A medium through which sellers communicate with potential buyers, advertising constitutes a major component of an organization's marketing strategy, and is a $200 billion-a-year business in the United States. Traditional advertising includes
The field also encompasses other specialty marketing concepts, such as product promotions, infomercials, direct marketing, and Internet advertising. In fact, one of the newest trends has been interactive advertising, an electronic twist on database marketing, in which companies customize the content of their Internet sites in response to information about the person viewing the site.
The history of advertising is as old as business itself. In the American colonies, certain craftsmen—such as cobblers, tinsmiths, and gunsmiths—erected signs outside their homes depicting their trade. The signs were usually much larger than life so out-of-town visitors knew that the man with the four-foot-long wooden shoe hanging by his door could repair a worn sole.
Print advertising in the United States started in colonial-era newspapers and broadsheets as small, word-only ads, similar in concept to today's newspaper classified ads. Sometimes the ads would appear on the front page (a practice that has only recently been revived by USA Today). In time, the use of illustrations to actually show the products for sale began to appear.
At first the ads were created by the publisher of the newspaper as a service to the advertiser. After the U.S. Civil War, an idea that first emerged in the 1840s began to grow in popularity. Advertising agents, supposedly independent creators of ads that would go into newspapers, started acting as middlemen and marketing advisers between the newspapers and advertising merchants. The first heavily advertised products were patent medicines.
One of the first true agencies and the oldest one still in business is N.W. Ayer & Son. Ayer was founded in 1869 by Francis Wayland Ayer, who, like legions of admen after him, recognized the value of the illusion of permanence. Ayer named his agency after his father because it sounded as if the firm was older than it actually was. Ayer's father was not in the ad business, but his name looked good on the company letterhead.
The first true copywriter in advertising came along in 1880 when retailer John Wanamaker hired John E. Powers to write ads for the Grand Depot department stores in Philadelphia. Powers wrote simple ads, hated "catchy" headlines and illustrations, and once said that the key to advertising was to "have the attention of the reader. That means to be interesting. The next thing is to stick to the truth, and that means rectifying whatever's wrong in the merchant's business. If the truth isn't tellable, fix it so it is. That is about all there is to it."
Powers' intuitive assessment of what makes good advertising has remained constant throughout the past 130 years of modern advertising. Research repeatedly confirms that a "basic selling proposition" is the most important variable in determining an advertisement's success in attracting the attention and trust of buyers. If consumers can easily find the reasons why they should buy the product or service, are convinced the ad is truthful, and are motivated to act, the ad or commercial has served its purpose. One study found that an ad with good execution but an inferior selling proposition had a 60 percent likelihood to have an inferior persuasive score, while an ad with so-so execution but a superior selling proposition had a 75 percent likelihood of getting a high persuasive score.
Two of the strongest elements of a good selling proposition are a convincing introduction of a new product or adding of new features to an existing product, and a skillful differentiation between the advertised brand and competing brands. Advertisers who demonstrate that their product is "new and improved," or better than the competing brand sell product.
Advertising continues to undergo drastic changes in response to expanding media venues, changing consumer demographics, and new technology. In 1980 two-thirds of every marketing dollar went into traditional advertising. By 1990 that figure had shrunk to one-third. Another study says brand loyalty, so lovingly built by advertising since the 1950s, is declining. Some studies suggest that more than a third of the people who consider themselves brand loyalists today could pick another brand the next time they buy, maybe for as simple a reason as a 50-cents-off coupon.
The biggest change affecting advertising is that mass merchandising of consumer goods over network television, which was the way to go for the past 40 years, may no longer be effective. There is no longer just one mass market reached by three coast-to-coast TV networks. The choice of channels has evolved into 50-plus cable choices with more to come. This multiplicity of channels can fragment audience demographics along the lines of age, ethnicity, and other factors—a potential benefit for some advertisers, but a drawback for companies that still concentrate on the major broadcast networks. Even worse for television advertisers, VCRs and some newer television sets can help viewers avoid seeing commercials altogether.
