Advertising
Advertising has been defined as “Any paid form of non-personal
communication about an organization, product, service, or idea by an
identified sponsor” (Alexander 1965, 9). Advertising intrudes into our lives
and is not always welcome. Some scholars suspect that we are being
manipulated by dark arts (e.g., Packard 1957). This advertising research
paper examines current practice from three perspectives: the advertiser,
the consumer, and society at large.
Advertisers know, roughly, what they want to achieve and seek to do so
efficiently. A situation vacant may be read by 1,000 people but if the firm
finds one successful candidate and that was the cheapest solution, then
the “waste” of the other 999 is immaterial. That is why the most often
quoted adage about advertising, “Half the money I spend on advertising is
wasted; the trouble is, I don’t know which half”. To understand what the
advertiser can expect for the money leads to the exploration of how
advertising works, how ad performance can and should be measured, and
how to improve that performance.
We then take the perspective of the consumer. Advertising provides some
benefits to consumers, but some argue that it also encourages them to
spend money on products they do not need and/or inflates the prices they
have to pay. Some also argue that advertising is responsible for excessive
consumption of, e.g., foods high in sugars, salts, and fats or alcohol by
young people. In short, advertising produces counter-productive behaviour
from the consumer’s point of view, or so it is alleged. How do the positives
compare with the negatives?
Finally, we take the perspective of society as a whole and the extent to
which advertising is a benefit or a curse. Governments are now among the
largest spenders on advertising, which makes it harder for them to be
generally hostile to the techniques, and yet they have to deal with
malpractice, typically through regulation. This can take three forms: self-
regulation by the industry, legal regulation, and “co-regulation” which has
become fashionable (e.g., for broadcast media in the UK) as a compromise
between the two.
Although this advertising research paper is mostly concerned with
marketing communications for brands by for-profit companies, advertising
is also important for individuals, notably classified, and not-for-profit
organizations such as charities and governments.
History of Advertising
Since the dawn of time, sellers have been seeking to attract attention and
present their wares in ways that encourage sales. A recent classified ad
for a second-hand bicycle is substantively the same as an ad for a Roman
chariot 2,000 years ago. Media have changed, notably broadcast and
digital, and our understanding of how ads work has changed, but
advertising itself has changed much less. Advertising has always provided
information, used emotional appeals to sell to us, and reminded us. But it
used to be less pervasive than it is today because of the limited media
and the limited number of goods then available for trading (Norris 1980).
Advertising agencies have existed since at least the eighteenth century
but their formal standing as experts’ dates from the mid-nineteenth
century in developed markets and the late twentieth century in the late
developers. These “full service” agencies offered the complete range of
advertising services to advertisers while at the same time being paid by
the media carrying the ads. Competitive pressures have eroded the fixed
commission system, with advertisers now demanding, in effect, control of
the media discounts and paying the agencies a mix of lower rates of
commission, fees, and payment by results (Lace 2000). With increasing
media complexity in the late twentieth century, most agencies have split
into “creative” and “media-buying” agencies with their minor roles
covered by other specialist agencies, e.g., public relations and events
(Lears 1994).
The importance of small start-up agencies is as great as it ever was, but
globalization has also promoted mergers of the larger, more mature,
agencies into perhaps half a dozen multinationals led by WPP and
Omnicom, followed by a second tier of worldwide groups and partnerships
(Lears 1994). But the turnover of talented individuals and the avoidance
of brand conflicts have maintained stability of the sectors, in the UK at
least but probably worldwide too.
By 2000, an estimated US$233 billion was spent on local and national
advertising, while sales promotion expenditures increased to more than
US$250 billion (Belch & Belch 2001). This is significant because with
classic packaged goods, or fast-moving consumer goods, advertisers have
shifted budgets from advertising to promotions, but the slack has mostly
been taken up by new advertisers such as financial services and
government. As a share of world GDP, however, advertising appears to
have grown (WARC 2006).
Measurement techniques have become more sophisticated partly in
response to advertiser demands to see quantified results and partly as
advertisers and their agencies have taken a more scientific approach to
understanding how advertising works (e.g., Pedrick & Zufryden 1991).
