CH-14-18 Sales Promotion – Advertising and Promotion: An Integrated Marketing Communications Perspective : Chapter Notes

This Document Contains Chapters 14 to 18 Chapter 14 Sales promotion Chapter Overview Sales promotion and its role in a firm’s integrated marketing communications program is the focus of this chapter. We examine how marketers use both consumer and trade promotions to influence the purchase behaviour of consumers as well as wholesalers and retailers. The chapter discusses the scope of sales promotion and the reasons for its increasing importance. The content of a promotion plan is reviewed such as specific promotion objectives, strategic use of promotion regarding consumer franchise-building versus non-franchise-building promotions and key promotion tactics. The chapter thoroughly examines consumer and trade sales promotion techniques used by marketers. The chapter concludes with a discussion IMC issues as they relate to sales promotion. Learning Objectives 1. Explain the role of sales promotion in a company’s integrated marketing communications program and to examine why it is increasingly important. 2. Identify the objectives, strategy, and tactical components of a sales promotion plan. 3. To examine the consumer promotion strategy options and evaluate the factors to consider in using them. 4. Describe trade sales promotion strategy options and evaluate the factors to consider in using them. 5. Apply key IMC issues related to sales promotion decisions. Chapter and Lecture Outline I. SALES PROMOTION PLANNING Fully integrated marketing programs include consumer and trade promotions that are coordinated with advertising, public relations, and Internet marketing programs as well as sales force efforts. A. Characteristics—sales promotion has been defined as “a direct inducement that offers an extra value or incentive for the product to the sales force, distributors or the ultimate consumer with the primary objective of creating an immediate sale.” There are two important aspects to sales promotion that should be noted: • sales promotion involves an inducement that provides an extra incentive (e.g., financial, emotionally based, value oriented, or experiential)to purchase a product • sales promotion is essentially an acceleration tool that is designed to speed up the selling process and maximize sales volume B. Types of Sales Promotion—sales promotion can be broken down into two major categories: • Consumer sales promotion which are promotions directed at the consumers who are final purchasers of goods and services • Trade sales promotion which includes promotional programs and activities designed to motivate distributors and retailers to stock and promote a manufacturer’s products The activities included under each sales promotional category are shown in Figure 14-1. When a promotional push strategy is used, the goal is to persuade the trade to stock, merchandise and promote a company’s products by aggressively selling and promoting to resellers. A company’s sales representatives can offer resellers special programs such as promotional allowances and cooperative advertising. Trade advertising in publications that serve the industry may also be used as part of a push strategy. When a promotional pull strategy is used, the goal is to create demand among end users that will in turn encourage retailers to carry a brand. Heavy spending on consumer advertising and sales promotion is an important part of a pull strategy. C. The Growth of Sales Promotion The role and importance of sales promotion in companies’ integrated marketing communications programs have increased dramatically due to a number of factors such as: 1. Strategic Importance—sales promotion experts or agencies are part of the brand building team at the start of the planning process as all promotional professionals realize the dual importance of the communication and behavioural effects of sales promotion. 2. Reaching a Specific Target Audience—sales promotion tools are effective in reaching specific geographic, demographic, psychographic and ethnic markets. 3. Promotional sensitivity—the percentage of purchases made in conjunction with a promotional offer has increased. 4. Declining brand loyalty—consumers have become less brand loyal, are purchasing more on the basis of price, value, and convenience, and are looking for more deals and will buy whatever brand is on sale. 5. Brand proliferation—consumer product companies are launching more new products each year. Sales promotion tools such as samples and coupons are often used as part of the process that leads consumers from trial to repeat purchase at full price. Promotions play an important role in securing and maintaining shelf spaces for new and existing products. 6. Short-term focus—the increase in sales promotion in motivated by marketing plans and reward systems geared to short-term performance and the immediate generation of sales volume. Marketing and brand managers use sales promotions routinely, not only to introduce new products or defend against the competition, but also to meet quarterly or yearly sales and market share goals. 7. Accountability—many companies are demanding to know what they are getting for their promotional expenditures. They feel that sales promotion programs are more economically accountable than advertising since they often generate a quick and easily measured jump in sales. 