But while some consumers are happily zapping the commercials they taped on "free TV," some of the same people are tuning in and buying from home-shopping stations, which offer nothing but commercials. Shop-at-home television, also being integrated with Internet shopping, is now a multibillion-dollar business in its own right.
Changes in advertising practices are being felt in local communities as well. The local television network affiliates also have to compete with low-power, low-cost cable stations. Daily newspapers are mounting campaigns to get people to read their news, rather than get all of it from television and radio. Trade and professional magazines, always affected when the industries they cover go into or recover from recessions, have only recently started to pick up sales. Only in the past year have advertising rates and space sales held steady or even increased a bit, indicating a slowing or end to an advertising recession.
Technology has created even more opportunities—or obstacles—to reaching the public. Advertising executives are trying to figure out what role advertising will play in reaching people who regularly use computers at work and home. This is a growing market of affluent, educated consumers willing to spend money, but until recently they have been reached only through traditional means. The big question is whether these consumers will accept advertising over the computers they use.
The most expensive advertising is network television commercials where 30-second spots can cost a vast amount of money, depending on which highly rated shows they appear. These commercials, designed to appeal to the large, multicultural, mass audience that supposedly watches television, are also the most in danger of dying according to advertising prognosticators. In the spring of 1994 Edwin L. Artzt, CEO of Procter & Gamble Co. (P&G), which spends more than $1 billion a year on television advertising, stunned advertising agency executives when he said that he was not sure advertising-supported television would be around much longer.
Artzt was making the point that the traditional network television viewership is slowly, but daily, dropping as the audience uses its remote control to sample cable offerings, or turn the set off in pursuit of other forms of entertainment. He predicted that mass market merchandisers such as P&G may one day return to a practice common in early television of totally sponsoring shows rather than buying 30-second commercials during the show. A modern-day model may be Hallmark Cards Inc., which occasionally sponsors shows that attract the same people who enjoy buying sentimental greeting cards.
Some ad-effectiveness research studies seem contradictory, particularly with television commercials. One recent study found that commercials with children are the most popular, with 61 percent of people surveyed saying they enjoyed them, followed by commercials with humor, and commercials with celebrities. At the bottom of the list of popularity were "endorsement from experts" (17 percent) and "product demonstrations" (17 percent). That research seems to fly in the face of other studies listing the "selling proposition" as the most important persuasive element in advertising. Another study released by a different organization found that 50 percent of television watchers do something other than watch television during commercial breaks. Only 22 percent of the people in this survey say they watch commercials closely and 26 percent say they are annoyed by commercials. The most faithful television commercial watchers are those older than 60 and those with the lowest incomes. These are the same two groups that most national television advertisers do not target.
Almost every city of any size either has its own local network affiliate or is reached by a neighboring city. Commercial time rates vary by size of the market (how many television viewing households can be reached by the signal) and how much of that market competing stations already have. Local stations sell commercials during network shows and local news broadcasts, and during syndicated shows that are generally grouped around the late afternoon news hour until network television begins. Most local television stations can themselves produce commercials for low-budget customers, although it is probably better for both advertiser and station to involve an ad agency with television commercial experience.
"Spot buys" are possible on several stations when dealing with a cable operator. For example, a local car dealer pushing four-wheel-drive pickup trucks with a target market of young men may show the same commercial on different cable stations carrying professional football, wrestling, and a Chuck Norris film festival. Like local network affiliates, cable television stations can sometimes produce commercials for local advertisers on a budget. Companies can also advertise on cable at the national level, where the average commercial slot is still considerably cheaper than on the national broadcast networks. Based on 1997 figures, advertising spending on the top 25 cable networks amounted to only one-third of that on the 6 national broadcast networks, even though the ad volume on cable was nearly ten times greater.
|The following are estimates for selected U.S. media. This list is not exhaustive; it accounts for less than half of all advertising spending in the United States.|
|Network TV||$15.2 billion|
|Spot TV||$14.5 billion|
|Yellow pages||$10.8 billion|
|Cable networks||$5.8 billion|
|National radio||$2.5 billion|
|Outdoor ads||$1.5 billion|
While advertising agencies sometimes disdain it, radio is a favorite of advertisers and the public alike. Once thought to be slowly dying, AM radio made a dramatic comeback in the 1990s as regulatory reform allowed the growth of corporate chains and the resulting shakeout eliminated some of the less profitable stations. The FM side of the business was also an important part of the consolidation trend. One national rating bureau found that 96 percent of Americans over the age of 12 listen to the radio daily. The same study found that from the mid-1980s to the mid-1990s the amount of time spent listening to radio rose almost 2 hours to 24 hours a week. Spurred by these solid demographics, by the late 1990s spending on radio advertising had nearly tripled from mid1980s levels, reaching $15 billion per year.
