In the next five sections of the Principles of Marketing Tutorials we begin an in-depth look at each promotional mix item. In this tutorial, we present the first of a three-part examination of advertising with a discussion of basic concepts and trends. Our coverage of advertising continues in our Managing the Advertising Campaign Tutorial, where we look at what decisions are needed to carryout a successful advertising campaign and in our Types of Advertising Media Tutorial, where we examine different options for placing advertisements.
In this tutorial we cover several fundamental issues in advertising including examining what advertising is and why it is important to the marketing organization. We also look at managing the advertising effort by comparing in-house management to that offered by advertising professionals, such as advertising agencies. Finally, the tutorial identifies different types of advertising and addresses trends facing the advertising industry.
What is Advertising?
Advertising is a non-personal form of promotion that is delivered through selected media outlets that, under most circumstances, require the marketer to pay for message placement. Advertising has long been viewed as a method of mass promotion in that a single message can reach a large number of people. But, this mass promotion approach presents problems since many exposed to an advertising message may not be within the marketer’s target market, and thus, may be an inefficient use of promotional funds. However, this is changing as new advertising technologies and the emergence of new media outlets offer more options for targeted advertising.
Advertising also has a history of being considered a one-way form of marketing communication where the message receiver (i.e., target market) is not in position to immediately respond to the message (e.g., seek more information). This too is changing. For example, in the next few years technologies will be readily available to enable television viewers to click a button to request more detail on products advertised on TV programs. In fact, it is expected over the next 10-20 years advertising will move away from a one-way communication model and become one that is highly interactive.
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Importance of Advertising
Spending on advertising is huge. One estimate by marketing consulting firm, Zenith, places worldwide spending on advertising at over (US) $500 billion. This level of spending supports thousands of companies and millions of jobs. In fact, in many countries most media outlets, such as television, radio, websites and newspapers, would not be in business without revenue generated through the sale of advertising.
While worldwide advertising is an important contributor to economic growth, individual marketing organizations differ on the role advertising plays. For some organizations little advertising may be done, instead promotional money is spent on other promotion options such a personal selling through a sales team. For some smaller companies advertising may consist of occasional advertisement and on a very small scale, such as placing small ads in the classified section of a local newspaper.
But most organizations, large and small, that rely on marketing to create customer interest are engaged in consistent use of advertising to help meet marketing objectives. This includes regularly developing advertising campaigns, which involve a series of decisions for planning, creating, delivering and evaluating an advertising effort. We will cover advertising campaigns in greater detail in the Managing the Advertising Campaign Tutorial.
Advantages of Advertising
There are a number of reasons marketers are attracted to advertising as a method for promoting their products. These advantages include:
Quickly Reach a Large Audience – Advertising not only has the potential to reach a sizeable audience, it can do so in a very short period of time (e.g., TV ad watched by millions of potential customers)
Helps in Gaining Product Distribution – For consumer goods marketers, the inclusion of advertising within a marketing plan may be a convincing factor in gaining the support of resellers (e.g., wholesalers, retailers).
Provides Effective Targeting and Tracking – Newer approaches to advertising offer marketers highly effective methods for targeting customers and also tracking their response.
May Reach Customers at Different Times – With the rise of social media and video sharing sites (e.g, YouTube), advertisements are not restricted to being delivered through a single media outlet (e.g., TV ad only) or only at a specific time (e.g., single showing of ad during a television program). This is because customers can still be exposed to an ad even though it is not in the media outlet where it was originally presented.
Effective When Addressing Certain Issues – Advertising is often the best promotional method for responding to serious or sensitive issues, such as addressing a major catastrophe.
Disadvantages of Advertising
While advertising is often hailed as the best way to promote a product, it does come with several negative issues. These disadvantages include:
Can Be Highly Expensive – Some forms of advertising are extremely expensive to create and distribute; consequently, these may not be a viable option for many businesses, especially smaller marketers.
Number of Exposures Needed to Reach Customers is Increasing – Due to the large number of advertisements customers experience every day, the number of exposures to an advertiser’s message (i.e., see or hear an ad) that are needed before the message is fully comprehended by the target market appears to be increasing.
Often Requires Hiring Creative People – To be effective with advertising often requires creative skills that may not be the forte of many smaller marketers, thus requiring they spend money hiring or outsourcing the creative process if they want to produce effective advertisements.
Increase in Customer Avoidance to Ads – Because of the constant onslaught of advertising across numerous outlets, many customers have taken a negative view and intentionally try to avoid exposure to ads (e.g., use a digital video recorder to skip ads).
Potential Environmental Issues – Some forms of advertising have raised environmental concerns (e.g., ads on car windshields become loose increasing trash found in public spaces).
