The impact of Advertising on Business

According to the Advertising Educational Foundation, advertising took place long before America was even colonized. Advertising carried out over by the Europeans in an organized form and started in the 16th century with billboards, posters and traveling salesmen. In the late 19th century, the idea of the brand name was introduced. For a successful business, good advertising techniques are needed to promote that business’s products and services.

Advertising and promotion involve two different functions which are related to framework of business. Whereas advertising presents product or service to public, promotion keeps the focus on that same product or service. Advertising occupies newspapers, television and radio to create visual and audio messages about a specific product or service. According to the Free Management Library “Promotion can include advertising, but it can also include public relations and sales efforts”.

Over past many decades, advertising has been interpreted many ways. However, Jef I. Richards says that (“Oracles on Advertising”: Searching for definition”, Journal of Advertising 2002, pp.63-77) Advertising is a paid, interposed form of communication from a visible source, illustrated to convince the receiver or audience to take some action, now or in the future, Leo Burnett determined it as “selling corn flakes to people consuming Cheerios” (Bendinger 1993, p. 60), U.S. President Calvin Coolidge describe it “the life of trade” (Bradley, Daniels, and Jones 1960, p. 13), English professor S.I. Hayakawa named the advertising “a symbol- operating occupation” (Hayakawa 1964, p. 269). Although each of these clearly catches some aspect of advertising’s essence, they lack adequate precision to recognize advertising from some other forms of speech. Moreover, Boaze (2004) defines two types of advertising – the first one that we buy for and the other that are free. Both types have their place for every company. Each company must determine when and how to use each type.

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Importance of Advertising

According to Terence A. Simp (IMC in Advertisement and Promotion pp.185) “Advertising is expensive for a company at the same time requires huge investment and its results often uncertain. Organizations spend billions of dollars on advertising in order to keep the creation and production of its products as well as bring income to pay its employees. But managers of certain companies keep in their mind that it unnecessary to advertise when their brands reaches great success.

The size of an organization may determine how advertising campaigns are implemented. For example, a large business may split its advertising budget by applying half of the budget towards media advertisement and the other half towards efforts conducted by an internal sales team. A small business may elect to place small ads in specific media or promote their product through sources that offer free advertisement. Regardless of the technique, all organizations must develop an advertising plan that will support the organization’s marketing objectives and minimize the risks of costly advertising.

An organization can avoid costly mistakes by developing a strategy that focuses on what the message is and what the desired result should be. In order to accomplish this goal, advertising representatives should determine what type of advertising is best for their company. Egelhoff found six types of advertising that can help company use in its planning phase. The six types of advertising are followings:

Company Image: Depending on the type of company, it may be beneficial to create an ad campaign which focuses on promoting the company versus its product line. This is especially helpful for new businesses. Name recognition could be very valuable in the long term.

Name Brands: Many large organizations have developed advertisement strategies that highlight specific brand names. By highlighting brand names, the company is attempting to create an image in the mind of the consumer. The goal is to assist the target market with identifying with the product.

Advertising A Service Instead of A Product: This type of advertising may be difficult for some organizations to achieve. Services are not tangible products so it may be hard for the consumer to clutch the intent of the message. The advertising campaign usually has to explain and demonstrate the benefits of the service. In addition, service advertising tends to appeal to the emotions of the consumer.

Business To Business Advertising (B2B): If an organization is attempting to market to another business, the use of direct mail and advertisement in trade journals would be more appropriate. Advertising to the general population would be inappropriate and a waste of time and money. For example, pharmaceutical representatives tend to market directly to physicians. The campaign focuses on explaining the benefits of specific drugs to doctors so that they would recommend and encourage their patients to use them.

Co-Op Advertising: This type of advertising involves manufacturers absorbing part of the cost and supplying the artwork for the ads. Although this type of advertising could be good for certain companies such as small businesses, there could be disadvantages. For example, the organization has to follow the guidelines of the manufacturer or run the risk of having to cover all of the campaign costs.

Public Service Advertising (PSA): Many companies will set aside a portion of their advertising budget to run campaigns in conjunction with the service of a non-profit organization or public service event. For example, a business may secure ad time on a local television network for community programs.

So, Companies do not have to use all of the different types of advertising. As stated above, each advertising department should first determine what they want to say (i.e. the ad campaign) and

who they want to say it to (i.e. target market). Once these questions have been defined, the advertising team can decide which types of advertising it will use in order to have a successful campaign.

Each campaign is unique. Therefore, organizations may change types based on the campaign.

