What is Advertising?

• Any form of nonpersonal presentation and

promotion of ideas, goods, or services by an
identified sponsor.
• U.S. advertisers spend in excess of $175 billion
each year.
• Advertising is used by:
– Business firms,
– Nonprofit organizations,
– Professionals,
– Social Agencies.
• Advertising has been used for centuries.
• U.S. advertisers spend more than $264 billion
each year; worldwide spending approaches
$550 billion.
• American Marketing Association proposed the following
definition of advertising :
• "Advertising is any paid form of non-personal presentation
and promotion of ideas, goods, and services by an
identified sponsor."
• John S Wright, Willis L Winter, and Sherilyn K Zeigler
defined Advertising as :
• "Advertising is controlled, identifiable information and
persuasion by means of mass communications media."
 John J Burnett defined Advertising as :

• "Advertising is the non-personal communication of

marketing related information to a target audience,
usually paid for by the advertiser, and delivered
through mass media in order to reach the specific
objectives of the sponsor."
 Benefits of advertising:

• To create awareness: it can help to make things known.

• To create or develop favorable attitudes: a positive view of
the product or service.
• To develop a brand identity: advertising can help introduce
a product with a special image or characteristic.
• To position a product in a market: where a market is
segmented, advertising can help position a product with a
particular segment and identify with it.
• To sustain relationships: it is a force to build and strengthen
producer-customer relationships over time.
e

• To persuade: advertising puts up a case for the customer to be

interested in the product on offer.
• To create demand: Advertising makes the product seem
desirable, worthwhile and attainable.
• To build up enquiries: often advertising is a bridge between the
product and a sales call. Its function is to obtain enquiries for a
sales call, or for literature, or for a sample, or for a price
estimate.
• To support distributors: where there is a distributive chain, the
distributor may require reinforcement in the local marketplace.
Advertising is one of the forces that can supply this.
g

• To sustain the organisation: a company may need to

consolidate, or re-establish, or explain or reposition or
rebuild relationships. Strong corporate role.
• To launch new products: advertising is a key weapon in the
battery of services used to launch products into the
marketplace.
• To offset competition: Advertising helps meet competitors
and match competitors, by persuading the customer or
providing a counter-claim.
• To help provide a point of difference: people do not favour
'me-too' products. The brand needs a difference, a unique
personality, a point of interest, a feature which will isolate it
from a multitude of others. These can be powerfully
conveyed through advertising.
• To help reach people: in some cases, an organisation
may need to reach an important contact group. Advertising
can help the organisation in this regard.
Functions

• Most of advertisements help in producing psychological effects

and can help in changing only in mental states of audiences and
predispose them towards the purchase of advertised products.

• Form of communication and To deliver the desired information

to the targeted audience
• Stimulates Demand
• Develops brand preference
• Lower Prices
• Cutting costs
• Competitive Weapon
 Model developed by
Robert lavidge& Gary Steiner
Hierarchy of Effects Model – Sequential steps

Cognitive – Awareness, Knowledge

Affective – Liking , preference , conviction.

Conative - Purchase
• Jagdish n sheth has given four functions

• Precipitation – stimulates the demand

• Persuasion - comparative (Consumers know abt
the product- Making wise decision to buy the
product
• Reinforcement – Consumers feel good and serves
the function.
• Reminder – keep the Brand name always fresh
 Advertising Agencies

• An advertising agency is an independent business ,

composed of creative and business people develop
prepare and place advertising in advertising media for
sellers seeking to find customers for their goods and
services. (American association of advertising agencies).
• Advertising agencies can range in size from
one or two person operation to large
organisations with over 1,000 employees
CENTRALISED SYSTEM

COMPANY PRESIDENT
MARKETING DEPARTMENT
- MARKETING RESEARCH
- PRODUCT PLANNING
- ADVERTISING MANAGEMENT
- SALES MANAGEMENT

FUNCTIONS : PLANNING &

BUDGETING,ADMINSTRATION AND EXECUTION,
COORDINATION WITHIN THE COMPANY AND
OUTSIDE AGENCIES
• Advantages; More efficient communications
• Requires fewer personnel , continuity of staff,
more involvement of top level management.

