Advertising has invoked wide range of discussions on its impact, effectiveness or use. This has led to the development of several model and methods to understand how exactly advertisement impacts the target. This paper tries to identify the different models relevant to consumer durable industry and tries to answer if advertising works and if so how. It also discusses the different ways in which advertising affects can be monitored to ensure that advertising is successful.
Advertising has been considered to hold a key role in persuading an individual to select a product. When we look at the top 100 companies in the world, all of them have one thing in common – all of the companies advertise their products and services regularly. There are several instances of advertising significantly benefiting companies. However there are several cases in which advertising has been a failure too. While it can be concluded that advertising works, there are different parameters that determine the success of an advertising campaign. In this paper, we will try to understand the key parameters and factors that influences the effectiveness of advertisements. It also discusses how advertising campaigns can be monitored to measure its effectiveness.
The effectiveness of advertising can change with each type of industry with the different dynamics specific to it. Consumer goods industry extensively uses advertisements to increase sales. Hence this industry is ideal for analysis.
Objectives and Affects of Advertising
Objectives of advertising
There are usually three key objectives of advertising campaigns from point of view of marketing theories. Sometimes advertising can be used for multiple of these objectives.
1. The nature and way of differentiating and discriminating between different brands: A company can differentiate its products or services, especially when there is intense competition in the market.
2. Maintaining and building brand: Brands are extremely critical for companies to have sustainable competitive advantage. Advertisement in this case becomes an important marketing tool to build, enhance and maintain the branding propositions. This is also applicable for the brand of the company as well.
3. Influencing the human mind by reminding or persuading: In industries like consumer goods, it is important to reach out to the customer, draw their attention and persuade them to adopt the products. This is more critical if the product life is short.
Depending on the industry, the advertising campaigns can be used in different environments.
How advertisement works
The affect of advertising depends on the how the advertisement is generated and exposed. Some of the critical parameters in delivering an advertisement are:
§ Structure of advertisement
§ Media vehicle selection
§ Scheduling Insertions
Each of these parameters need to be evaluated for each of the instances of advertising. The affect of advertising would depend on how close the parameters match to the objective of the advertisement.
The process of impact of an advertisement can be depicted as in the following figure:
Affects of advertising
To understand whether advertising works, it is important to understand how effect of advertising is measured and the factors that affect the success of an advertisement. Very often sales response is regarded as the measure of advertising effect.
There are different parameters on which effect of advertising can be measured. One of the effective parameter in the case of consumer goods is to measure how it the demand curve for the products is shifted.
§ In consumer markets, it is found that non-price advertising affect consumer price sensitivity. This can be attributed to increased consumer awareness of critical attributes of the brands, reduced search cost and expanded consideration parameters. All these result in more elastic demand. It helps in matching the perceived value closer or higher compared to the price of the product.
§ Advertising has been found to increase the perceived degree of differentiation in the market, especially if the competition is high. Advertising is found to increase brand loyalty which in turn reduce demand elastics. Additional benefit also could be increased entry barrier for other players into the market.
§ Advertising is also found to raise the demand elasticity. Advertising to specific consumers whose willingness to pay is lower than the price of the product helps to flatten the demand curve in the vicinity of the product price. This leads to more elastic demand at the price point.
Example of how a consumer goods company used advertising for protecting it market share is Heinz. Heinz advertising focuses on differentiating the brand of the product on a particular dimension – “thickness”. The advertising was profitable as it reduced the loss in market share that the brand would have suffered with an increase in price. The thickness dimension was highly valued by customers who considered it as an important feature of the product.
Models for Analysing Advertising
There are several theoretical models developed over the years for measurement of advertising effectiveness. Some of the key ones used are discussed here.
Ehrenberg’s Salience Theory
Ehrenberg’s theory was based mainly on frequently purchased consumer goods in the conditions of sustainable markets. However the model has been found to be effective in other conditions as well such as durable goods in qausi-sustainable markets.
The theory is based on the fact that it is mainly the number of customers that distinguishes brands rather than the customer loyalty to a brand being advertised. This is further based on the behavioural view of loyalty. According to Ehrenberg, the loyalty of a brand in case of consumer goods that are frequently purchased is measured as an average number of its purchases over a given period. In the case of bigger brands (i.e., brands with high penetration), it is usually to have customer purchase these more frequently than small ones.
In mature markets, it is difficult for brands to grow on a steady pace. Hence the main goal of advertising in this environment according to Ehrenberg is to maintain and defend the number of customers. This can be achieved by providing adequate publicity to the brand. It is not necessary to put in effort to change the brand from what it has been before of differentiate it from the competition and substitutes.
Here the underlying principle is that competing brands are similar to each other and they are substitutes. This means that customers usually buy a set of brands (not just one brand) relatively regularly. This creates split loyalty. According to Ehrenberg, what makes brands different in this environment is the number of customer attached to each brand.
