Advertising Decisions

1
Advertising Decisions

• How Much to Spend?
• What Message to Use?
• What Media/Schedule to Select?

2
Advertising

• Advertising interacts with other mix elements
• Personal selling (especially for industrial
  products)
• Branding (advertise the brand/company?)
• Price (increase or decrease price elasticity?)
• Distribution (who are the targets for
  advertising?)

3
Sales Response to Advertising

• Shape S-shape? Linear? Decreasing returns?
  Saturation point? Threshold?
• Dynamics Growth and decline equal?
  Delay/carryover effects? Hysteresis?
• Interaction Advertise in strong (or weak
  markets)?

4
Hysteresis Example
1.4
Average duringHeavy Advertising
1.2
Pretest Average
1
0.8
Sales Rate
0.6
HeavyAdvertising
0.4
0.2
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
32
34
Time (4-week periods)
5
Response Shape Example
Radio Equipment in Newspapers
Service Recruiting in Newspapers
300
1,200
250
1,000
200
800
ResponseUnits
Response Units
150
600
100
400
50
200
0
0
0
500
500
1,000
1,500
2,000
2,500
3,000
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Advertising Units(a)
Advertising Units(b)
6
The Timing ofAdvertising Response
6
4
Sales Increase ()
2
0
-2
0
1
2
3
4
5
Advertising Pulse
Months
7
What Do We Know About Advertising Response?

• 1. Sales respond dynamically upward and downward,
  respectively, to increases and decreases of
  advertising and frequently do so at different
  rates.
• 2. Steady-state response can be concave or
  S-shaped and will often have positive sales at
  zero advertising.
• 3. Competitive advertising affects sales.
• 4. The dollar effectiveness of advertising can
  change over time as the result of changes in
  media, copy, and other factors.
• 5. Products sometimes respond to increased
  advertising with a sales increase that falls off
  even as advertising is held constant (Little,
  1979, p. 644).

8
Advertising Budgeting in Practice

• Affordable method
• Percent of sales
• Competitive parity method
• Objective/task method
• Model-based approaches
• Response models
• Shared experience

9
Response Model Theoretical Idea

• discounted sum over markets time of
  salesMax Profit (advertising levels  
   margin advertising competition, other
  mix spending levels)

• Need to know
• Sales response for each market area, over time.
• Competitive responses.
• Interactive effects.
• Examples
• Rao Miller
• ADBUDG

10
Rao and Miller

• Idea
• Use natural variations in changes in advertising
  versus changes in sales across markets to develop
  a response function.
• Use response function to optimize advertising
  spending.

11
Relationship between Marginal Sales Created by
Advertising and Average Advertising-Expenditure
Levels for Brand B
37.5
District 10
30
District 9
Y
District 11
District 8
22.5
District 7
District 4
District 6
District 5
Y Change in sales dollars per 1,000 persons
per year for a 6 change in advertising dollars
per 1,000 persons per year
15
District 3
District 1
7.5
District 2
0
0
4.5
9
13.5
18
22.5
27
X
X Advertising dollars per 1,000 persons per
year
12
Advertising Response Functionfor Brand B
37.5
District 11
30
22.5
District 7
Sales Dollarsper 1,000 Persons per Year
District 10
District 5
District 1
15
District 6
District 8
District 4
District 9
7.5
District 3
District 2
0
0
9
18
27
4.5
13.5
22.5
Advertising Dollarsper 1,000 Persons per Year
13
ADBUDG Model Assumptions

• If advertising is cut to zero, brand share will
  decrease, but there is a floor (min), on how much
  share will fall from its initial value by the end
  of the period.
• If advertising is increased a great deal, say to
  something that could be called saturation, brand
  share will increase but there is a ceiling (max),
  on how much can be achieved by the end of one
  period.
• There is some advertising rate that will maintain
  initial share.
• An estimate can be made by data analysis or
  managerial judgement of the effect on share by
  the end of one period of a 20 increase in
  advertising over the maintenance rate.