Content has increased in variety with more entertainment and appeals to
emotion, but this has largely been driven by the wish to exploit new
media. Perceptions of different advertising styles may be seen as
evolutionary by those involved but the changes in style also reflect the
fashion cycles that are necessary to maintain the appearance of novelty
(Fox 1984; for a fuller account of the history of advertising see McDonald
& Scott 2007).
The Advertiser’s Perspective
This section follows the process of commissioning advertising through to
assessing the results. In practice, the process is rarely as tidy as shown
here: circumstances dictate changes in decisions and choices made in the
“wrong” sequence. Specifically, we look at determining goals and briefing
agencies, agreeing the budget, choosing and scheduling media, pre-
testing (or “copy testing”) the campaign before it runs, and subsequent
evaluation.
Determining Goals and Briefing Agencies
In recent years, the brief from client to agency setting out the
requirements has been increasingly formalized (IPA 2003). Ideally the
client should have already resolved with the advertiser’s other senior
management how, preferably in quantified terms, the advertising could
help achieve the corporate goals and roughly what budget would be
available for the purpose. Experience from previous campaigns plays a
major part in the assessment. In other words, what do we want from the
advertising versus what expenditure, and is that value for money
credible?
The briefing itself is an interactive process as the agency brings its own
experience and negotiating skills, typically, to making the goals easier to
achieve and the budget bigger. What should emerge from the process is a
clear identification of the target market and the changes the advertising
should achieve. These may be indicated by changes in intermediate
measures such as awareness or attitudes to the brand, or changes in
behavioural measures such as sales or penetration, i.e., the percentage of
the market trying the brand. These goals, ideally, should be few and
quantified and subsequently used for pre- and post-testing to identify
achieved performance. That rarely happens in practice (Ambler &
Goldstein 2003).
But the brief is a great deal more than establishing the benchmarks for
later performance evaluation. It needs to motivate and excite the
creatives (art and copy) to produce brilliantly productive work (Fletcher
1997). The brief should not describe the means, i.e., what the ad should
contain, but the end, i.e., challenge the agency with what the campaign
should achieve. Creatives love tight briefs and hate open-ended ones; one
cannot solve a problem that is not there. A tight brief also proscribes what
an ad must not do, e.g., use young people when advertising a brand of
alcohol.
Agreeing The Budget
Apart from the horse trading mentioned above, there is no shortage of
more or less scientific approaches to budget setting. Practitioners like to
claim that they set the budget to maximize projected return on
investment (ROI). This plays well with peers and their financial colleagues
but it is a myth, and even if it could be done ROI is the wrong financial
objective (Ambler & Roberts 2006).
One reason it cannot be done is that the creative content (copy) has not,
at this stage, been decided and nor have the media. The copy and the
media are the key factors in ad performance and estimating not only what
the advertising will achieve but the counterfactual (what would have
happened without the advertising) calls for considerable confidence.
Research (e.g., Low & Mohr 1999) indicates that formal models are rarely
used to identify profit-maximizing budgets but when they are, they are
simply treated as one input among many (West 1995).
More firms than would admit to it practice the “affordable” method, i.e.,
the money the company can spend without jeopardizing a respectable
profit for the year. Two other methods remain popular: maintaining a
constant advertising to sales ratio and doing much the same as the
previous year (March et al. 1989). Newlove & Arrow (1962) argued in
favour of constant ratios if elasticities and margins are stable.
A better theoretical approach recognizes that ads work in two stages: they
change brand equity (what is in consumer heads) and brand equity, later,
changes consumer behaviour. That may imply that the goals for the ad
campaign should be set by changes in brand equity (intermediate) metrics
and the budget made available in those terms. In practice few advertisers
formalize brand equity measurement in that way. Furthermore, the
correlation between intermediate and behavioural metrics can be poor so
that clients typically prefer the latter, e.g., sales or penetration or profit,
where advertising can measurably deliver those goals.
Choosing And Scheduling Media
Media neutral planning (MNP; Saunders 2004) waxed and waned in the UK
rather rapidly in the early 2000s. It shared with the more substantive
integrated marketing communications (IMC; Schultz 1993) the idea that
communications should be planned from the consumer’s perspective. MNP
went much further in suggesting that campaigns should be tailored first to
the relevant media for the target market and creative matters considered
only after that. Most other practitioners see creative and media
considerations as being interactive. IMC primarily argues that
communications should be consistent with each other and with what the
consumer should reasonably be expected to take on board.