The magnitude of Advertisement – According to The Journal of Advertising Age “Advertising expenses in the United States is overgrown $ 294 billion in 2008 by estimating top 100 leading national advertisers. This measures to nearly $1000 in advertising for every approximately 300 million men, women and children living in the United States.

Top 10 Spenders in U.S Advertising 2008 ($ million)

Rank

Company

Headquarters

Ad Expenditures (million)

1

Procter & Gamble Co.

Cincinnati

$4,838.1

2

Verizon Communications

New York

$3,700.0

3

AT&T

San Antonio

$3,073.0

4

General Motors Corp.

Detroit

$2,901.1

5

Johnson & Johnson

New Brunswick, N.J.

$2,529.2

6

Unilever

London/Rotterdam

$2,422.6

7

Walt Disney Co.

Burbank, California

$2,217.6

8

Time Warner

New York

$ 2,207.6

9

General Electric

Fairfield, Conn.

$2,019.3

10

Sears Holding Corp.

Hoffman Estates, |||.

$1,864.9

Figure 1.1: Top 10 Spenders in U.S Advertising 2008 (million)

Source: “100 leading National Advertisers,” Advertising Age 2008

1.2 Objectives, Research Questions and Research Hypothesis.

Research objectives:

To identify and recognize the role of advertisement on Business.

To Study the factors, strategies of effective Advertisement.

Based on the above objectives, the following research questions are raised:

What is the role and functions of advertisement on Business?

What are the crucial factors, strategies of effective advertisement?

Based on the above research questions, the following research hypotheses are developed:

There exists strong advertisement influence which provides effective business

There exist factors and strategies increasing sales promotion

1.3 Scope

This study points to identify several media factors and crucial strategies which are will be found on Literature Review. Moreover, a variety of factors and functions of advertisement will be found in this chapter. Most important several variable factors are used to explain the relationship between Target audience, Marketing Strategy and media planning and Media Strategy.

Chapter Two:

Literature Review

2.1 Literature Review of Advertisement strategies, Ad functions and some critical communications factors influencing on business promotion.

This chapter provides a brief outline of the various researchers’ opinions and ideas about critical advertisement strategies and the relationship between marketing strategy, Advertisement Strategy and Media Strategy. In addition, certain factor affecting to customers – Target audience and some basic marketing strategies such as celebrities role on advertisement, Customer Characteristics. Lastly, this chapter tries to identify the role of advertisement strategy in a firm and its environment.

2.2 The functions of Advertisement

A lot of companies as well as not-for-profit organizations have faith in advertising. Basically, advertising is valued because it is recognized as performing five critical communications functions James Webb Young (Advertisement age 1973): (1) informing, (2) Influencing, (3) reminding and increasing salience, (4) Adding value, and (5) assisting other company efforts.

Informing

One of advertising’s most important functions is to announce brands. Andrew Ehrenberg (“Brand advertising as Creative Publicity” 2002, pp.7-12). Advertising informs audience about new brands, educates them about a brand’s distinct features and benefits, and facilities the invention of positive brand icons. In addition, advertising is an efficient form of communication capable of reaching mass audiences at a relatively low cost per contact, it assists introduce new brands and increases demand for existing brands, largely by increasing consumers’ top-of-mind awareness (TOMA) for established brands in mature product categories (Stephan Miller and Lisette Berry 1998).

Influencing

Effective advertising influences prospective customers to try advertised products and services. Sometimes advertising influences primary demand -that is, creating demand for an entire product category. More frequently, advertising attempts to build secondary demand, the demand for a company’s brand. Advertising by both B2C and B2B companies provides consumers and customers with reasoned arguments and emotional appeals for trying one brand versus another.

Reminding and Increasing Salience

Every advertising illustration assists keep a company’s brand fresh in the consumer’s memory. When a need arises that is related to the advertised product, the influence of past advertising makes it possible for the advertiser’s brand to come to the consumer’s mind as a purchase candidate. This has been referred to as making a brand more salient; that is, encouraging the memory trace for a brand such that the brand comes to mind in relevant choice situations by Ehrenberg (Brand Advertising as Creative Publicity”).Effective advertising also increases the consumer’s interest in mature brands and thus the likelihood of purchasing brands that otherwise might not be chosen Karen A. Machleit, (“The mature brand and brand interest” 1993). Advertising has been demonstrated, furthermore, to influence brand switching by reminding consumers who have not recently purchased a brand that the brand is available and that it possesses favorable attributes by John Deighton (The effects of Advertising on Brand Switching and repeat purchasing).