8. Power of retailers—recent developments have helped to transfer power from the manufacturers to the retailers. With the advent of optical checkout scanners and sophisticated in-store computer systems, retailers gained access to data concerning how quickly products turn over, which sales promotions are working and which products make money. Retailers use this information to analyze sales of manufacturers’ products and then demand discounts and other promotional support from manufacturers of lagging brands. 9. Competition—many companies are turning to sales promotion to gain or maintain a competitive advantage. A major development in recent years is the use of account-specific marketing (also referred to as co-marketing) whereby a marketer collaborates with customizes promotions for individual retailers. II. SALES PROMOTION PLAN A. Objectives for consumer sales promotion—companies must give consideration to what they hope to accomplish through their promotions and set clearly defined objectives and measurable goals for their sales promotional programs. While the basic goal of most sales promotion activities is to induce purchase of a brand, there are different objectives the marketer might have for both new and established brands. These include; obtaining trial purchase, obtaining repeat purchase, increasing consumption, building brand equity. B. Consumer Sales Promotion Strategy Decisions 1. Sales Promotion Strategy Options—the options identified in Figure 14-1 are important strategic choices. In making these choices it is important to make the distinction between consumer-franchise building sales promotions and non-franchise building efforts. Consumer-franchise-building promotions are designed to communicate distinctive brand attributes and contribute to the development and reinforcement of brand image and identity. Non-franchise-building promotions are designed to accelerate the purchase decision process and generate immediate increases in sales. An additional decision criterion relates to the incentive characteristic. As illustrated in Figure 14-2, the choice is based on the target audience and the intended behavioural response. Operant conditioning, a form of behavioural learning this approach, can help explain the different types of behavioural responses. Learning occurs as a result of the outcomes or consequences associated with a particular response. Reinforcement refers to a reward or favorable consequences associated with a behaviour and is an important element of instrumental conditioning. Sales promotion rewards a consumer through the incentive. Operant conditioning concepts that are particularly relevant to sales promotion are schedules of reinforcement and shaping as shown in Figure 14-3. 2. Application across Product Lines—another strategic decision is the degree to which each sales promotion tool is applied to the range of sizes, varieties, models, or products. 3. Application across Geographic Markets—sales promotions can be run nationally, regionally or in select markets. C. Consumer Sales Promotion Tactics Decisions—the value, timing and distribution of the sales promotion offer are key tactical decisions. 1. Value of Incentive—the marketer must decide on the value of the promotion in terms of any discounts offered, the value of premium offers and whether non-economic incentives will be used. 2. Timing—the marketer must decide during which months, weeks, days and/or seasons the promotion will be run. 3. Distribution—the marketer must establish the logistics with respect to how the promotion will get to the consumer and how the consumer will get to the promotion. III. CONSUMER SALES PROMOTION STRATEGY OPTIONS The various consumer sales promotion techniques used by marketers should be discussed along with their strengths and limitations and the role they play in meeting various promotional objectives. A. Sampling—sampling involves a variety of procedures whereby consumers are given some quantity of a product for no charge to induce trial. Sampling is often used as a way of introducing a new brand to the market although it is also used for established products. 1. Strengths of sampling • Samples are an excellent way of inducing trial • Sampling allows consumers to experience a product directly and gain an appreciation for its benefits and characteristics 2. Limitations of samplings • Costs of sampling programs can be very high • The benefits of a brand may be difficult to gauge from a sample 3. Sampling Methods—decisions must be made concerning the method by which the sample will be distributed. The sampling method is important not only in terms of costs, but also in terms of influencing the type of consumer who receives the sample. Some of the more widely used sampling methods include: • Door-to-door sampling • Sampling through the media • Sampling through the mail • In-store sampling • On-package sampling • Event sampling • Location sampling B. Coupons—are the oldest, yet most widely used and effective sales promotions tool. The number of coupons distributed to consumers has increased dramatically over the past decade. 1. Strengths of coupons • Coupons make it possible to offer a price reduction to those consumers who are price sensitive without having to reduce the price for everyone. • Coupons allow the offering of a price reduction without having to rely on retailers. • Couponing can be an effective promotional device for generating trial of a new brand. • Coupons can be used to encourage trial and increase consumption of established brands. 2. Limitations of coupons • It can be difficult to estimate how many consumers will redeem a coupon and when they will do so. • Previous loyal users often redeem coupons targeted to attract new users of established brands. • Couponing programs can be expensive. • Problems of coupon misredemption and fraud exist. 