Transcript PPT - Advertising Principles

Conditions for use of advertising
principles
Adapted from J. Scott Armstrong
Updated on Sept 2014
Conditions R17
1
Learning Diary
The lectures follow an experiential learning experience.
To make this work properly:
1. Obtain a learning diary (paper). A 10 x 13 bound
diary is suggested.
2. Keep it up to date.
3. Take the learning diary with you to all class sessions.
4. For self-learners, use the diary to track your
learning progress for all of your learning activities.
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Objectives of this session
To understand and apply these principles and
techniques (not to convince you). Ask for clarification as
needed.
Set a goal for yourself on how many principles and
techniques you plan to use by the end of this session.
Even a goal of one will help you. Put this in your learning
diary now.
Note: We will discuss only some of the slides. When you go
through the lecture on your own, view it in “Slide Show” and
follow the experiential procedures.
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Procedure
Focus on understanding.
Record questions in your learning diary that will help
you to apply the techniques or principles, then,
after you decide which ones you want to apply, try
to answer these from the readings. If not clear, ask
others for help.
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Conditions
Principles are “condition/action statements”
So far, all advertising principles are related to conditions. There
are no “universal rules” for persuasive advertising.
You need to define the conditions before you decide what
actions to take.
The conditions section examines three main areas:
– Objectives
– Product
– Target market
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Can companies articulate their objectives?
68 entries in the print-ad Gold Key Awards were asked
to include a statement of objectives. None specified
the amount of change or the time period. (Hartley &
Patti 1988).
Of the 29 winners of EFFIES (for “effectiveness”) only
17% of the 167 objectives were measurable
(Moriarty 1996)
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Bose Wave radio ad:
What are the
objectives of this
ad?
Write your answer
in your learning
diary.
When you finish,
click here.
7
Setting objectives
Assume that you had to identify objectives for the Bose
Wave radio ad campaign. What techniques would
you use to identify objectives?
– Ask clients: Use Non-directive interviewing of key
people in the firm. This is perhaps the most
important technique you can learn at a business
school.
– Suggest to clients: Evidence-based approach to
objective setting.
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Guidelines for non-directive interviewing
1. Don’t evaluate what the interviewee says.
2. Let the interviewee know that you’re interested in what he
says and that you understand. Take notes, unless the replies
are highly sensitive.
3. Don’t interrupt.
4. Don’t bring in your own ideas during the interview.
5. Don’t worry about pauses in the conversation.
Take notes in your learning diary to ensure you can practice
these guidelines.
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Assume you are creating an ad for someone
offering consulting services for advertisers
Use NDI to determine what benefits your client might
have for an advertising group. In particular, look for a
Unique Selling Proposition.
Groups of three:
Client looking to be advertised
Interviewer
Silent observer (does the interviewer use NDI properly?)
Less than a 5-minute interview.
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Form tentative groups
We will be doing group exercises (such as developing a
“house ad” for your agency).
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Big Guys Case
Big Guys Case:
Short version
Provide your response
to this short (onepage) case in your
learning diary before
clicking for the next
slide.
You are the marketing manager of a manufacturing firm known as “Big Guys
Incorporated.” You are responsible for all marketing decisions and strategies, including
the pricing structure of the firm’s products.
Recently your company introduced a new, highly technical product, and you
have been asked to set the pricing strategy for this product. You are aware that your
main competitor, “Other Guys, Inc.,” intends to introduce a product that is very similar.
You should assume that the competitor’s product is as good as yours in every way that is
important to the market, and the market is the same for both products. Therefore, the
pricing strategy that you must formulate for your product should take into account this
competitive force.
You are essentially faced with the choice between two strategies.
Low price: keep your price low, which causes your competition to suffer a
substantial loss.
High price: choose a higher price that produces higher profit for your firm, but
which also allows the competition to prosper.
You then calculate the present value of the total profits expected for your firm over the
next 5 years, as well as for the competitors (“Other Guys”). You determine the following
results for both strategies:
Expected Profits over 5 Years
Firm
Low-price
strategy
High-price
strategy
Big Guys
$40 million
$80 million
Other Guys
$20 million
$120 million
At this point you must choose your strategy, either a low price or a high price.
Which strategy would you choose?
____Low Price
____High Price
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Source: “Competitor-oriented objectives: the Myth of Market Share,” Armstrong &
Green 2007.