Value Adding

In general there three ways by which companies can add value to their offerings (American Association of Advertising Agencies, 1989): Innovation, enhancing quality, and changing consumer perceptions. These three value-added components are completely interdependent as astutely captured in the following quote: “Innovation without quality is mere novelty. Consumer perception without quality or innovation is mere puffery. And both innovation and quality, if not translated into consumer perceptions, are likely the sound of the proverbial tree falling in the empty forest”. Advertising adds value to brands by influencing perceptions. Effective advertisement makes brands to be seen as more elegant, modern, more prestigious or higher quality, etc.

Assisting other company efforts

William R. S. (Journal of Marketing Research) requires that another critical role of advertising is to help sales representatives. Advertising pre-sells a company’s products and provides salespeople with valuable information previous to their personal contact with potential customers. Sales effort, time, and costs are shrunk because less time is necessary to inform prospects about product forms and benefits. Furthermore, advertising makes valid or credible the sales representative’s demands.

2.3 Formulating and Performing Advertising Strategy

Terece A. Sh suggests advertisement management process, which consist of three sets of interrelated activities: Advertising strategy, Strategy performance, and assessing ad effectiveness.

Performance of Advertising Strategy

Strategy performance manages with the tactical, day-to-day activities that must be performed to achieve an advertising campaign.

Advertising Strategy

Setting Objectives

Formulating Budgets

Creating Ad massages

Selecting Ad Media

Strategy Implementation

Assessing Ad Effectiveness

Figure 2.1: The Advertisement management process

Source: Terece A. Sh (2008) IMC in Advertising and promotion

Evaluating Advertising Effectiveness

Evaluating effectiveness is a crucial aspect of advertising management-merely by measuring results is possible to define if objectives are being performed. This frequently compels that baseline measures to be taken before an advertising campaign starts (to define, for a pattern, how many percentage of the target audience is aware of brand name) and then subsequently to define whether the objective was reached.

But Egelhoff, T. (2004) suggests another way of advertising strategy. He says that strategic planning is necessary to provide the baseline information for a successful ad or advertising campaign that not only wins customers, but that also advances the organization’s goals and objectives. This should be coupled with research in order to determine the best target market and the best way to reach that market.

Strategic planning – budgeting, media selection

Research and evaluation

Design and development

Strategic Planning

For most companies, the strategic planning function is the process of defining the long-term goals of a company and developing a plan to use the company’s resources – including materials and personnel – in reaching these goals. One of these resources is the advertising personnel and the ads that they develop. One of the aims of strategic planning within the advertising management function is to define ways in which the advertising department can support the organization in meeting its goals. In general terms, the purpose of advertising is to persuade potential customers to purchase the products or services of the organization. Another part of the strategic planning function of advertising management is to create an advertising campaign that will meet this goal in terms of the higher level strategy of the organization. Traditionally, this has meant determining the best way to persuade potential customers to purchase the product or service offered by the organization. However, increasingly, advertising is becoming more closely associated with public relations. Therefore, advertising agencies may be called upon to develop ads that manage the public image or reputation with outside agencies and groups. (Egelhoff, 2004)

Budgeting

The following aspect of advertising management is developing the advertising budget (Egelhoff, 2004). For the most part, the greatest proportion of the budget needs to be divided with those areas that have the highest possible return on investment. To define how the budget for an advertising campaign should be allocated, one needs first to determine what the expected outcome of the ads will be both in the short term and in the long term. Similarly, one must estimate the revenue that the ad will produce. It is typically bad strategy to spend more on an advertising campaign than the campaign

will generate in incomes in the short- and long-terms.

Media Selection

Another aspect of strategic planning for advertising management is the invention of a media strategy. This is often done as part of an integrated marketing communications approach in which frequent sources of marketing information are mixed and integrated in order to develop an effective marketing campaign. Media selection models are available to help advertising managers select the appropriate media for an effective advertising campaign. (Egelhoff, 2004)

Research and evaluation

Research and evaluation are useful tools throughout the development and realization processes in order to provide information to help develop better advertising both now and in the future.

Design and development

The third major group of activities in advertising management is the actual design and development of the ad or advertising campaign.

Strategic Planning

Research & Evaluation

Design Development

BUDGETING

MEDIA SELECTION

Figure 2.2: Strategic Planning

Source: Egelhoff, T. (2004).

Media of Advertising

In this section focuses on four general mass media advertising: newspapers, magazines, radio, and television. According to Marketing Fact Book the highest rate among four mass advertising media took place Television advertisement, bidding nearly 42% of the total expenditures in 2007

($190billion), newspapers approximately 31%, magazines (including business-to-business magazines) about 16%, and radio slightly over 11%.