14
InputCalibrating Sales Response to Advertising
Function
Max share at endwith saturation AD
Saturation advertising
End sharewith 20 AD
20 advertising
Share
Maintenance advertising
Initial Share
Zero advertising
Min share at end
One period
Time
15
Share Response vs Advertisingin 1 Period
Max
Share
Min
20
Maintenance
Advertising
Share Response min (max min)(adv)c / d
(adv)c
16
Effective Advertising

• adv media efficiency (t)
• copy effectiveness (t)
• adv dollars (t)

17
Adding Time Delays/Carryover

• In the absence of advertising, share would
  eventually decay to some long-run minimum value
  (possibly zero)
• The decay in one time period will be a constant
  fraction of the gap between current share and the
  long-run minimum, that is, decay is exponential
• Long run min lowest share possible in the
  long run
• Persistence fraction of the difference
  between long run min and amount of
  share retained with zero advertising

18
The Full Model

• Sharet Long Run Minimum (LRM)
• Persistence (Sharet1 LRM)
• Share Response

19
Advisor

• Goal Develop norms for levels of spending for
  the marketing communications mix (PS, TS and
  ADV).
• Relate norms to product, market, environmental
  characteristics.
• Use results to develop guidelines, auditing
  procedures for portfolios of products.

20
The ADVISOR Model Concept












NormRange




IndividualFirm Data
xyz Norm


































AdvisorModel


MarketingSpending























Product xyz
Customers
21
Media Decisions

• Requires
• 1. The objective function, which assigns a value
  (profit/effective exposures, etc.) to an
  insertion schedule.
• 2. The solution strategy (heuristic,
  optimization, etc.).
• 3. The constraints (budget, other).
• Main components of the model
• 1. The vehicle exposure measureused to measure
  the net reach, schedule exposure or GRPs.
• 2. Repetition effectwhat is the relative impact
  of successive exposures on the same person?
• 3. The forgetting effectwhat forgetting occurs
  between exposures and what is the nature of the
  decay?
• 4. The media option source effectwhat is the
  relative impact exposure from a given source?
• 5. The segmentation effectwho is exposed and
  what is the fraction of the audience that
  represents target segments?

22
Media Decisions (contd)
Approaches Linear Programming (Charnes Cooper
1960s) Mediac (Little Lodish)Includes market
segments, sales potentials, diminishing marginal
returns, forgetting, timing. Other Solem (Bimm
Millen)Admod (Aaker)Urbans Model Current
Models DSS/What-if tools(Maximize weighted sum
of reach and frequency)
23
Advertising Copy Analysis

• Response Measure
• Attention Persuasion
• Understanding Purchase
• Creative Quality Models
• Quality Weighted Sum/Product of Key
  Indicators
• Indicators include
• Page number Color
• RH/LH side Bleed
• Size Short/Long copy, etc.
• explains about 30 of variance
• Other Approaches ADCAD

24
Johnson Wax (Enhance) Map Conditioning vs. Clean
0.60
Sassoon
Agree
Br. Clean
Loreal
Clean
Fx.inst
Enh.Post
Tame
0.00
W.Balsam
Enhance
Herb.ess
Condition
Suave
F.Fawcett
0.60
0.00
1.00
1.00
Conditioning
Enhance Before use positioning Enh.Post
After use positioning I ideal brand
positioning
25
Johnson Wax (Enhance) Map Conditioning vs.
Effects
0.60
Loreal
Condition
Fx.inst
Sassoon
F.Fawcett
Effect onHair
Agree
Enhance
0.00
W.Balsam
Herb.ess
Br. Clean
Enh.Post
Tame
0.60
Suave
0.00
1.00
1.00
Conditioning
Enhance Before use positioning Enh.Post
After use positioning I ideal brand
positioning
Note The poor Enh.Post position suggests a need
to revise copy.
26
Typical Sequence of Steps in Ad Design

• Marketing Strategy
• Objective
• Target audience
• Advertising Strategy
• Link to marketing strategy
• Find unique brand opportunity

• Desired Consumer
• Response
• Beliefs, feelings, or behavior
• Creative strategy
• Primary Benefit
• Message/support
• Executional elements

