need to select specific target markets that - Providing the consumer with the product when
offer the greatest potential. They can then fine-tune he or she wants it
their mix of marketing elements (the four Ps) to match - Availability of products
the needs or wants of the target market. - Enough manpower to service the customers

How do we identify the market? 5. Place Utility

Research > Segment > Define - Having the product available where the
customer can get it
As advertiser, we have to remember that it is not only - Physical Store
important about what we say but also to whom we say - Marketplace
it to.
6. Psychic Utility
All advertisers face the challenge of how best to present
their products, services, and ideas effectively through - Product offers symbolic or psychological need
the media to audiences. satisfaction
 - Sex Appeal
- Social Status/ Symbol
- Confidence
The Purpose of Marketing and Advertising
Marketing
- Develop goods and services we want
- Pricing them attractively
- Distributing them to convenient locations
- Informing us about them through advertising
and IMC
Advertising
- Communicates product features and benefits
price options, and locations where the product
can be purchased
Two Steps of Market Segmentation
1. Identifying groups of people (or organizations) with
shared needs and characteristics
2. Aggregating (combining) these groups into larger
market segments according to their interest in the
product’s utility
A company may differentiate its products and marketing
strategy for every segment, or concentrate its marketing
activities
Target Market: The market segment or group within the
market segment toward which all marketing activities
will be directed.
Target Audience: The specific group of individuals to
whom the advertising message is directed.
Two Main Types of Target Market
1. Consumer Market (B2C)
- Typically directed to the customers/end users
- For personal consumptions
- Advertising forms: websites, social media, TV,
radio, newspapers, and magazines
2. Business Market (B2B)
- Business are the buyers
- For resell
- For corporate use
- three specialized types of business advertising:
trade, professional, and agricultural
- Business Advertising: people who buy goods
and services for resale, for use in a business or
organization, or for manufacturing other
products
3 Specialized Types of Business Advertising
1. Trade Advertising targets resellers (wholesalers,
dealers, and retailers) to promote greater distribution of
their products
2. Professional Advertising aimed at teachers,
accountants, doctors, dentists, architects, engineers,
lawyers
3. Agricultural Advertising (Farm) to promote products
and services used in agriculture to farmers and others
employed in agribusiness
User-Status Variables
Six categories into which consumers can be placed,
which reflect varying degrees of loyalty to certain
brands and products.
1. Sole users - most brand loyal and require the least
amount of advertising and promotion
2. Semisole users - not brand loyal and has an
alternative brand
3. Discount users - They will only buy at a discount
4. Aware Non-triers - Patrons of other brands and have
tried your product but is not satisfied
5. Trial/rejectors - Tried the product based on
advertising message but did not like it
6. Repertoire users - Brand switchers and not brand
loyal. Primary target of brand advertising
Usage-Rate Variables
● Determines the extent to which consumers use a
product: light, medium, or heavy
● Advertising has an easier time getting heavy user to
increase usage than light users
● By finding common characteristics among heavy users
of their products, marketers can define product
differences and focus ad campaigns more effectively
Purchase-Occasion Variables
● Buyers can also be distinguished by when they buy or
use a product or service
● The purchase occasion might be affected by frequency
of need (regular or occasional),
Geographic Segmentation
● People in one region of the country (or the world)
have needs, wants, and purchasing habits that differ
from those in other regions.
● When marketers analyze geographic data, they study
sales by region, country size, city size, specific locations,
and types of stores
Demographic Segmentation
● Is a way to define groups by their statistical
characteristics: gender, age, ethnicity, education,
occupation, income, and other quantifiable factors
● Demographics are often combined with geographic
segmentation to select target markets for advertising
(Geodemographic Segmentation)
Psychographic Segmentation
● With psychographics, marketers group people by their
values, attitudes, personality, and lifestyle.
● This enables marketers to view people as individuals
with feelings and inclinations.
Product Concept
● The consumer’s perception of a product as a “bundle”
of utilitarian and symbolic values that satisfy functional,
social, psychological, and other wants and needs.
Product Classifications
Product Branding: That combination of name, words,
symbols, or design that identifies the product and its
source and distinguishes it from competing products—
the fundamental differentiating device for all products.
Advertising and Price Element: Companies that don’t
compete on price typically use image advertising to
create a particular perception of the company or