Television Advertising

Television advertising is perhaps the most prominent and effective way to deliver a marketing message to a mass audience. Because it is so effective, it is also one of the most expensive. The nature of television advertising has changed in recent years, as it is becoming increasingly difficult for network executives to

assure advertisers that their ads are being seen during commercial breaks.

Print advertising

Print advertising can run the scale from display ads in newspaper and magazines to billboards, catalogs, leaflets, pamphlets and brochures. Print advertisements can be a highly effective way to reach a target audience, but they can also be expensive, primarily due to the cost of purchasing advertising space, and/or

the cost of designing printing, distributing, and/or mailing brochures, pamphlets and catalogs.

Radio Advertising

Radio advertising is another effective way to get a marketing message out to a target audience. As Sarah White points out in her book, “The Complete Idiot’s Guide to Marketing Basics” (1997), the advantage of radio advertising is that it is easier to target a message to a specific audience. A business that is looking

to market a product to young people would likely choose a Top 40 station to advertise on, while someone looking to promote a product to Baby Boomers would be more likely to choose a station that has a classic rock, oldies or easy-listening format.

Internet Advertising

The rapid rise of the Internet over the past fifteen years has had a huge influence on the field of advertising, both in terms of the opportunities that it offers, and the challenges it presents. In terms of opportunity, the Internet has provided marketers with easy, inexpensive access to customers and potential customers from all over the world. Reaching these customers is also incredibly easy and cost-effective.

Dating back to 1994, the World Wide Web has become an important advertising medium. Although at the time of this writing the internet commands less than 10% of U.S. Advertising income, total online advertising spending in the United States is expected to reach $42 billion by 2011 quoted by Maddox “Outlook Bright for Online Advertising”. Probably the most drastic indicator of the internet’s rise as an advertising medium is the fact that advertising income Google and Yahoo generated in a recent year virtually equaled the mixed prime-time ad incomes the major U.S. television networks collected Kris Oser “New advertising Kings: Yahoo, Google”.

Media Planning Process

Media planning is the design of a strategy that shows how investments in advertising time and space will contribute to the achievement of the marketing objectives. The challenge in media planning is defining how best allocate the fixed advertising budget for a particular planning period among ad media. Media planning covers coordinating three levels of strategy: marketing, advertising, and media strategy.

Marketing strategy gives the incentive and direction for the choice of both advertising and media strategies. Nowadays, Marketing strategies are very important to any business environment. Marketing strategies can help to an organization to analyze its customers, launch new products, increase selling, and build a customer loyalty. Any crucial strategy must to be used by organization in order to achieve sustainable competitive advantage. Also, successful strategies lead to the organization or company to be a leader in the marketplace. The advertising strategy -includes ad objectives, budget, and massage and media strategies.

Advertising Strategy

Advertising Objectives

Advertising Budget

Marketing Strategy

Massage strategy

Media Strategy

Media strategy

Target Audience Selection

Objective Specification

Media and vehicle Selection

Media Purchasing

Figure 2.3: Media planning process

Source: IMC in Advertisement and promotion

2.3 Selecting the Target Audience

Effective media strategy demands, that the target audience be emphasized.

A target audience is a group of individuals that a company has identified as being the most important to reach with the message of a particular marketing campaign. A company determines the target audience through the process of market segmentation – division of a market into smaller, more specialized categories based on a variety of factors, including customer buying habits. A target audience can vary depending on the purpose of the campaign. If the purpose of the campaign is to generate fast sales,

the target audience might be existing customers who are likely to make large purchases quickly. If the purpose of the campaign is to broaden the customer base, the campaign could be targeted to individuals that have been identified as a good fit for the company.

Customer Characteristics

More companies try to study customer behavior and study about their customers, the easier it will be to create a marketing plan that appeals to them. What factors influence their decision-making habits? What do they like about the company? What do they dislike? There are many ways to gather information about a company’s customers and potential customers. A company can host focus groups, visit trade shows, and talk with those in the company who interact with customers on a daily basis. A company can send out customer satisfaction surveys, or ask for comments on a web bulletin board.

Advertising and Celebrity endorsement process

Advertising began playing an active role when it came to the development of the society in the economy in the early 1930s. Celebrities exploited as spokespersons, in order to advertise and promote products, services and ideas. Those celebrities came from the art science, modeling, sports and Movie industry (Kambitsis et al 2002). Advertised brands often receive endorsements from a variety of popular public figures. It has been estimated that approximately one sixth of ads world-wide feature celebrities Erine White “Wall Street journal” (2004).