Objective setting
You are starting a new ad agency. You tell your
assistant to write a set of objective for the agency. He
says that he does not know how to set objectives. You
are away on a business trip. Write a message to him
with operational steps for setting objectives (put this in
your diary).
When you finish, click here.
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Setting objectives: Evidence-based approach
Objectives should be
– Relevant
– Comprehensive
– Explicit
– Measurable (how much and by when)
– Challenging yet achievable
Such objectives increase motivation and improve performance,
as shown by studies involving over 100 different tasks with
over 40,000 participants in eight countries using laboratory
and field experiments (Locke & Latham 2002).
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Are you satisfied with the objectives stated by
Levi Strauss for its 501 jeans ad campaign?
1. maintain and increase brand share,
2. maintain the 501’s price premium,
3. introduce and establish the Pan-American advertising support
in Spain, and
4. achieve the above using TV advertising.
Write your answers in your diary, then click here for evidencebased answers.
#1 is not relevant
#2, 3 and 4 are strategies, not objectives
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Focus on relevant objectives
What would be the ultimate objectives for the Bose
Corporation?
To test, keep asking why until it makes no sense.
Do not confuse strategies with objectives
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“What do you believe would be the effect on
long-term profitability if a firm’s objective is to
achieve higher market share?”
Survey of 99 marketing faculty:
%
HIGHER
57
UNDECIDED
16
LOWER
27
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What should be the objectives of firms?
(n=170 marketing students)
Primary Purpose should be to be:
• better than its competitors
• the best that it can
%
29
71
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Design of the Big Guys Case
A clear and important conflict between
maximizing profits
and
beating the competitors
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Expected Profits Over Five Years
Low-Price Strategy
High-Price Strategy
$40 million
$80 million
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Results: No mention about competitor
% Less Profitable Decision
(n)
17.6
(17)
6.7
(15)
Technical Product
15.2
(33)
Weighted Average
14
Product Not Specified
Perfume
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Subjects given opportunity to beat others
Expected Profits Over Five Years
(millions of dollars)
Low Price Strategy
High Price
Strategy
Big Guys (Us)
40
80
Other Guys
20
160
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Effects of information about competitors
on the pricing decision
Information
Provided about
Competitor?
Type of
Information
Total
Decisions
Percent
Choosing
Less Profit
No
--
65
13.8
Yes
Beat
60
60.0
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Further assessment of pricing decision
20-year version reduced percentage of low-profit
decisions by 11%.
Still, one-third of the 97 subjects selected the less
profitable decision.
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Beat others:
“Two comparable but independent geographic regions”
“Over past five years . . .
Harry charged a high price
Louis charged a low price”
Same profit matrices used
Results in Percentage of unprofitable decisions
(n=sample size)
Pricing
Ex Post Pricing
Harm
Beat
33.9 (127)
60.0 (24)
39.5(76)
50.7 (69)
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Effects of management training
Exposure to
Formal
Management
Training
Low
Moderate
High
Percent
Less
Profitable
Decisions
37.7
46.3
54.5
Number of
decisions
236
227
88
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Follow-up questionnaire
Of those who mentioned their competitor, 83%
selected the less profitable decision.
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Effects of Information on decisions
Your Profit
Low Price
High Price
$40 Million
$80 Million
Competitor’s Profit
When only information about the profits of their own company is given,
most people select the high price, as economic theory would predict.
Low Price
High Price
Your Profit
$40 Million
$80 Million
Competitor’s Profit
$20 Million
$160 Million
When information about a competitor’s profit is added, most people
select the low price in order to win.
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What if we ran the following study?
1.
2.
3.
Select 20 firms in different industries
Assess the extent to which their goals are competitor-oriented
(market share)
Examine their profits over the next three decades
Assuming that the 20 firms differ greatly with respect to their
competitor-orientation, what would you predict?
Profits in firms with market share as a primary goal would be:
_____
_____
_____
_____
_____
much lower
lower
the same
higher
much higher
than in firms with profit-oriented goals.