Most of radio's ad dollars are spent locally with just $1 billion a year spent on network radio buys. The most expensive buys are those scheduled around "drive time" in the morning and evening when people are listening on their way to and from work.
Radio ad rates are generally considered inexpensive compared to print since they can be targeted by type of audience that listens to the station. Rates vary depending on size of the market reached, which is determined both by the power of the station's transmitter and the popularity of its talk or music format.
One recent study touted by the industry demonstrated the power of radio to extend the effect of television campaigns at much lower costs. The study found that radio "transfers and magnifies" images first seen on television when the listener hears a similar ad on radio. The researchers found that 60 percent of the people who listened to a radio spot made a connection with a similar-sounding television commercial. Devout radio listeners were 12 percent more likely to "transfer image" to the intended television spot.
Except for USA Today, the Wall Street Journal, and Investors Business Daily, there are few national daily publications that try to reach all newspaper readers. Almost all newspaper advertising is either for local merchants and professionals (local department stores and accountants at tax time) or for national products and services that are available through a local source (airline tickets, grocery stores).
Before television, newspapers and magazines shared media dominance. Throughout the early 1990s, however, newspapers have seen slack ad rates and declining readership. Today, newspapers account for less than 10 percent of U.S. advertising expenditures.
Taking a cue from USA Today, most local newspapers have been fighting back by revamping their design to appeal to younger readers. They are adding color and more features that they think will appeal to the 20-somethings.
Newspapers have also been pursuing their own studies to prove that newspapers deliver the buying public, even if the overall subscription numbers are down. One study showed a 50 percent increase in the sale of a popular brand of cookie after a one-third page, color ad ran for a month in one newspaper. Over an I1-week study period, the sale of the cookie was up 38 percent. Sales for a particular brand of cat food jumped 11 percent after its ad ran.
A survey conducted by a Canadian newspaper chain reconfirmed what advertising agencies have been telling their clients for years: bigger is good and with color is even better. The study found a half-page ad was 80 percent as effective in attracting attention as a full-page ad. A quarter-page ad was 60 percent as effective as a full-page ad. Using a second color boosted attention, but running full-color ads did not have a major effect in attracting more readers. That finding was a surprise to publishers who have been investing in color presses. Not surprisingly, awareness of individual ads decreased as the number of ads on the page increased. The only research finding that may surprise advertisers is that there appeared to be no effect on the placement of ads on the right or left page or above or below the fold. The standing belief is that ads placed on the right side are noticed more by readers.
The study's encouraging finding for newspaper publishers was that readers who noticed the ads were 77 percent more likely to buy advertised products compared to those who had not seen the ads. The "intent to purchase" was somewhat higher among ad readers, which implies that shoppers in the market for certain products search out and study ads to help them make a purchase.
According to the Newspaper Association of America, more than $10 billion in advertising funds available to local retailers each year goes unused. That money is for cooperative ("co-op") campaigns that manufacturers of products set aside to reimburse retailers who mention their specific products in local ads. Many manufacturers will allocate between 3 and 10 percent of a retailer's dollar purchases to co-op advertising that the retailer can draw against to help promote the local store and the manufacturer's product line.
Retailers do not always use the money because they do not always know it is there, or they do not wish to keep up with the manufacturer's bookkeeping requests to prove that the money was spent advertising its product line. The Newspaper Association suggested that most newspaper sales representatives would be happy to help with the paperwork since it might mean another sale.
Billboard advertising always seems to be under attack by one activist group or another. The main objections are that they distract drivers, frequently advertise controversial products such as liquor and cigarettes, and detract from the landscape.
