The response to advertising

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The response to advertising

• Week 9 7 March 2003

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Methods for measuring advertising response

• Qualitative research
• Focus group, personal interview
• Little relevance
• Experiments
• Are they realistic?
• Surveys
• More value when data are collected at intervals
• Links with demographic characteristics
• Consumer panel data
• Change over time (panellists diary, home scan)
• Econometric analysis
• Data fusion
• Combining data from two sources using common
  elements, e.g. purchase with TV viewing through
  consumer viewing habits

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IRI BehaviorScan

• Cable tv checkout scanner very accurate
  measure of response to advertising
• IRI BehaviorScan in the 1980s
• Poor off-air TV transmission and relevance of
  cable TV
• IRI can control (switch) the advertisement for
  each individual (consenting) household
• Local stores are equipped with IRI scanners
• Purchases are associated with households through
  identification card
• Marketing mix variables (prices, deals) are also
  recorded
• GFK Behaviorscan in Europe (France and Germany)

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Limits of IRI BehaviorScan

• Household owning more than a TV set (one not
  scanned)
• Out of town shopping
• Is the isolated community representative of the
  US?
• Tests limited to commercially advantageous
  studies and big brands (they are expensive)
• Trade response is not taken into account
  (retailers stock advertised goods)
• Competitor response is not considered
• There is no market validation ads that are
  perceived as weak do not enter the nationwide
  market

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Nielsen home scan

• Home scanned panels
• National samples
• No experimentation
• Link with television viewing data

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Store level data

• Sales extracted from checkout data
• Aggregate sales by brand and variety
• Nielsen ScanTrack
• IRI Infoscan

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Sales response
Spontaneous or assisted advertising recall
Advertising effort (expenditure, pressure)
?
Advertising awareness
Purchase
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Effects of advertising

• Direct effects
• Price support
• Sales support
• Indirect effects
• Increases consumption from stock, future purchase
• Increases retailer demand, opportunity to
  purchase, sales
• Improves targeting, reducing costs
• Restrains market entry by competitors, which may
  raise sales and margins

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Price support

• Limited supply
• Advertising raises price by raising demand
• Unconstrained supply
• Increased acceptability of brand price
• Price premia due to brand name

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Reassuringly expensive
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From the web site

• Stella Artois has used the same Reassuringly
  Expensive slogan for over 20 years but in that
  time only five adverts have been made.

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how much does it cost?

• On blind tests Stella is not significantly
  preferred
• In Britain it is premium priced
• The price premium is estimated at 7.5 (Baker,
  1993)
• Larger turnover finances the adspend

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Sales support

• In mature markets competition is on market
  shares, not total product sales
• Advertising can be necessary just to defend a
  companys own market share
• Advertising has usually a modest impact (brand
  loyalty)
• Some numbers from IRI tests (293 cases)
• Considering a 50-100 increase in adspend, 49 of
  the companies experienced an increase in the
  volume of sales (23 on average)
• Only in 20 of the tests the increase in adspend
  was justified by a sufficient increase in profits
• Half of the tests had no effects ineffective
  ads? Competitors reaction?

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Increasing consumption from stock

• Goods kept in home (cereals, canned soups, tea)
• Increased consumption leads to further sales

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Supporting distribution

• It is rare that loyalty leads to refusing an
  alternative when favoured brand is unavailable
• Availability on shelf
• Distribution increases are reported in relation
  to advertising effects

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Supporting promotions

• Synergy between ads and promotions joint effect
  is larger than the simple sum of the two effects
• Strong effects of in-store advertising
• Point-of-sale discounts (coupons) act
  sinergistically with advertising

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Improving targeting

• Communicating with the right groups and
  discouraging those who are unsuited to the
  product will reduce costs (e.g. enquiries to
  staff)
• Especially for expensive goods and for elite
  stores

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Restraining market entry

• Big brands advertise more, but maybe spend a
  lower proportion of sales profits
• Economies of scale
• Customer retention
• Trade commission (e.g. US) see excessive
  advertising as a restraint of trade

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Advertising and price elasticity

• Despite higher prices, heavy advertising seems to
  lead to lower price elasticity, especially for
  fast moving consumer goods
• Hamilton et al. article (1997)

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Advertising and consumer response

• Unique Selling Proposition (USP) a marketing
  claim based upon a distinctive product feature or
  unique element in the marketing mix
• A good ad is one that successfully implants
  knowledge about USP (Reeves, 1961)
• Too cognitive approach?
• For fmcg there are just one or two salient
  attributes

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Effect sequential models AIDA (19th Century)
Attention
Interest
Desire
Action
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Lavidge and Steiner (1961)
Awareness
Knowledge
Liking
Preference
Conviction
Purchase
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DAGMAR model(Colley, 1961)
Awareness
Comprehension
Conviction
Action
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Conversion and reinforcement