Increase in People Sharing Dislike of Ads – People exposed to ads they dislike are more likely to share their displeasure with a larger group (e.g., on social media).
Objectives of Advertising
In the Promotion Decisions Tutorial, we explained five objectives that may be achieved using promotion. Advertising can address all of these, though at different levels of effectiveness. The objectives of advertising include:
Building Product Awareness – The mass communication nature of advertising makes it a particularly attractive promotional option for marketers, who are introducing new products and looking to build market awareness. Additionally, advertising can be used to help support a strategy to reposition a product by creating awareness among a target market to benefits offered by the product that are new or that may not have been previously known.
Creating Interest – Advertisements are creative productions with the power to capture customers’ attention. As we will see in Managing the Advertising Campaign Tutorial, the large number of methods and media outlets for presenting an advertisement offers marketers ample ways to create appealing ads intended to excite customer interest.
Providing Information – Many forms of advertising expose a targeted market to a message in a brief way and are often not suitable for providing extensive information. However, there are some forms of advertising that can convey a good amount of information. For instance, advertisements sent by direct mail can offer in-depth product information with the inclusion of detailed booklets, links to online videos, and product samples.
Stimulating Demand – Advertising is often used as part of a campaign to encourage a target market to make a purchase. While this certainly seems an obvious usage of advertising, in fact, by itself advertising is not the most effective promotional tool to achieve this objective. Instead, advertisements, that on the surface appear to have the objective of stimulating demand, are generally part of a broader promotional strategy that includes other forms of promotion, most notably sales promotion.
Reinforcing the Brand – Repeated use of advertising is often required to support a product. Given the number of ads a target market is exposed to on a regular basis, it almost has become a necessity for marketers to advertise consistently as they fear customers will forget about their product if competitors advertise more frequently. Companies operating in markets where competitors spend heavily on advertising must also spend in order to maintain a consistent share-of-voice within the market (i.e., percentage of one marketer’s spending on advertising in relation to total spending).
Managing Advertising Decisions
Delivering an effective marketing message through advertising requires many different decisions as the marketer develops its advertising campaign. For small campaigns involving little creative effort, one or a few people may handle the bulk of the work. In fact, the internet has made do-it-yourself advertising an easy to manage process and has especially empowered small businesses to manage their advertising decisions. Not only can small firms handle the creation and placement of image advertisements appearing on the internet and mobile apps, new services have even made it possible for a single person to create video advertisements.
For larger campaigns the skills needed to make sound advertising decisions can be quite varied and may not be easily handled by a single person. While larger companies manage some advertising activities within the company, they are more likely to rely on the assistance of advertising professionals, such as those found at advertising agencies, to help bring their advertising campaign to market.
Advertising Agency Functions
Professionals at an advertising agency and other advertising organizations offer a number of services for both offline and online advertising. These services may include:
Account Management – Within an advertising agency, the account manager or account executive is tasked with handling all major decisions related to a specific client. These responsibilities include locating and negotiating to acquire clients. Once the client has agreed to work with the agency, the account manager works closely with the client to develop an advertising strategy. For very large clients, such as large consumer products companies, an advertising agency may assign an account manager to work full-time with only one client and, possibly, with only one of the client’s product lines. For smaller accounts an account manager may simultaneously manage several different, though non-competing, accounts.
Creative Team – The principle role of account managers is to manage the overall advertising campaign for a client, which often includes delegating selective tasks to specialists. For large accounts one task account managers routinely delegate involves generating ideas, designing concepts and creating the final advertisement, which generally becomes the responsibility of the agency’s creative team. An agency’s creative team consists of specialists in graphic design, film and audio production, copywriting, website and mobile app design, and much more.
Full-service advertising agencies employ marketing researchers who assess a client’s market situation, including understanding customers and competitors, and carrying out tests creative ideas. For instance, in the early stages of an advertising campaign researchers may run focus group sessions with selected members of the client’s target market in order to get their reaction to several advertising concepts. Researchers are also used following the completion of an advertising campaign to measure whether the campaign reached its objectives.
Researchers – Once an advertisement is created, it must be placed through an appropriate advertising media. Each advertising media, of which there are thousands, has its own unique methods for accepting advertisements, such as different advertising cost structures (i.e., what it costs marketers to place an ad), different requirements for accepting ad designs (e.g., size of ad), different ways placements can be purchased (e.g., direct contact with media or through third-party seller), and different time schedules (i.e., time of day an ad will be run). Understanding the nuances of different media is the role of a media planner, who looks for the best media match for a client and also negotiates the best deals.