The fact that the customer buys a certain brand means that it is salient to the customer. Salience according to Ehrenberg means the following:
§ Brand awareness;
§ Presence of brand in the consideration set for the customer, i.e., the brand is placed by the customer among those brands that he/she has an intention to choose.
§ Expressed intention to repurchase the brand;
§ Positive attitude towards the brand;
§ Approval of its price;
§ Recommending the brand to other people;
§ Propensity to buy this brand if the usually purchased brand is unavailable.
Hence the salience is related to how the brand comes to the consciousness in personally relevant choice situation.
In this model, advertisement is considered to be able to modify the attitudes, desires and reflections of a consumer, thereby persuading the consumer towards a brand. Here advertisement is regarded as a principal tool to construct a brand, differentiate it from competitor brands. Here the brand differentiation is considered to be key in persuading the consumer in an environment where the characteristics of the product or the offering are almost identical.
In this model, the brand differentiation is considered to be means of achieving a competitive advantage and creating a condition for constructing a rational and emotional reasoning for the consumers to prefer a brand over its competing one. Hence the brand has to be unique in some way in the eyes of the consumer and the consumer would have a reason to prefer it to other brands. In the absence of such uniqueness or if the uniqueness is lost, the brand is transferred to the zone of commodities and can rely only on accidental purchases or purchase out of price considerations or forced purchase when other brands are unavailable.
There are two possible ways of brand differentiation
a. Functional or utilitarian difference. An example of such differentiation is use of rotating discs for choosing menu used by Sony
b. Emotional or imagery difference. An example of this is yogurt made ‘on grandma’s recipe’ created by Danone.
Here the main goal of advertisement is considered to be building of brands and additional sales when compared to the sales level before the advertisement. Hence it contains both long run and short run perspective.
There are a variety of models available for measuring effectiveness of advertisement. The scope of this paper includes the key and popular models that are relevant in consumer goods market.
Gatekeeper model is one of the models available to monitor the effectiveness of advertisement through various stages. The model looks at the effects of advertising in terms of a series of gates. These gates are
§ Communication effects and
Measuring Short Term Advertising Effects
This is the first gate that a campaign must pass. A short term advertising strength (STAS) index is used to evaluate the campaigns that can pass through the gate. It measures the sales response within seven days of exposure of the advertisement.
STAS uses electronic single source data to capture purchases in households immediately following the exposure of brand advertising. An analysis of 340 brands over six counties revealed that all successful brands, i.e. brands having high market share also have correspondingly high STATS scores. STAT index has been accepted as a robust measure of an advertising campaign. It can provide an indication of the campaign whether it is weak or strong within weeks of the campaign launch. The brands that generate high STATS scores should be allowed to pass through the gate. Brands with mid range STATS should be further investigated and modified if necessary. If the STATS fall below the acceptable level, then the campaign should not be allowed to proceed through the gate.
Measuring Medium-Term Advertising Effects
Medium-term advertising effects must consider how to keep the brand in the customer’s vision after the campaign. This looks at the interactions between market growth and various parameters such as STATS, advertising intensity, promotional intensity and continuity.
Finding of research done show that brands with average growth are not influenced by promotional intensity or advertising intensity when STAS is low. The brands with high STAS index and strong creative benefit from increased investment in advertising. The medium-term advertising effects is usually found to represent the cumulative result of short-term effects. The exposure and frequency also makes a difference in the effectiveness of advertisement. It has been found that for low involvement goods, a single weekly exposure is optimal.
Long-Term Advertising Effects
The final gate for campaigns is that they must be capable of building brands that can sustain in long term. Long-term effects can be defined as those measured over more than one year. It is usually difficult to measure the long term effects. The long-term effects take the form of brand enrichment and value. Brand enrichment can be measured in terms of the depth and breadth of a brand’s relationship with its consumers.
Measurement of advertisement effects involves different metrics. These metrics can be applied to different gates and can define the levels of success. The key measurement metrics can be defined for the following levels:
§ Contact Figures: This metrics collects information on the foot print of the advertisement and the impact. The key metrics at this level are:
§ Awareness Figures: This metrics collect information on recollection of brand and awareness about the brand. The key metrics at this level are:
§ Attitude Figures: This metrics collect information on higher level of involvement of the consumer, i.e. attitude.
Advertising has invoked mixed reactions among marketing professionals. Although there is an argument that advertising does not work, it is clear from the fact that all the successful companies advertise, that advertising is effective and working. However there are certain prerequisites to the advertisement to work. All the associated parameters, market conditions, competition and other factors need to be considered while devising an advertising campaign. Equally important are other factors such as structure, media selection, scheduling and timing. It is also important to measure the effect of advertising at periodic intervals to ensure that the campaign is successful.
While there are multiple ways of measuring advertising effect and the success, each industry needs to evaluate the models and methods with respect to the characteristics of its market. It is fair to conclude that advertising works but only if done well.
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