Billboards work, however, if the execution is unusual and the message simple. One study found that highway billboards were remembered much more often than those on surface streets; that those on the right side of the highway were seen more than those on the left; and that black and white signs drew just as much attention as color. Simple messages were recalled best. Billboards with fewer than seven words were most often remembered.
It may sound like a good idea to fax a personalized ad to a business, but it may be violating a 1992 Federal Communications Commission ban on unsolicited fax advertising. Still, many companies continue the practice, and enforcement has been lax. The FCC rule says fax advertisers should stop if the company receiving their faxes sends a letter requesting that the unsolicited faxes stop.
The hodgepodge of half-hour infomercials—from beef-jerky makers to wonder car polishes to seminars on finding true love—work, and are a growing part of advertising. In 1994 there were some 200 infomercials playing on cable television, accounting for about one-quarter of the programming time on cable systems. One trade association estimates consumers have bought nearly $1 billion worth of goods and services advertised on these programs.
Infomercial industry executives predict that the medium's content will grow in sophistication as cable television stations proliferate. The executives believe there will be channels that may show nothing but infomercials touting cars, boats, computers, or other high-ticket items. Production values will no doubt improve as consumers will expect broadcast quality television commercials that sell them expensive items.
The Internet is advertising's underdeveloped frontier. While already there exist Internet-only ad agencies, there is no widespread agreement on what the best methods of Internet advertising are or what their effectiveness is.
Early attempts to advertise on the Internet have sometimes met with angry resistance from Internet users, some of whom resent the commercialization of the erstwhile academic network. Consumers on the Internet have been especially rankled by unsolicited broadcast e-mail messages, unaffectionately known as "spam." As with unsolicited faxes, this sort of e-mail can have legal implications when consumers specifically request to be removed from an advertiser's list.
The ubiquitous Internet banner ads, often appearing at the top of a web page with a link to the sponsor's site, have been less controversial, but their success rate is questionable. A 1998 study reported that most banner advertisers were unhappy with the effectiveness of such ads. Other forms of Internet-related advertising include (1) search-engine submission, typically a free service that allows advertisers' sites to be indexed on popular search engines; (2) cross-media promotion, also called offline promotion, such as when a magazine ad refers to a Web site; and (3) solicited e-mail, which requires potential customers to join a mailing list to receive periodic promotions.
Beyond assessing how much in sales an ad generates—which is not as simple as it sounds—there are many measures of whether advertising is serving its intended purpose. Traditional gauges include so-called copy testing, which evaluates how well consumers remember an ad, whether they find it persuasive, what image of the product consumers come away with, and so forth.
These all seem like worthy qualities to measure, but there is, in fact, an ongoing debate within academic and professional circles over what constitutes advertising effectiveness and how it might be measured. Many managers believe that an ineffective advertising campaign simply won't return a meaningful sales increase, but there is evidence that certain ads have actually diminished sales. When segments of the public find an ad irritating or when ads deliberately or inadvertently raise negative concerns, consumers may avoid the advertiser's product or service. In addition, some ads may draw attention to an entire product category, thereby benefiting competitors as much—or more—than the advertiser.
There are other unexpected consequences in advertising as well. Consider these real-life research findings: it is seemingly possible for an advertising campaign to significantly increase the public's awareness of a product without delivering a commensurate boost in sales; conversely, it appears that a campaign can add little to the public's knowledge, yet provoke a jump in sales. This surprising result is not the norm, but extensive professional literature on advertising effectiveness suggests some of the possible causes:
Such issues complicate research into advertising effectiveness, but they do not mean that any given ad is a stab in the dark. Sophisticated advertisers always test market a new ad (or even a few variations of a potential new ad) with several different audiences to gain insights on how well the message will be received. This fact underscores that measuring effectiveness need not wait until the ad is formally launched, reducing the likelihood that an ad will flop once major media time or space is purchased.
——. Among measures of effectiveness, whether before or after an ad is run, those related to persuasion tend to be most valued. This relates in part to the basic selling proposition: if it's a strong proposition, the ad is more likely to persuade; if the underlying proposition is weak, no amount of creativity in the execution will change people's minds. According to some advertising veterans, the ability to shift consumer attitudes far outweighs the benefits of simple name recognition and similar effects, particularly when the advertising objective is short term.