Other Specialists – In addition to the services listed above, many advertising agencies offer their clients a variety of other services. These include management of social media outlets, expertise in improving a client’s position on search engine results and marketing analytics.
Types of Advertising
If you ask most people what is meant by “type” of advertising, invariably they will respond by defining it in terms of how it is delivered (e.g., television ad, internet ad, etc.). But in marketing, type of advertising refers to the primary “focus” of the message being sent. The different types of advertising include:
Most advertising spending is directed toward the promotion of a specific good, service or idea; what we have collectively labeled as an organization’s product. In most cases the goal of product advertising is to clearly promote a specific product to a targeted audience. Marketers can accomplish this in several ways from a low-key approach that simply provides basic information about a product (informative advertising) to blatant appeals that try to convince customers to purchase a product (persuasive advertising) that may include direct comparisons between the marketer’s product and its competitor’s offerings (comparative advertising).
However, sometimes marketers intentionally produce product advertising where the target audience cannot readily see a connection to a specific product. Marketers of new products may follow this “teaser advertising” approach in advance of a new product introduction to prepare the market for the product. For instance, one week before the launch of a new product a marketer may air a television advertisement proclaiming “After next week the world will never be the same” but do so without any mention of a product or even the company behind the ad. The goal is to create curiosity in the market and interest when the product is launched.
Image advertising is undertaken primarily to enhance an organization’s perceived importance to a target market. Image advertising does not focus on products as much as it presents what an organization has to offer. In these types of ads, if products are mentioned it is within the context of “what we do” rather than a message touting the benefits of a specific product.
Image advertising is often used in situations where an organization needs to educate the targeted audience on some issue. For instance, image advertising may be used when a merger has occurred between two companies and the newly formed company has taken on a new name. It may also be used if a problem has led to negative publicity (e.g., oil spill) and the company wants to let the market know they are about much more than this one issue.
Organizations also use advertising to send a message intended to influence a targeted audience. In most cases there is an underlying benefit sought by an organization when they engage in advocacy advertising. For instance, an organization may take a stand on a political issue which they feel could negatively impact the organization and will target advertisements to voice their position on the issue.
Public Service Advertising
In some countries, not-for-profit organizations are permitted to run advertisements through certain media outlets free-of-charge if the message contained in the ad concerns an issue viewed as for the “greater good” of society. For instance, ads directed at social causes, such as teen-age smoking, illegal drug use and mental illness, may run on television, radio and other media without cost to organizations sponsoring the advertisement.
Trends in Advertising
1. Digital Convergence
Like most areas of marketing, advertising is changing rapidly. Some argue that change has affected advertising more than any other marketing function. For instance, while many different media outlets are available for communicating with customers, the ability to distinguish between outlets is becoming more difficult due to the convergence of different media types.
Digital convergence, which refers to the use of information technology methods to deliver media programming, allows one media outlet to take advantage of features and benefits offered through other media outlets. This can be seen most clearly with television, which in many areas around the world, is broadcast digitally using the same principles of information delivery that are used to allow someone to connect to the internet or mobile networks. This convergence of television opens many potential opportunities for marketers to target customers in ways not available with traditional over-the-air television advertising. For example, the development of interactive television is enabling viewers to respond to advertisements (e.g., click) on their screen in much the same way as can be done when seeing ads on a website.
The convergence of television with other technologies opens many potential opportunities for marketers to target customers in ways not available with traditional television advertising. For example, technology may allow ads delivered to one household to be different than ads delivered to a neighbor’s television even though both households are watching the same program.
But convergence is not limited to just television. Many media outlets are experiencing convergence as can be seen with print publications that now have a strong web presence. The future holds even more convergence opportunities. These include outdoor billboards that alter displays as cars containing geographic positioning systems (GPS) and other recognizable factors (e.g., GPS tied to satellite radio) pass by; a social media site using information about its users’ to display advertisements related to specific life events, such as a wedding engagement; or direct mail postcards that carry a different message based on data that matches a household’s address with television viewing habits.
2. Audience Tracking
The movement to digital convergence provides marketers with the basic resources needed to monitor users’ activity, namely, digital data. Any media outlet relying on technology (e.g., internet, mobile, CRM, etc.) to manage the flow of information does so using electronic signals generated by computer technology. In a simple form, an electronic signal is represented as being either “on” or “off”. In computer language, this is further represented by two numbers “0” and “1” and, consequently, is known as digital data. All digital information has the potential to be captured, stored, and evaluated using data analytics and other software programs.
For media outlets, information delivered in digital form offers the possibility of greater tracking of customers’ exposure to specific advertisements. And tracking does not stop with what ads are being delivered; it also works with information being sent from the customer. For instance, as we noted earlier, by clicking on their television screen viewers will soon be able to receive instantly information about products they saw while watching a television show. This activity can be tracked then used in future marketing efforts, such as ads for the same product appearing on a customer’s smartphone.