Disadvantages : Longer response time,

limited ability to handle many product lines
Less involvement and understanding of overall
marketing goals
 DECENTRALISED

• VP MARKETING
PRODUCT MANAGEMENT MARKTG SERVICES
BRAND MANAGER 1 Advt dept Marktg research
BRAND MANAGER 2
BRAND MANAGER 3 – ad agency

Advantages : conc individual manager attention . Rapid response

to problems and emerging oppurtunities,increased flexibility

Dis; less effective decision making ,misallocation of funds

Unhealthy internal conflicts
 Full service agency :

• Full service agency offers its clients a full range of

marketing, communications and promotion services
including planning, creating the advertisement,
performing research and selecting media. A full service
agency may also offer non advertising services such as
strategic market planning, design of sales promotions,
sales training and trade show materials, package design
and public relations.
• The full service agency is made up of departments that
provide the activities needed to perform the various
advertising functions and serve the client.
• In-House Agency : Even though most companies use
full service advertising agencies, an organisation may
decide to establish its own operation for all services
of an advertising agency within its own structure.
The in-house agency as its name implies is owned by
and operated under the direct supervision of the
advertiser. It performs all the creative and media
services provided by the traditional full- service
agency. A major goal in adopting this approach is to
reduce the total cost of the advertising.
 IN HOUSE AGENCIES

• ADVT

• COST SAVINGS
• MORE CONTROL OVER ACTIVITIES AND COST
• INCREASED CO-ORDINATION
• DISADVANTAGES
• LESS EXPERIENCE AND LESS FLEXIBILITY
• Creative Boutique : It is an agency that provides only
creative services. The client may seek outside creative
talent because it believes that an extra creative effort is
required or because its own employees do not have
sufficient skill in this regard. Full-service agency often
subcontract work to creative boutiques when they are
very busy or want to avoid adding full time employees to
their payroll. Creative boutiques are usually founded by
members of the creative departments of full service
agencies who leave the firm and take with them clients
who want to retain their creative talent.
• Media Buying Services: There are independent companies
specialize in the buying of media, particularly radio and TV
time. Media buying is a niche service and these agencies
are specialized in the analysis and purchase of advertising
time & space. Both agencies and clients utilize their
services for developing their own media strategies and
using the buying service to execute them. Because media
buying services purchase such large amounts of time and
space, they receive large discounts and can save the small
agency or client money on media purchases. Media buying
services are paid a fee or commission for their work.
e

• Special Service Agency (Group): Some agencies

focus their efforts only in some selected areas and
then become specialists in those areas. There is
great multiplicity of firms whose objective is to
provide advertisers, advertising agencies and the
advertising media with a host of specialized
services. These firms collectively are called special
service groups and they are the least known
component of the advertising industry.
 AGENCY COMPENSATION

• COMMISSION

• Directly concerned with media charges

• 15% fixed commission

• Simplicity and quality of ad.produced.

• Negotiated Fee

• Cost plus system

• Incentive based compensation
• Combining fee and commission system
• Fixed monthly based on work paid
• Used in commercial TV adds – 15%

• Percentage charges

• 17.65 to 20%
 Agency evaluation

• Regular assessment of two aspects Financial and

qualitative

Financial – How the agency conducts its business costs

,expenses and number of personnel hours charged to
an account and wht payments are made to the media
and other service suppliers
QUALITATIVE – Exploresthe agency’s efforts to planning,
developing ,and implementing the clients company s
advt.campaign and assessment of achievements.
• AGENCY NAMES

• LEO BURNETT CO
• DDB NEEDHAM WORLDWIDE
• BBDO WORLD WIDE
• J WALTER THOMPSON CO
• FOOTE,CONE BELDING
• REASONS FOR LOSING CLIENTS

HOW THE AGENCIES ACQUIRE NEW CLIENTS

REFERRALS, SOLICITATIONS,PRESENTATIONS
 Advertising Campaign

• DUNN & BARBAN

• An advertising campaign includes a series of ads placed

in various media that are designed to meet objectives
and are based on an analysis of marketing and
communication situations.

• CAMPAIGN – Organised and carefully planned use of paid

publicity for the accomplishment of a definite purpose
Seven steps

• Appraisal of advertising opportunity

• Market analysis
• Setting advertising objectives
• Setting budget and necessary control systems
• Determining media and creative strategy
• Create ads ,pretest and release of ads.
• Evaluate final testing – post testing
 Appraisal of advertising opportunity