27
ADCAD System Overview
Background information (problem definition
brand, competitor, product, and audience
characteristics)
Knowledge Base Published theory Published
empirical findings Cumulative agency experience
ADCAD Reasoning Process
Questions, definitions, and explanations
Market Assessment
Information from Marketing Research and Databases
Marketing Objectives
Target audience selection and other marketing
decisions
User
Advertising Objectives
Communication Approaches Positioning Message
Characteristics Benefits Message
arguments Comparisons Ad format Message
sidedness Educational techniques Presenter
Characteristics Message Emotion Attractiveness
Strength Similarity Direction Expertise M
ood Objectivity
Recommendations and rationale
What if sensitivity analysis
28
Past present product usage
Nature of product
Past present brand usage
Product usagerate
Marketing Objectives
Brandmarket share
Product life cycle stage
Currentbrand loyalty
Product purchase interval
New brand uses
Brand purchase motivation
Brand type
Product purchase motivation
Package visibility and recognition at POP
Decision involvement
Current brand recognition
Current top-of-mind awareness
Time of brand decision
Advertising29
29
Creative Strategy

• Presentation Techniques

Message processing motivation
Decision involvement
Decision involvement
Product knowledge
Consumer education level
Brand knowledge
Benefit Presentation
Message Sidedness
Performance evaluation ability
Benefit awareness
Product knowledge
Brand attitude
Benefit delivery
Benefit uniqueness
Conflicting information
Benefit importance
Advertising30
30
Marketing Objectives

• Stimulate primary demand
• Reinforce primary demand
• Stimulate brand trial
• Stimulate repeat purchase or loyalty
• Increase rate of brand usage
• Attract trier-rejectors

31
Advertising Objectives

• Create/increase brand recognition
• Create/increase top-of-mind awareness
• Communicate category image/mood/lifestyle
• Communicate brand characteristics
• Communicate brand image/mood/lifestyle
• Maintain brand recognition
• Maintain top-of-mind brand awareness
• Reinforce category beliefs
• Reinforce brand image/mood/lifestyle
• Communicate brand changes/enhancements
• Communicate new brand image/mood/lifestyle
• Communicate new brand uses

32
Format

• Demonstration of product in use or by analogy
• Demonstration of results of using the product
• Endorsement by celebrity/authority
• Testimonial by product user
• Customer interview
• Slice-of-life
• Problem-solution

• Fantasy, exaggeration, or surrealism
• Musical
• Comedy or satire
• Serious drama
• Vignette
• Unusual/extreme
• (Announcement)
• (Case-history)
• (Brand production/preparation)

33
Presenter Characteristics

• Species
• Age
• Sex
• Identity
• Recognizability
• Credibility (Expertise, Objectivity)
• Attraction (Likability, Similarity)

34
Presentation Techniques

• Package-closeup Familiar scenario
• Color illustration General humor
• Long package display Product humor
• Jingle/rhyme/slogan Incongruent elements
• Questions Animation/cartoon/rotoscope
• Brand name repetition Hidden-camera
• Personal reference Implicit conclusion
• Music and/or singing Explicit conclusion
• Visual/verbal integration Climax presentation
• Visual stimuli/imagery Anti-climax presentation
• Quantitative arguments Strong arguments
• Surrogate indicators Capture consumer emotions
• Front-end impact Message sign-off
• Short copy Short headline
• Nouns in headline

35
Emotion in Ad
Sanguine Phlegmatic Melancholic Choleric

• Anger then relief Convenience
• Relief Dullness then elation
• Fear then relaxation Elation
• Relaxation Boredom then excitement
• Fear then trust Excitement
• Trust Apprehension then flattery
• Moderate or high fear Flattery
• Disappointment the optimism Tension, discomfort,
  threat
• Optimism Surprise
• Annoyance then convenience Nostalgia

36
Recommended Benefits

• Guarantees or warranty
• Nutrition or health
• User satisfaction or loyalty
• New product or option
• New brand uses
• New solution
• (Dependability)
• (Self-expression)

• Price/economy
• Value
• Quality
• Challenge
• Enjoyment
• Safety
• Status
• Convenience