From whichever place one begins, the target market should ultimately
determine the relevant media both in terms of readership and in providing
the appropriate context for the copy. An ad depending on high fashion and
addressed to young women should clearly not appear in the Sporting Life
which is read by middle-aged men more interested in horses than
fashions. Thus, media considerations are less driven by reach (how many
people see it), frequency, or the cost per 1,000 readers (or viewers) than
the relevance of the media and whether, in that context, the message is
likely to work.
This in turn leads to the question of how the ads might be expected to
work. For a new product or brand, the primary aim is, typically, achieving
awareness. Thereafter advertising works mostly through two approaches,
broadly classified as either active or central processing, involving
argument and logic, or passive peripheral processing, which relies on
cues. Other scholars have reached similar, but not identical, conclusions
that advertising persuades the viewer to do something they would not
otherwise do (the strong theory) or merely reinforces existing habits
(Jones 1996).
Pre-Testing (Or “Copy Testing”) The Campaign
Pre-testing is a contentious topic. Predictiveness is dubious and ads are
rarely pre-tested against the particular goals for the campaign. Specialist
agencies, such as Millward Brown, more usually test with their standard
metrics which has the advantage, of course, of using other campaign tests
as benchmarks (Ambler & Goldstein 2003). Even if pretesting is poor value
in assessing campaign proposals, it has advantages such as gaining top
management approval. Protagonists for pre-testing include Pieters &
Wedel (2004).
Post-Campaign Evaluation
Post-campaign assessment, on the other hand, is not contentious in
principle although there are various competing approaches. Specialist
research agencies, once again, tend to use their standard metrics rather
than the original campaign goals. Post-campaign assessment usually
takes the form of “tracking,” i.e., the key brand equity metrics are
consistently monitored over time, for example, monthly.
A key factor is that the advertiser is looking for changes in brand equity, in
other words brand effects, not advertising effects. According to
recognition and recall of the ad may lead to brand effects but they are not
valuable effects in themselves.
The Consumer’s Perspective
From as early as the first half of the nineteenth century, there has been
public ambivalence toward advertising (Nevett 1982). It is seen as
manipulative, intrusive, and seeking to persuade us to buy what we do not
need (such as lottery tickets) or to buy what is bad for us (such as alcohol,
tobacco, or fatty foods). Because brand leaders are typically more
expensive than their private label equivalents, some argue that
advertising causes us to pay more than we should.
On the other hand, advertising pays for the media we enjoy such as
television, newspapers, and the Internet. Quite often we enjoy the ads
themselves which enter into general parlance such as “It does what it
says on the tin” (Ronseal). Calfee (1997) has made the case for the
defence, as has the Advertising Association in the UK and the equivalent
trade associations in other countries. Advertising provides information and
reminds us, quite often, of what we have bought before and may intend to
buy again.
The Social Perspective
Opponents of advertising claim that it commercializes culture, undermines
values, and leads to less happiness as society is reminded of what it
cannot afford. Supporters argue that advertising merely mirrors society as
it is (Fox 1984). They see it as a necessary part of a healthy market and
contend that it has contributed to the growth of GDP and widespread
prosperity (O’Guinn & Faber 1991).
The truth, as always, lies somewhere in between. Advertising in itself is
neither good nor bad, but it can be good or bad in the way it is used.
Accordingly, most countries have developed regulation as a means to
control “bad,” or potentially harmful, advertising while allowing “good”
advertising a reasonably free rein. Regulation, much of it self-regulation,
has grown rapidly since the 1960s to meet increasing cultural sensitivities
but also to dissuade governments from interfering. Self-regulation is seen
as being more flexible and responsive to consumer protection than legal
rules, but governmental wish to control the industry has led to “co-
regulation,” i.e., government retaining the right to intervene when they
deem it necessary. For example, the Code of Advertising practice in the UK
is administered by a trade committee with an independent chairman
which can, and does, amend the Code when the need arises, rather than
following the lengthy and cumbersome process of changing UK law.
Ofcom, the UK government quango, is an example of co-regulation in the
UK (see www.ofcom.org.uk).
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