• Whether the advertisement suits the particular

market conditions
• Acc. To Neil H Borden : 5 Conditions govern the
advertising opportunity
• (i) Presence of positive primary Demand
• (ii)Good chances of product differentiation
• (iii)Products are hidden or readily noticeable qualities
• (iv)Presence of powerful emotional buying motives
• (v) Availability of funds
Analyzing & Defining the target market
• Established brand – what has been done in past
• New product – More in depth analysis of market
• Consumer reach may be needed to find out
Who buys the product?
What do they really buy?
When do they buy?
Helps in deciding whom the advertiser wants to
reach
 Setting Advertising Objective
• Promotion or brand managers should set
objectives for an advertising campaign
• Most managers use hierarchy effects model
• Refers a sequence “ awareness advertisement
to direct action advertisement”
• Eg. Maggi Hot & Sweet Tomato Chilli Sauce –
Theme “It is Different”
 Determining the Advertising Budget

• Budget controls all proposed expenditure by

fixing a limit
• Different companies use different approaches
to determine proper allocation
• “Top-Down” practice often stops campaign
with excellent potential
• When 2 brands equally preferred, the one that
advertises more gets the edge
 Deciding Media & Creative Strategy
• Media plan is developed simultaneously with
creative plan
• Media planning is complex because of
different kinds of media.
• Goal is to find a particular combination of
media
• Creative strategy concern what message to
deliver to the audience
 Crating Ads, Pre-test and Release Ads

• Advertising should be pre-tested before actual

execution to avoid any costly mistakes
• Techniques such as market tests, Focus
groups, Survey, Computer Stimulation tests,
etc., are used before the ads are places in
media
Evaluating the Final Results (Post- Testing)

• Ongoing testing evaluates the campaign while it

is running in the market place
• To analyze at what extent the message is
reaching the target audience
• Post testing is done to determine at what extend
the advertising campaign objectives have been
accomplished
• Provides feedback to managers and helps in
future planning.
 Setting Objectives

• Specific Communication Task

• Accomplished with a Specific Target Audience
• During a Specific Period of Time
Four goal elements
Target – 200 million middle class people
Communication objective – the ability to
identify brand X as a cost effective toothpaste
Desired change – from 10% to 20%
Time horizon – 1 year
Objectives could be with the aim to inform, persuade, remind or reinforce
Inform – awareness creation
new uses
informing the price changes
reducing fear
explain how it works
describing available services
correcting false impressions
company image building
Persuade - build selective demand for a brand
encourage switching
persuading customers to buy now
comparison advertising
• Remind - to stimulate repeat purchase

• Reinforce - convince current customers –

right choice showing the satisfied customer
Communications Objectives
Repurchase/Re
gular use

Trial

Preference

Liking

Knowledge/
Comprehension
 DAGMAR
• Defining Advertising Goals for Measured Advertising Results
(DAGMAR)
• DAGMAR was the study of Association of National Advertisers
(ANA) that the goal of advertising is to achieve specialized
objectives and it recognized that different advertisements can
have a number of objectives.
• "Advertising's job, purely and simply, is to communicate to a
defined audience information and a frame of mind that
stimulates action. Advertising succeeds or fails, depending on
how well it communicates the desired information and attitudes
to the right people at the right time and at the right cost."
- Russell H. Colley
• DAGMAR Approach can be summerized as follows :
• (i) Advertisine goals are virtually always communication
goals : Colley pointed out that advertising is only one
part of the marketing mix for all companies. He assumed
that specific goal for advertising in virtually all situations
would have to be represented in terms of some
communication objective.
• (ii) Goals should be written down : The goals should be
made very clear in form of writing, so that every one
understands what is being done.
• (iii) Advertising should be measured in terms of effects, not exposures : Colley
pointed out that in reaching out a certain number of potential consumers, no
matter how astronomical that number seems to be, is meaningless unless there is
some effect in terms of communication goals.
• (iv) Advertising operates through a hierarchy of communication effects : There is a
series of mental step through which a brand or objects must climb to gain
acceptance.

• The next step is brand comprehension, which involves the audience member
learning something about the brand.
• The next step is the attitude and conviction step and intervenes between
comprehension and final action. The action phase involves some overt move on
the part of the buyer like trying the brand for the first time, visiting a show room or
requesting information.
• (v) Creative planning considerations should come before media
decisions in the advertising planning process : When media
considerations come first, there is a tendency to be concerned
about the amount of reach an advertising campaign can
develop rather than the effects that are to be generated. The
creative or message strategy decision is always intimately
related to the communication effects that are intended.
Therefore, the creative planning decision should occur first.
• (vi) Benchmark measurements should be developed before the
campaign is implemented : Colley suggested a particular
research procedure for measuring advertising effectiveness.
This involved developing a measurement of the level of an
objective before the campaign and then measuring deviations
from the measurement as an indicator of communication
effect.
• (vi) Specific criteria must be developed : It is
impossible to develop benchmarks unless the
objectives are stated specifically in terms of some
operational measurement. This means that the
advertising objective should state the specific
target market segment, the marketing goal in
some percentage terms over sometime period
and the advertising goals, in terms of a percentage
attainment in a particular time period.
• Colley identified following advertising tasks or
advertising objectives that a firm can pursue :
• - Perform the complete selling function (take the
product through all the necessary steps toward a sale).
• - Announce a special reason for "buying now" (price,
premium, etc.).
• - Remind people to buy.
• - Stimulate impulse sales.
• - Tie in with some special buying event.
 Money: ADVERTISING BUDGET