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Competitiveness Scale (MS is Market Share)
Competitiveness
1=low
Pricing Goals*
Principal Goal
Collateral Goal
Number of Firms
11=high
1
High Profit
3
2
Profit
1
3
Stability
1
4
High Profit
Maintain MS*
2
5
High Profit
Increase MS
0
6
Profit
Maintain MS
4
7
Profit
Increase MS
0
8
Maintain MS
Profit
2
9
Increase MS
Profit
1
10
Maintain MS
4
11
Increase MS
2
* High profit means a return of investment of at least 15% after taxes
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Competitiveness and ROI by Firm
Competitiveness
Firm
DuPont
General Electric
Union Carbide
Alcoa
Kennecott
General Motors
Johns Manville
Standard Oil of N.J. (Exxon)
General Foods
US Steel (USX)
International Harvester
Kroger
Standard Oil of Indiana
Sears
Goodyear
Gulf
American Can
Swift
A&P
National Steel
Return on Investment (After Taxes)
1=low
11=high
1
1
1
2
3
4
4
6
6
6
6
8
8
9
10
10
10
10
11
11
1947-55
1956-64
1965-73
1974-82
25.9
21.4
19.2
13.8
16.0
26.0
14.9
16.0
12.2
10.3
8.9
12.1
10.4
5.4
13.3
12.6
11.6
6.9
13.0
12.1
15.5
9.4
9.1
4.2
8.9
13.2
4.6
7.8
11.4
6.0
4.6
6.1
5.4
8.5
7.0
8.9
5.2
2.4
7.8
6.0
8.0
6.7
6,3
4.2
8.2
12.0
7.6
7.6
8.9
3.5
4.0
4.9
6.4
6.4
5.7
7.12
4.8
3.3
4.2
5.1
6.9
7.9
6.6
5.5
3.2
6.3
4.9
8.0
7.4
3.4
-3.4
4.6
8.3
4.2
4.0
6.3
3.8
n.a.
-2.9
1.1
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Competitor-Oriented Firms Less Likely to Survive
(1955 to 1992)
Profit
Competitor
Oriented
Oriented
DuPont
Survived
General Electric
Goodyear
Union Carbide
A&P
Alcoa
Gulf
Did Not Survive
American Can
Swift
National Steel
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Effects of the Experience Curve Descriptions
Exposure to
Experience
Curve
Percent
Selecting Less
Profitable
Decision
Sample Size
No
44.5
137
Yes
58.8
97
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Prediction case on competition in advertising
57 subjects made “advertising spending decisions as
marketing managers of medium-sized manufacturers
in mature markets.” Cooperative decisions would
produce higher profits than competitive decisions.
(Prisoners’ Dilemma design)
What % chose the less profitable objective so they could
beat their competitor? (Corfman & Lehmann 1994)
78%
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Firms should maximize NPV subject to meeting
certain levels for their stakeholders’ objectives
Do not think about competitors when setting objectives.
• Do not use market share as an objective
• Do not try to be “number 1”
• Avoid sports and military analogies
• Do not use management science techniques that aim to
improve market share
• Experience curve
• Portfolio matrix method
*See competitor-oriented objective experiments and the followup study.
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Example: Irrelevant objectives
In 1990, when marketing a new dish soap Persil in the U.K., Lever’s
goal was to defeat P&G’s Fairy brand. They set a goal of 18 percent
market share.
Losses were substantial for both companies.
Conclusion: Objectives should be relevant to the organization’s
objectives
– Don’t care how bright or how catchy … nor how much general
interest. The key is ‘does it sell?’ What’s the profit of the ad
investment?” - L. Thomas of Lord and Thomas Agency (largest
U.S. advertising agency in 1905)
– Some advertising agencies base their fees on profits generated
from the campaign.
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Comprehensive objectives: Examples
Identify all stakeholders: stockholders, creditors,
employees, local community, customers
Customers’ experience: Subjects were presented with 3
identical jars of peanut butter. One brand was familiar and
the other two were unknown.
3/4 preferred the known brand (Hoyer & Brown 1990)
Distributors can benefit from advertising. When Kellogg
advertised its Nutri-Grain bars in the U.K. in 1997,
independent retailers asked if they could stock them.
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Explicit objectives
State objectives for each of the stakeholder groups
(e.g., ROI for stockholders/retailers; safety/satisfaction
for consumers)
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Measurable objectives
State quantitative goals
“Obtain an ROI of 20% on this advertising
investment”
State time deadlines
“This campaign is expected to produce an ROI of
20% in the first year”
Objectives should be ambitious but also attainable
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Propose objectives for the Bose Wave radio
campaign
Apply concepts on objective setting.
5 minutes for describing the objectives in your
learning diary.
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End of objectives section
The section on objectives is applicable to almost all
decision-making in firms.
Mission statements typically ignore the evidence-based
approach.