A study of companies by the North American Advertising Agency Network found that the clients of advertising agencies believe agency efficiency in carrying out advertiser orders is more valuable than "creativity." Clients prefer agencies that come in on time and on budget rather than those who spend more time and money trying to think of new ways to dazzle the customer.
The same study found that advertisers are continuing to shift to the idea that agencies should be compensated by a negotiated fee or for hours billed. Until recent years, agencies had traditionally tacked a 15 percent commission on their media purchases for their major means of compensation. Advertisers have been cutting that commission as a cost-savings measure. Large agencies, faced with a fragmented marketplace that no longer produces large commissions from huge network television buys, agree. The years-old debate on how much advertising is worth continues.
"Breaking through the clutter" is the standard term advertising agencies use when trying to sell their clients on new campaigns. The "clutter," of course, is all the other advertisements competing for consumers' attention. Trying to find a technique that will make potential buyers pay attention is a constantly changing process. Sometimes agencies find the key is to make fun of the commercials themselves—which is how the Energizer bunny was born in the 1980s. The bunny would interrupt fake commercials with its selling proposition that its power allowed it to keep "going and going and going.…"
In recent years creativity has reigned as agencies have searched for ways to make people look and listen. Much advertising now uses computer-generated images in order to attract attention. Today, television features tango-dancing gas pumps instead of a pitchman explaining how his brand of gasoline is the best. At the opposite end of the technology scale, but still high on the creative meter, is the frame-by-frame process of claymation where clay raisins were given personalities to sell dried grapes.
Creativity has its downside. One ill-conceived style in print and television ads used multiple hard-to-read typefaces on the theory that the unusual look would attract attention. On television, the typefaces were put in motion, scrolling in all directions across the screen, sometimes too fast to read. The result was the opposite of what creative directors intended. One study showed that only 11 percent of magazine readers bothered to read the jumbled copy of a cosmetics ad, which was 19 percent below the average for the category. A supposedly stylish athletic shoe ad drew only 12 percent of the potential magazine readers, 43 percent below what that category normally attracts. Such results demonstrate that while creativity attracts attention, the majority of consumers will ignore ads that are difficult to listen to, view, or read.
No matter how creative advertising is, most advertising agencies and manufacturers agree that the consuming public falls into what is commonly called "the 80-20" rule. This theory, which seems to crop up no matter what is being sold, says that 80 percent of the product will be bought by 20 percent of the potential consumers. The other 80 percent of buyers fall into other categories. They may sample products with the potential of establishing a brand loyalty, already maintain loyalty to another brand, or buy whatever is on sale or discounted by use of a special offer such as a coupon.
The figures might vary by the product being sold, but a core of loyal customers will always buy their favorite product unless its manufacturer drives them away by drastically changing it or raising the price too much. To that end, much advertising—particularly for consumable products—is designed to attract people who will become brand loyalists. Advertisers know much of this money is wasted on the majority of people, but they believe nothing else will establish brand loyalty like frequent advertising.
Once this brand loyalty is established, manufacturers often keep it by shifting some advertising dollars into promotion dollars. Known customers might be offered discounts or direct mail coupons for increased purchases. Advertising's real effect on brand loyalty itself is more difficult to measure. Some studies suggest that brand loyalists pay even more attention to advertising once they have bought because they are reassuring themselves that they made the right decision. This is particularly true of high-ticket items such as cars, kitchen appliances, and computers.
Finding consumers who want more information is a trend advertisers believe will allow them to better target some of their ad dollars, rather than try to hit everyone in the mass market. The process is called "self-selection," where potential buyers notice some advertising and then request more information. Requesting that information indicates interest, which allows the advertiser to identify a potential customer who might need more persuasive communications than is possible in early advertising. This is the sort of advertising push that results when a potential buyer writes or calls for more information such as an explanatory videotape. For instance, a car buyer who requests the full-color brochure after seeing a magazine ad is likely to be studying cars in anticipation of buying one soon.
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