Advertising budget is an estimate of future advertising

expenditure that will be used to implement managerial
decisions to maintain or improve profit results.

Advertising allocation must be considered as a capital

investment rather than current expense. Investment is a
capital asset that brings benefits in the future.

The usual starting place for management in setting the

advertising budget is to decide the overall objectives of the
company.

The objectives can be e.g., the growth, profits, net return

investments, attracting personnel etc.
• Budgetary process
• The advertising budgeting process involves the following steps :
• - Step 1. Preparation of Budget : It is generally prepared by
advertising manager in consultation with marketing manager. The
advertising budget made is based on inputs provided by
marketing research people. The budget is generally made on
annual basis. Primary input would depend upon type of product,
new or established one, target market, demographic
composition, advertising copy and media selection etc.
• - Step 2. Presentation and approval of Budget : After the budget is
made, it is presented to top management for the approval of the
budget.
• Step 3. Execution of the Budget : After the budget is approved by the
top management, it is executed. Various channels and media for
budget allocation are considered. The task of preparing advertising
messages and acquiring advertising time and space is given to
advertising agency.
• - Step 4. Control of Budget: After the budget is executed, the results
come out.
• Control of budgets involves comparing the desired advertising
objectives and actual advertising objectives. The purpose is to know
the effectiveness of advertising in terms of money allocated to
advertising. If it is found that the allocated budget is on the higher
side or on the lower side, the appropriate corrective action can be
taken.
 Factors influencing the advertising
budget allocation:
• (i) Marketing mix of the company : The important factor
influencing the amount to allocate to advertising is the
general marketing mix of the company for marketing the
product (s) involved.
• (ii) The Sales forecast : While making the final budget, it is
important to correlate the amount needed to sales
forecast. It is needed to know what may be expected to
happen in the light of past experience, present conditions
and any changes in factors that were influential in the
past. This forecast is developed to provide the following
data :
 Competition
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Advertising Budget Methods
Setting the Advertising Budget
• - Sales in units rather than Rupee volume : Used whenever
possible in order to be more specific in allocating the budget to
various items.
• - Sales by customer classes : Data for ascertaining the advertising
cost in reaching various customer groups.
• - Sales by product lines : In order to determine how much
advertising will be needed to attain the volume projected.
• - Sales by territories : Helpful in deciding what advertising
expenditures should be made in each area.
• (iii) Affordability : The most important and the foremost factor
while deciding the budget is how much funds are available to the
company.
• (iv) The Product life cycle : When the product is introduced, high
level of advertising is required because the product is new and
the market is to be informed and persuaded to purchase the
product. When the product reaches to the maturity stage, more
advertising expenditure is required to reduce the dropping of
sales and to maintain the status .
• (v) Quality of the campaign : If the advertising message is of high
quality and it is widely recognized and established, even a small
budget can be effective.
• (vi) Level of competition : If the competitors advertising budget is
immense and is advertising heavily, the higher budget would be
required to counter attack.
• vii) The budgeting cycle : Budget appropriation would also
depend upon the time period for which the budget is
allocated. If the budget is made for six months, lesser money is
required than the budget for one year.
• (viii) Contingency Planning : There are many external
uncontrollable restraints that must be taken into consideration
while planning the budget.
• (ix) Type of the Product: If the product is one for which a strong
consumer demand can be stimulated, so that the pull strategy
of marketing can be used effectively, the budget for advertising
might constitute virtually the entire marketing budget.
 Methods of determining budget
appropriation:

• The Percentage of Sales Method : This method is most widely

used method of setting the appropriation. Percentage of sales
method is based on previous year's sales, on estimated sales of
coming year or on some combination of these two. If virtually all
conditions in the firm's market including the general economic
conditions and the competitive activity, remain ,then it is quite
possible that the same correlations will remain between the
advertising and other sales and promotional activity expenditures
and the resulting sales volume.
• Merits
• - Percentage of sales is simple to calculate, and it is almost the nature of
management to think of costs in percentage terms. Moreover, when it
is wide spread throughout the industry, it results in advertising
becoming proportional to market shares.
• Demerits
• - As sales decline the expenditures of advertising decline, despite the
possibility that it is at this point the demand may require that extra
effort toward stimulation.
• - The percentage of sales method is not consistent with the basic
marketing principle that advertising is an important factor in stimulating
demand, and, as such precedes sales rather than being determined by
sales.
• Unit of Sales Method : A variation of the percentage of
sales method is the "fixed-sum-per-unit" appropriation
technique. This method is also based on the premise that a
specific amount of advertising is related to the marketing
cost of each unit produced rather than total sales volume.

• The advantage is that the manufacturer will know in

advance how much the advertising cost of each unit of the
product will be, which is especially useful in price
determination.
• iii. Competitive Parity Method : In this method, a manager
establish budget amount by matching the percentage sales
expenditure of the competitors.
• This method consists of setting the appropriation by relating it in
some manner to the expenditures of the firm's major competitor
or competitors. It leads to stability at the market place by
minimizing marketing warfare.
• The demerits of this method are :
• - It is a defensive strategy.
• - It is difficult to determine the competitor's budget.
• - It assumes that because firms have similar expenditures, their
programmes will be equally effective.
• iv. Objective task method : Most often, the funds for
promotional efforts are decided upon, before the
preparation of detailed plans on how these funds are to be
spent. But in this approach such plans are worked out
before funds are allocated.
• In this method objective setting and budgeting go hand in
hand rather than sequentially. Objective task method is a
build up approach. Here, the funds are allocated to different
advertising functions and media. The major problem with
this method is the difficulty of determining which tasks will
be required and the cost associated with each task.
• v. Arbitrary allocation method : In this method, the budget
is determined by the manager solely on the basis of his
judgment, intuition or without any rule or rationality. In
this method there is no systematic thinking, no objective
setting and there is a complete ignorance of the
advertising purpose.
• vi. Affordable Method : Also called as ‘all you can afford’
method and the budget is
• based upon what the company can afford and. is generally
related to company's profits or company assets. This
approach is common among small firms.
• vii. Sales response & Decay Model : The model is based on
the assumption that the shape of advertising sales response
function is known and the objective is to determine such a
point that would optimise the advertising out lay/sales
response ratio. The model measures the incremental changes
in revenues at a given time relative to changes in the
advertising budget at a time under a given set of situations.
• The change in the rate of the sales with time is function of
following factors :
• - The sales response constant ( sales generated per
advertising rupee)
• - Sales decay constant (fraction of sales lost per time unit)
• - The advertising budget
• - Saturation level of sales.
• viii. Communication Stage Model : Designed by G. Ole, the
model takes into consideration the impact of several variables
that effect advertising expenditures to ultimate sales while
formulating the size of the budget.
• ix. Pay out planning Method : This method is widely used for
making advertising budget for the new product. A pay out plan
is developed to determine how much to spend. The basic idea
is to project the revenues the product will generate over two or
three years, as well as the costs it will incur. This method is
based on the expected rate of return. This method will assist in
determining how much advertising expenditures will be
necessary when the return might be expected.
Message:

• Advertisements must contain an appeal for creating human

interest so that it may be followed up by the audience.
Through various appeals advertisers influence the
prospect's purchase decision rationally or emotionally.
• Appeals are cues that provide stimulus. Appeals are
developed on the basis of buying motives. Advertising
message should appeal directly or indirectly to those key
needs which influence behaviour.
• Rational Appeals
• Here the functional benefits of a product are highlighted.
Industrial buyers are most responsive to rational appeals.
Buying motives are normally considered rational under
the following circumstances :
• - High quality appeal
• - Low price appeal
• - Long life appeal
• - Performance appeal
• - Ease to use oriented appeal
• Emotional appeals
• Emotional appeals are those appeals, which are not
preceded by careful analysis of merits and demerits of
making a buying decision. Emotions are those mental
agitations or excited states of feeling, which prompt to
make a purchase. Emotional appeals are designed to stir
up some negative or positive emotions, which will
motivate product interest. An advertiser may try to induce
a particular behavioural change by emphasising either
positive or negative appeals or a combination of both.
• Moral Appeals
• Moral appeals are those appeals to the
audience, which are directed to their sense of
right and wrong. These are often used in
messages to arouse a favourable response to
social causes such as adult literacy, social
forestry, anti smuggling, consumer protection,
equal rights for women, rural development etc.
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