Applications within your organization?
Your family?
Read the section on “Objectives” in the PA chapter on
Conditions (pg. 15-20).
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Product-related Conditions
Advertisements should be deigned for the type of
product. This lecture examines some key conditions.
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Comparative advantage
In the 1950s, the ad agency head, Rosser Reeves, said:
“Our problem is that a client comes into my office
and throws two newly minted half dollars on my
desk, and says ‘Mine is the one on the left. You
prove it is better.’”
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Does your product have a comparative advantage?
Q: What branded products have no comparative
advantages for any customers?
• I expect that nearly all products have either real or
imagined benefits for some customers.
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Short written quiz. Do not sign your name & do
not yell out your answer.
1. A bat and a ball cost $1.10 in total. The bat costs a
dollar more than the ball. How much does the ball cost?
____
2. If it takes 5 machines 5 minutes to make 5 widgets,
how long would it take 100 machines to make 100
widgets?
____
3, In a lake, there is a patch of lily pads. Every day, the
patch doubles in size. If it takes 48 days for the patch to
cover the entire lake, how long will it take for the patch
to cover half of the lake? ____
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Results from “Bat & Ball” study
• Presented to 3,235 students at universities (e.g., MIT,
Princeton, Harvard, Carnegie Mellon), with no time limit.
– 17% correctly answered all three.
• Range from 50% at MIT to 5% at Michigan State
– 32% missed all three.
• Implications for advertising?
People can be led astray when their involvement is low (Frederick
2005). “The three questions that could land a job.”
Beware when you purchase low-involvement goods.
* The ball costs 5 cents, the machines will produce the widgets in 5
minutes, and the lake will be half covered in 47 days. Adprin.com
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Involvement
Involvement has been important in advertising since early 1900s.
Earlier terms included “short circuit” and “long circuit.” A 2011 on
this topic is, Thinking Fast and Thinking Slow.
Under “high-involvement” people think about an ad’s claims.
Under “low-involvement,” the processing is peripheral -- customers
are influenced by seemingly irrelevant considerations.
High-involvement products are
expensive, or ones that lead to
personal risks or to a concern about
how they are viewed by the consumers’ peer group,
when being considered for purchase.
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Identifying involvement
How would you code the following products on the high vs. low-involvement
scale? Code before clicking to see ratings by experts:
– The Bose Wave radio
Hi
– A BMW automobile
Hi
– Bud Lite beer
Lo
– Grey Goose vodka
Hi
– Perfume
Hi
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Utilitarian or hedonic products
• “Utilitarian” products (sometimes called “problemsolving” or “informational” products) offer utility.
• “Hedonic” products (sometimes referred to as
“transformational” or “feeling” products) offer
positive experiences.
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Coding “Utilitarian” or “Hedonic” products
How would you code the following products as to Utilitarian or Hedonic?
Code before clicking to see ratings by experts:
– The Bose Wave radio
U&H
– A BMW automobile
U&H
– Bud Lite
H
– Grey Goose
H
– Perfume
H&U
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What should you do when a product can be
coded in more than one way?
Coding depend upon the target market and the
situation.
When a product is coded as subject to both conditions,
advertisers can include some ads based on hedonic
appeals and other ads based on utilitarian appeals.
Related evidence suggests that you should not mix
these appeals in the same advertisements. See
Principle 3.1 in Persuasive Advertising.
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Commercial or pro-social products
• When people see an ad for a commercial product,
they are more wary than for an ad that relates to a
social cause.
• A pro-social ad, such as “Please help to reduce
hunger in Africa,” is less likely to lead to counterarguing.
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Conditions: “Pro-social products/ services”
“City officials want to
throw us in jail
because we give
tours and describe
things without a
license.”
Note: The Institute for Justice believes that this restriction violates 1st amendment freespeech rights.
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Search, experience, or credence
• Search: Can check features prior to purchase
• Experience: Can be evaluated only after use
• Credence: Cannot be properly evaluated even after
use
Automobiles are ___________
University educations are _____________
Movies are ___________
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Classification examples and answers
Automobiles are experience
University educations are credence
Movies are experience
Additional examples of each:
Search – checking that a car has four doors
Experience – the Bose Wave radio
Credence - vitamins
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Target market conditions
Who should be targeted?
(e.g., to reduce smoking)
For example, who is in the target market for Starbucks?
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What are some key ways by which
to classify target markets for a given product?