• Problems in sequential models
• They are not appropriate for repetitive
  advertising of established brands
• Not appropriate for repeat purchase and full
  awareness
• Ehrenberg theory (1974)
• Advertising to retain consumers
• Quality to retain consumers

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Ehrenberg ATR model
Awareness
Before purchase
Trial
Advertising
Reinforcement
After purchase
Repeat purchase
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Leaking bucket approach

• Customers do switch brand, so a brand can attract
  non-customers to replace the ones it is losing
• Offensive function of advertising
• Defensive function of advertising

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Rossiter and Percy (1997)Buyer response sequence
Exposure
Processing
Involvement
Communication effects in relation to brand
positioning
Target audience action
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Involvement and information processing

• Different levels of involvement lead to a
  different way in processing ads
• High involvement decisions are more consistent
  with sequential models
• Low involvement purchases are more related to
  reinforcement models

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Batra and Ray classification

• Three types of response to advertising
• Low involvement process, the ad affects brand
  salience and increase purchase disposition (no
  prior change in attitudes)
• High involvement process following the Theory of
  Planned Behaviour (belief, attitudes, intentions,
  actions)
• High involvement sequence (dissonance-attribution)
  , behaviour first change and then there are
  changes in attitudes and beliefs

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Elaboration-likelihood model

• Petty and Cacioppo (1983,1985)
• Persuasion is more likely to occur when people
  need to review the arguments (supporting or
  contrasting them) rather than with ready-made
  arguments
• Central route to persuasion
• Elaboration
• Long-lived and resistant changes
• Predictive of future behaviour
• Peripheral route
• Association of feelings and response to cues
• No arguments generated (future change more
  likely)
• Involvement increases elaboration

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The five communication objectives (Rossiter
Percy)
Category need
Brand awareness
Brand attitude
Advertising
Brand purchase intention
Purchase facilitation
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Category need

• Arousing need
• Connections between audience values and product
  category
• Good association also with the brand

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Brand awareness

• Recall or recognition?
• Recall category brand
• Recognition brand category
• It depends on purchasing context
• Recall products bought via intermediaries
  Courier service, radio stations
• Recognition the visual part is relevant
  (supermarket) Packaged foods (conjoint
  analysis)

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Brand attitude

• Some brand names are well known despite a bad
  attitude towards them
• Better attitudes may be achieved by advertising
  how the product meets specific needs

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Purchase intention

• Advertising can generate a purchase intention by
  instructing consumers how to buy
• E.g. times and places which can become cues to
  buy when the consumer finds himself in such
  situation

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Purchase facilitation

• How much does it cost?
• Where can you buy it? (Store)
• How can I pay? (e.g. diluted payments, on-line
  purchase)

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Securing attention

• Not only grabbing attention, but also remaining
  on the subject
• Arousal
• Relevant information
• Attitude change

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Image meaning and culture

• Framing (schemata, heuristics) are important
• Music, communication ads as art
• Advertising is culturally (socially) situated
• Long-lived shared meanings
• Transnational advertising must rely on basic
  ideas to be cross-cultural

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Ads classification

• Credibility
• Stimulation
• Taste
• Empathy
• Clarity
• Attracting attention
• Involving

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FCB classification grid(Foote, Coone, Belding)
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Percy-Rossiter grid
Type of motivation
Informational (-)
Transformational ()
Low involvement
Type of decision
High involvement
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Sales effects over time
S Shaped (unfamiliar products)
Sales
Concave (mature brands)
Threshold frequency
0
1
2
3
Number of exposures
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Implication of scheduling and media

• If the curve is concave, burst advertising
  strategy is questionable
• Burst is appropriate for new products (S-shape?)
• It is more effective to spread adspend across
  media (more coverage, fewer exposure, defer
  saturation)
• Media multiplier effect
• However, it can be more expensive
• Message change to overcome habituation

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Effects in the longer term

• 90 of the extra sales tend to occur in the first
  3-9 months of the advertisement
• 50 are made in the first 1-3 months

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Responsiveness to advertising

• Which brands are worth to be advertised?
• Size of the user group
• Large number of purchase occasions
• Leading brands
• Frequently purchased goods
• Proportionate loyalty
• Advertising in different loyalty segments
  (especially those at 50-70 level)
• New products
• Novelty effects
• Flexibility of total category consumption
• Food categories can gain against others (e.g.
  fish/meat)

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Ads or sales promotion?

• Discounts favour
• Stock/staff management
• Better returns than media advertising
• Media advertising favour
• Extra sales
• In the short or long term?