3. Coupon Distribution—Coupons can be distributed in a variety of ways including: • media delivery in newspapers and magazines and as free-standing inserts (FSIs) • through direct mail • in or on packages • in stores and at points-of-purchase • over the Internet through online promotion sites C. Premiums—a premium is an offer of an extra item of merchandise or service either free or at a low price that is used as an incentive for purchase. 1. Strength of premiums—usually inexpensive gifts or items that are included in the product package, distributed with a purchase or sent to consumers who make mail-in-requests along with a proof of purchase. A key feature is that the gift is viewed as a valuable incentive. Secondly, reinforce the brand image and work with co-branding. Third, premiums can encourage an impulse purchase to do the nature of the first two points. Fourth, premiums work with other IMC tools very well as there is a story or meaning to associate with. Finally, premiums generally obtain trades support as a push since they can see the pull efforts. 2. Limitations of premiums—while the gifts are inexpensive, they are costly on a per unit basis versus other forms of exposure. One solution is to use self-liquidating premiums that require the consumer to pay some or all of the cost of the premium plus handling and mailing costs. Premiums require a degree of effort in some cases where they need to send away for it. Finally, there is a risk of poor acceptance and being stuck with a worthless inventory. D. Contests and Sweepstakes—a contest is a promotion whereby consumers compete for prizes or money on the basis of skills or ability and winners are determined by judging entries against some predetermined criteria. Contests often provide a purchase incentive by requiring a proof of purchase to enter or to obtain an entry form from a dealer or advertisement. A sweepstakes is a promotion whereby winners are determined purely by chance and cannot require a proof of purchase as a condition for entry. Another form of a sweepstakes is a game which also has a chance element associated with winning. 1. Strengths of contests and sweepstakes • Contests and sweepstakes can be an effective way of getting the consumer to become involved with the brand by making the promotion product relevant. • Contest and sweepstakes can be executed to build brand equity through the consumer franchising building characteristic. 2. Limitations of contests and sweepstakes • A contest or sweepstakes promotion may overwhelm the ad or brand and may do little to contribute to the brand franchise or image. • There are numerous legal problems and considerations that impact the design and administration of contests and sweepstakes. • The presence of professionals or hobbyists who submit large numbers of entries but have no interest in the product can detract from the effectiveness of contests and sweepstakes. E. Refunds and Rebates—Refunds or rebates are offers to return some portion of the product purchase price after supplying some sort of proof or purchase. Consumers are generally responsive to refund or rebate offers, particularly as the size of the savings offer increases. 1. Strengths of Refunds and Rebates • Refunds and rebates can be effective sales promotional tools for creating new users and for encouraging brand switching • Refunds and rebates are often perceived as immediate savings or value even though the money is not received until the offer is redeemed and many consumers never follow through on the offer. • Refunds and rebates can allow a marketer to achieve a price reduction for much less than if a direct price deal were utilized. 2. Limitations of Refunds and Rebates • Many consumers do not like the delay and effort required to redeem refund and rebate offers. • The terms of some rebate offers are inconvenient or even unrealistic. • Consumers may have a negative perception of brands that use rebates. • Many retailers do not want to become involved with the administration of rebate programs. F. Bonus Packs—Bonus packs offer the consumer an extra amount of a product at the regular price by providing larger containers or extra units. Here are some of the strengths and limitations of bonus packs: 1. Strengths of Bonus Packs • They provide extra value to consumers without having to get involved with things such as coupons or rebate offers. • They can be an effective maneuver against a competitor’s promotion or introduction of a new brand by loading consumers with the product and making them less susceptible to competitors’ promotional efforts. • Bonus packs often receive favourable response from retailers. 2. Limitations of Bonus Packs • They may require additional shelf space and do not provide extra profit margins to the retailer. • They may appeal primarily to current users who may have purchased the brand anyway. G. Price-off Deals—price-off deals provide a reduction in the regular price of the brand, typically right on the package through specially marked price packs. 1. Strengths of Price-off Deals • They are controlled by the manufacturer, which enables them to ensure that the promotional discount reaches the consumer rather than being kept by the trade. • Price-off deals usually present a readily apparent value to consumers, particularly when they have a reference price point for the brand and recognize the value of the discount. • Price-offs can provide a strong influence when point-of-purchase comparisons are made. • They can encourage consumers to buy larger sizes. 