While media convergence offers marketers more options for tracking response to advertisements, such activity also raises ethical and legal concerns, particularly as these relate to customer privacy. Despite these concerns, customer tracking is widely used and newer methods continue to be deployed. Below we present just a few examples of how marketers are tracking users include:
Television Viewing – The advent of digitally delivered television allows cable, telephone and satellite providers to track user activity through the set-top boxes connected to a subscriber’s television. Future innovation will make the user television experience even more interactive and, consequently, open to even more tracking.
Television Recording – A DVR that is included with many set-top digital television boxes can track users recording habits and, based on a viewers’ past activity, make suggestions for programs they may want to record. Additionally, advertising services can program the DVR to insert advertisements within a program targeted to a particular viewer.
Mobile Device Usage – The newest frontier for user tracking can be found with mobile devices including smartphones and tablet computers. Tracking companies are moving aggressively into this area by offering data that includes: websites visited; downloads of music, games and apps; and other activity that occurs with mobile devices.
3. Ad Skipping and Blocking
As noted above, advances in television technology offers marketers tremendous insight into viewers’ habits and behavior. Yet from the consumer side, the DVR and other on-demand services, such as Netflix, not only allow people to watch programming at a time that is most convenient for them, it also offers consumers to ability to skip over commercials or watch programming that does not contain ads. Ad skipping is particularly an issue for broadcast networks that rely on advertising to pay for programming. Additionally, advertisers are becoming more concerned when advertising online. In this medium, ad blocking has become a major threat. Software for blocking ads can now be easily installed on computers, tablets, and smartphones.
As more consumers adopt ad skipping and ad blocking features, advertiser’s concern with whether they are getting the best value for their television and online advertising money may become a major issue. This may lead them to invest their promotional funds in other media outlets, where consumers are more likely to be exposed to an advertisement.
4. Changing Media Choices
There is a significant cultural shift occurring in how people use media for entertainment, news, and information. Many traditional media outlets, such as newspapers and major commercial television networks, are seeing their customer base eroded by the emergence of new media outlets. The internet and mobile apps have become the principal drivers of changing media choices. In particular, a number of valuable applications tied to the internet and mobile communication are creating new media outlets and drawing the attention of many, mostly younger, consumers. A few examples include:
Social Media – Possibly the most significant example of how media usage is changing can be seen with the rapid expansion of social media. Social networking outlets, such as Facebook and Twitter, not only offer a venue for social exchange but also, for a growing number of people, these outlets are becoming principle sources for obtaining news and information.
User-Generated Video Sites – In large part due to the popularity of YouTube, what now qualifies as video media has changed. Now anyone can produce videos and post for the world to see. The result is that advertising choices for video production is no longer limited to television programs as marketers can present their ads as part of online video.
Small Screen Video – While accessing video content over the internet through computers linked to high-speed data networks is common, the streaming of video over wireless networks to small, handheld devices, including smartphones, is rapidly growing. Many television networks now offer mobile apps that make its programming available in formats suitable for small screen viewing. These new formats also provide marketers with new advertising opportunities. With the number of small screen devices continuing to grow rapidly, it is likely this format for advertising will eclipse larger screen advertising within the next few years.
Mobile Apps – In addition to television networks benefiting from ads viewed within mobile apps, ads on smartphones and tablets are offering rich new ground for all advertisers. In fact, continual improvement in mobile device performance and network data speeds are opening the door for marketers to present advanced advertisements, including “in app” video ads.
Podcasting – Many journalists, industry experts, celebrities, bloggers, and others produce regular audio or video programs (i.e., episodes) that are freely downloadable and playable on computers, smartphones, and other mobile devices. This form of online entertainment has grown steadily in the last few years and provides many advertising opportunities.
Online Gaming – While gaming systems have been around for some time, gaming accessible over information networks is still evolving. As internet and mobile network connections increase in speed, gamers are expected to shift away from games loaded on their local computer and, instead, access games online. This shift is opening new territory for advertisers by enabling marketers to insert special content, including product advertising, within game play.
For marketers, these evolving technologies should be monitored closely as they become accepted alternatives to traditional media outlets. As these technologies gain momentum and move into mainstream acceptance, marketers may need to consider shifting advertising spending away from more traditional outlets (e.g., television, print, website, etc.) and toward the newer media options.
Marketers should also be aware that new media outlets will continue to emerge as new applications are developed. The bottom line for marketers is they must stay informed of new developments and understand how their customers are using these outlets in ways that may offer advertising opportunities.