37
Marketing Objectives RuleExample in ADCAD

• Marketing Objectives (11 rules)
• IF product life cycle stage introductionAND inn
  ovation type discontinuousTHEN marketing
  objective stimulate primary demand
• IF brand usage noneTHEN marketing objective
  stimulate brand trial
• IF current brand usage someAND (brand
  switching high OR product usage rate
  fixed)THEN marketing objective stimulate
  repeat purchase/loyalty
• IF current brand usage someAND brand switching
  lowAND product usage rate variableTHEN marke
  ting objective increase rate of brand usage

38
Positioning Rule Examplein ADCAD

• Positioning (24 rules)
• IF objective convey brand image or reinforce
  brand imageAND brand purchase motivation
  social approvalAND brand usage visibility
  highTHEN possible benefit status (c.f.
  Holbrook Lehmann 1980)
• IF an objective convey brand information or
  change brand beliefsAND perceived differences
  between brands small or mediumAND perceived
  relative performance inferior or
  parityAND relative performance
  superiorAND current brand loyalty competitor
  loyalTHEN message comparison direct comparison
  against competition (Gorn Weinberg 1983)
• IF ad objective convey brand information or
  reinforce brand beliefsAND conflicting
  information likely AND education college or
  graduateAND product knowledge
  high AND involvement highTHEN message
  sidedness two-sided (McGuire Papageorgis 1961)

39
Message Characteristic Rule Example in ADCAD

• Message Characteristics (80 rules)
• IF ad objective increase top-of-mind
  awarenessTHEN technique jingle, rhyme, or
  slogan (MacLachland 1984)
• IF ad objective convey brand information or
  reinforce brand beliefsAND market share gt
  18.5AND brand switching highAND product type
  existingTHEN technique sign off (Stewart
  Furse 1986)
• IF ad objective convey brand information or
  change brand beliefsAND message processing
  motivation lowAND message processing ability
  lowTHEN ad format problem solution (Schwerin
  Newell 1981)

40
ADCAD Consultation Input

• Input Market Assessment
• Audience Characteristics
• Sex female Past brand usage noneProduct
  category usage frequent Product purchase
  interval shortPerceived brand differences
  small Benefit value important yesCurrent
  loyalty unfavorable brand switcher Time of
  brand decision at point of purchaseBrand
  purchase motivation self esteem, Package
  recognition low social approval
• Product-Class Characteristics
• Life cycle stage maturity Complexity
  lowPossible to demo. quality yes Competition
  heavy
• Brand/Competitor Characteristics
• Brand market share 2.0 Relative performance
  parity Brand price 1.40 Competitor price
  3.60Package visibility at purchase high Brand
  usage visible lowQuality visibility in ad
  high Quality visibility in use lowBenefit
  value unique yes Benefit value deliverable
  yesPhysical/health risks low

41
ADCAD Consultation Output
Output Marketing and Advertising
Objectives Market objective stimulate brand
trial Advertising objectives create/increase
brand recognition, communication brand
image/mood/lifestyle Output Communication
Approaches Positioning Featured benefit
quality (user replaced Message comparison none
recommend benefit value) Message sidedness
one-sidedBenefit claim extremely
positive Number of benefits few Message
Characteristics Format demonstration of
product in use, Technique closeup, color
illustrations, long package endoresement by
celebrity, vignette display, music, visual
stimuli/imagery, surrogate indicators of
performance, capture consumer emotions Presenter/P
rincipal Character Identity celebrity Sex
female Likability highIdentification in
message early Attraction high Recognizability
high Message Emotion Strength
high Direction positiveTone
apprehension/flattery Authenticity of portrayal
high
42
Limitations of ADCAD Knowledge Base

• Unclear specification of the context in which a
  rule is valid
• No clear estimate of the degree of uncertainty
• Much of the knowledge is not empirically verified
  in a scientific sense

43
AD Agency Reactions

• Creating an advertisement is like making an
  omeletteeasy to do but difficult to do well! Do
  you know any computers that can make an omelette?
• Computers and creatives? Forget it!!
• What do you think?