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Advertising

Chapter 15

© 2009, The McGraw-Hill Companies, Inc. All rights reserved.

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CHAPTER OUTLINE

• Defining Advertising

• A Brief History of Advertising

• Advertising in the Digital Age

• Organization of the Consumer Advertising Industry

• Producing Advertising

• Economics

• Business-to-Business Advertising

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DEFINING ADVERTISING

• Simple definition of advertising– Nonpersonal presentation/promotion of ideas,

goods, or services– Paid for by identified sponsor

• This definition has become blurry– Many practitioners believe differentiating

advertising from other forms of marketing is no longer useful

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Functions of Advertising

• Marketing

• Education

• Economic– Reduces cost of personal selling and

distribution

• Social

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Types of Advertising

• Advertising can be classified in several ways– Target audience (consumer or business)– Geographic focus (international, national, or

local/retail)– Purpose (sell a specific product/service or

improve company’s image/influence public opinion)

– Primary or selective demand– Direct or indirect action

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A BRIEF HISTORY OF ADVERTISING (1 of 3)

• Examples date back thousands of years• Printing press allowed creation of new ad media

– Posters, handbills, newspaper ads (like today’s classified ads)

• 1800s – Consumer evolution– Railroad across US– US population doubled– New communication media– More disposable income

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A BRIEF HISTORY OF ADVERTISING (2 of 3)

• Magazines enabled truly national advertising

• Advertising agencies appeared

• 1920s – radio advertising; sponsors supplied programs

• Depression curtailed growth in advertising

• Advertising fortunes parallel social mood of the times

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A BRIEF HISTORY OF ADVERTISING (3 of 3)

• Contemporary advertising– Coping with technological and social change

• Consumer taking more control over media choices

– Traditional advertising model harder to justify– Guerilla marketing: non-traditional marketing

techniques– Online advertising

• Not as effective as initially hoped• Becoming more targeted, more interactive, more engaging• As Internet advertising becomes more effective, more ad

dollars will be spent online

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ADVERTISING IN THE DIGITAL AGE

• Birth of online advertising– 1994, HotWired web site, banner ads

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Audience Control

• Audience continues to take control over media choices– Avoid advertising

• Advertisers reach audiences in other ways– Product placement– Viral advertising– Target search marketing– Buzz marketing

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New Channels

• Digital revolution opens up new advertising avenues– Blogs– Podcasts– Cell phones– Web sites use ads more creatively

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User-Generated Content

• User-generated content popular with advertisers

• Consumers submit home-made commercials– No cost to company– Consumers engage with product– Can create buzz

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ORGANIZATION OF THE CONSUMER ADVERTISING

INDUSTRY

• Three main components of advertising industry

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Advertisers

• Two main types of advertisers– National– Retail (local)

• Basic advertising activities– Plan ads– Budget funds– Coordinate across the organization– Supervise outside agencies, if used– Follow up

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Agencies

• Independent business organization to develop, prepare, place advertising

• Agencies can be classified by the range of services they offer– Full-service agencies– Media buying services– Creative boutiques

• The top 5 mega-agencies are Omnicom, WPP Group, Interpublic, Publicis, Dentsu

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Media

• Four important dimensions vary by medium– Reach– Frequency– Selectivity– Efficiency

• Must consider the inherent characteristics of each medium

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PRODUCING ADVERTISING

• A variety of people work to produce advertising

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Departments and Staff

• Creative services

• Account services– Account executive (AE)

• Marketing services

• Administration

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The Advertising Campaign (1 of 2)

• Chose market strategy– Positioning

• Select main appeal or theme

• Translate theme into various media

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The Advertising Campaign (2 of 2)

• Produce ads– Print: rough layout; comprehensive layout– TV: Storyboard– Web: splash pages, skyscraper ads, floating

ads, wallpaper ads; short versions of TV ads

• Buy space/time

• Execute/evaluate campaign

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Advertising Research

• Formative research– Audience definition– Audience profiling

• Message research

• Tracking studies

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ECONOMICS

• We will examine the economics of the overall industry, then look at how an ad agency makes money

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Advertising Volume in Various Media

• About $280 billion spent in US on advertising in 2006

• TV & newspapers account for about half the total amount spent

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Agency Compensation

• Media commissions

• Agency charges

• Fees

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BUSINESS-TO-BUSINESS ADVERTISING

• Multi-billion dollar industry, with advertising directed at business rather than general consumers

• Four categories– Trade– Industrial– Professional– Agricultural

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Consumer Versus Business-to-Business Advertising

• Target audience much smaller

• Products are technical, complex, expensive

• Buyers are professional purchasing agents– Base decisions on reason and research

• Personal selling plays greater role

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Media

• Personalized media are best

• Business/trade publications account for about 60% of advertising dollars– Horizontal trade magazines– Vertical trade magazines

• Other selective channels also effective– Direct mail & e-mail; trade catalogs, web sites,

mass media (well-placed ads)

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Appeals

• Business ad copy is long, fact-filled, detailed, technical, accurate, complete– Little, if any, emotional appeal– Testimonials, case histories, new-product

news, demonstrations– Some ads use humor, warmth, creativity