List at least two two ways in your learning diary to
classify interest groups so that it will guide your
advertising. Then click for our answers.
Interest groups: customers, local community,
employees, suppliers, investors, retailers
Familiarity: What do they need to know?
Attitudes and beliefs consistent with the product? (i.e.,
does the ad tell you how to do what you want to do?)
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Target markets for the same product often differ
Who should be targeted? For example, to reduce
smoking?
1) Smokers?
2) People who live with smokers?
3) People who do not like the smell of smoke and think
that it is dangerous for them, and who would like to
prohibit smoking?
You might want to target different campaigns for each
target market. To date, the most successful
approach seems to be in targeting the third group.
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When to do target market research
When there is uncertainty about decisions related to:
1. Size of the target market.
2. Characteristics of potential customers.
3. What customers need to know (and what they
know already).
4. When they will make decisions.
5. How you can reach them (media decisions).
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Characteristics of the target market
• intelligent?
• able to purchase?
• business agent or final consumer?
• old enough to make decisions?
• current customer?
• able to see and hear easily?
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Types of customer decision-makers
• Some are impulsive and look for immediate
gratification
• Others think about offers and plan ahead
• Thus, different appeals may work
– See the marshmallow study
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Target market’s current knowledge and beliefs
about the brand
Are the target market’s attitudes consistent with your
message? Advertising is easier when it reinforces current
attitudes: “Here’s how to get what you want.”
Is the product new or established? Is it only new to some of
the customers? What benefits are they seeking?
May need to do target market research.
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What is news to the target market?
“Newness” is important for an advertising campaign.
The campaign should change over the life cycle
(Chandy et al. 2001).
Customers need information when a product is new to
them, whereas emotional appeals are relatively more
effective when the product is well-known.
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Sources of target market information
• Experts (managers, manufacturers, retailers)
o Small samples (5 to 20)
• Customers
o Large probability samples (mail, phone, mall intercepts,
Internet)
o Start small and use sequential sampling.
o Report to client at each stage so client has control over
this phase.
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Reducing errors in surveys
1. Response error: Use alternative ways of asking the
same concept.
2. Non-response error: Obtain a high response rate by
enclosing small payments and sending reminders.
Estimate trends in responses to key questions over
waves.
3. Sampling error: Use large probability samples.
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Requirements for reporting on surveys
1. Full disclosure of what exactly was done, when, by
whom, and findings.
2. Pretesting: No one can get it right the first time.
3. Provide confidence intervals.
4. Demonstrate validity (e.g., ask different questions
to get at the same concept, and compare findings
from expert and consumer surveys).
5. See the guidelines for presenting results (PA
Appendix H, especially under “exhibits”).
6. Follow the procedures in Dillman, Don A.,Mail and
Internet Surveys. New York: John Wiley.
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Summary of conditions
Start each ad analysis by identifying conditions
– Objectives
– Product
– Target Market
– Changed animations
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Checklist for conditions
Objectives
Product
Target Market
• Relevant
• Comparative
advantage?
• What interest
groups?
• High- or lowinvolvement?
• Familiar with
product?
• Utilitarian or
hedonic?
• Consistent with
attitudes?
• Comprehensive
• Explicit and
challenging?
• Measurable?
• Pro-social?
• Search, experience or
credence?
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Assessing conditions for the Bose Wave Radio
• Ask two or more people to independently code the
conditions for the Bose Wave Radio.
– In some cases, products cannot be easily coded.
• Compare and discuss (parallel processing).
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Techniques Used in this Lecture
• Non-directive interviewing
• Objectives setting
• Survey research
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Develop action steps for applications
Write a plan in your learning diary for applying at least
one technique from this session.
Be explicit about what you will do.
Set a time deadline for completing the application.
Include this in your applications report for this course.
Describe your plan and, later, how it turned out.
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Advice on learning techniques
One study found that fewer than 10% of students were
successful in applying new knowledge.
•This went to 20% if they actively applied what they
were taught during a class session.
•It went to 90% when they worked with a learning
partner and coached each other.
Select techniques to apply
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Follow-up: Complete prior to next session
1. ___Go through this lecture on your own (It is on the
Educational Materials page)
2. ___Study Persuasive Advertising pages 14-24 and
record your reading time in your learning diary.
Highlight techniques that you want to apply in
yellow.
3. ___ Complete the End of Chapter Questions for
“Conditions” and check your answers against
Persuasive Advertising .
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