personality for the brand. Companies that are more
price competitive may regularly use sale advertising,
clearance advertising, or loss-leader advertising.
Chapter 5
Communication Process in Advertising
1. Source: The party that formulates the idea, encodes it
as a message, and sends it via some channel to the
receiver.
2. Encoding
3. Message: In oral communication, the idea formulated
and encoded by the source and sent to the receiver.
4. Channel: Any medium used to send the message to
the receiver. Can be on the inform print, tv, radio,
digital, and other media
5. Decoding
6. Receiver: In advertising, the receiver is the target
customer whom the ads are directed to
Consumer Perception Process
Consumer Motivation Process
Account Planner: the individual at an advertising agency
primarily responsible for account planning.
Boase Massimi Pollitt, has been called the “father” of
account planning. He described planners as “the
architects and guardians of their clients’ brands, the
detectives who uncovered long-hidden clues in the data
and gently coerced consumers into revealing their inner
secrets.
Marketing Research
The systematic gathering, recording, and analysis of
information to help managers make marketing
decisions.
It helps identify consumer needs and market segments;
it provides the information necessary for developing
new products and devising marketing strategies; and it
enables managers to assess the effectiveness of
marketing programs and promotional activities.
Advertising Research
The systematic gathering and analysis of information
specifically to facilitate the development or evaluation
of advertising strategies, ads and commercials, and
media campaigns.
4 Categories of Advertising Research
1. Advertising strategy research. Helps define the
product concept or assists in the selection of target
markets, advertising messages, or media vehicles.
2. Creative concept research. Evaluates the target
audience’s acceptance of different creative ideas at the
concept stage.
3. Pretesting of ads. Uncovers and diagnoses possible
communication problems before a campaign begins
4. Posttesting of ads. Evaluates the impact of a
campaign after it runs.
Research that defines the product concept or assists in
the selection of target markets, advertising messages, or
media vehicles.
Methods for Pretesting an Ad
Advertising Plan
The plan that directs the company’s advertising effort. A
natural outgrowth of the marketing plan, it analyzes the
situation, sets advertising objectives, and lays out a
specific strategy from which ads and campaigns are
created.
Reviewing the Marketing Plan
The advertising manager first reviews the marketing
plan to understand where the company wants to go,
how it intends to get there, and what role advertising
plays in the marketing mix. The first section of the
advertising plan should organize information from the
marketing plan’s situation analysis into a SWOT analysis.
Setting Advertising Objectives
Based on the marketing plan, the advertising manager
determines what tasks advertising must take on.
What strengths and opportunities can be leveraged?
What weaknesses and threats need to be addressed?
Unfortunately, some corporate executives (and
advertising managers) state vague goals for advertising,
such as “increase sales and maximize profits by creating
a favorable impression of the product in the
marketplace
Advertising Strategy
The advertising objective declares what the advertiser
wants to achieve with respect to consumer awareness,
attitude, and preference.
Advertising strategy describes how to get there.
It consists of two substrategies: the creative strategy
and the media strategy.
Creative Strategy
A written statement that serves as the creative team’s
guide for writing and producing an ad. It decides the
most important issues that should be considered in the
development of the ad (the who, what, where, when,
and why), including the objective of the advertising; a
definition and description of the target audience; the
key benefit to be promised; the product features that
support that promise; the style, approach, or tone to be
used; and generally, what the copy should
communicate.
Media Strategy
A document that helps media planners determine how
messages will be delivered to consumers. It defines the
target audience, the communication objectives that
must be achieved, and the characteristics of the media
that will be used for delivery of the messages.
Allocating Advertising Funds/Budget 3 Methods:
1. Percentage-of-Sales Method: A method of
advertising budget allocation based on a percentage of
the previous year’s sales, the anticipated sales for the
next year, or a combination of the two.
2. Share-of-Market / Share-of Voice Method: A method
of allocating advertising funds based on determining the
firm’s goals for a certain share of the market and then
applying a slightly higher percentage of industry
advertising dollars to the firm’s budget.

3. Objective/Task Method: A method of determining

advertising allocations, also referred to as the budget-
buildup method, that defines objectives and how
advertising is to be used to accomplish them. It has
three steps: defining the objectives, determining
strategy, and estimating the cost.

Other Ways to Allocate Budget