2. Limitations of Price-off Deals • They can create pricing and inventory problems for consumers • They may appeal primarily to regular users rather than attracting nonusers H. Event Marketing—Event marketing is a form of promotion where a company or brand is linked to a specific event or a themed activity. It usually is developed for the purpose of creating experiences for consumers and promoting a product or service. Marketers often do event marketing by associating their product with a popular activity such as a sporting event, concert, fair, or festival. It is important to make a distinction between event marketing and event sponsorships, as the two are often used interchangeably yet refer to different activities. Event sponsorships are promotions whereby a company develops sponsorship relations with a particular event and provides financial support in return for the right to display a brand name, logo, or advertising message and be identified as a sponsor of the event. Event marketing has become very popular in recent years for at least two reasons: • Events can be used as to create experiences for consumers and associate a company’s brand with certain lifestyles and activities • Events can be used to distribute samples as well as information about a marketer’s product or service or to actually let consumers experience the product III. TRADE SALES PROMOTION A. Objectives of Trade Sales Promotion—sale promotion programs targeted to the trade should be based on well-defined objectives and a consideration of what the marketer wants to accomplish by using trade promotions. Objectives for trade promotions include: 1. Obtain distribution for new products 2. Maintain trade support for established brands 3. Encourage retailers to display and promote established brands 4. Build retail inventories B. Trade Sales Promotion Strategy Options—there are a variety of trade promotion tools that manufacturers can use as inducements for wholesalers and retailers. These include: 1. Trade allowances—probably the most commonly used trade promotion is some form of trade allowance which is a discount or deal offered to the retailer or wholesaler to encourage them to stock, promote, or display a manufacturer’s products. There are several types of trade allowances including: • buying allowances—a deal or discount offered to resellers in the form of a price reduction on product ordered during a fixed time period • promotional allowances—discounts provided to retailers for performing certain promotional or merchandising activities in support of a manufacturer’s brand • slotting allowances—rather than a discount, these are special fees that retailers charge manufacturers for agreeing to handle a new product and providing a slot or position in their store to accommodate the new product. There are several problems with trade allowances. Many companies are concerned over the abuse of trade allowances by wholesalers, retailers and distributors. Marketers give retailers trade allowances with the expectation that the savings will be passed on to the consumer in the form of lower prices. However, the trade members often pocket these discounts. Two practices that are particularly bothersome are forward buying and diverting. 2. Point-of-Purchase Displays —marketers use a variety of point-of-purchase materials including end-of-aisle displays, posters, banners, shelf cards, motion pieces, stand-up racks and other material. Point-of-purchase displays are an important promotional tool because they can help a manufacturer obtain more effective in-store merchandising of their products. Products often sell better when they are on display as they are more likely to be noticed by consumers and displays also are often accompanied by price deals. 3 Cooperative advertising—cooperative advertising, whereby more than one party shares the cost of advertising, is another important form of trade promotion. Actually there are three types of cooperative advertising including: • Vertical cooperative advertising—Vertical cooperative advertising is the most common type of co-op ad program used as part of a trade promotional program. Under a vertical co-op program, the manufacturer pays for a portion of the advertising a retailer runts to promote its product and its availability in the retailer’s place of business. The limit or amount of co-op funds the manufacturer provides to the retailer is usually based on a percentage of dollar purchases made from the manufacturer. This percentage is usually around 3 to 5 percent. • Horizontal cooperative advertising – refers to advertising sponsored in common by a group of retailers, companies or other organizations providing products or services to a market. • Ingredient sponsored cooperative advertising – refer to advertising supported by a raw materials or component manufacturer to help establish end products using the company’s materials or ingredients. 4. Contests and incentives—manufacturers use contests and special incentive programs to stimulate greater selling effort from resellers management or sales personnel. An important target of contests or special incentives is the sales personnel of the middlemen. In addition to using contests, programs targeted to sales personnel may include push money or spiffs. 5. Sales training programs—another form of manufactured sponsored promotional assistance is sales training programs for reseller sales personnel. Manufacturers provide sales training assistance to retail salespeople by having formal classes, having their sale reps work with resellers and providing sales manuals, brochures, videos and other selling aids. 6. Trade shows—a trade show is a type of exhibition or forum where manufacturers display their products to current as well as prospective buyers. Trade shows provide a major opportunity to display and demonstrate products, interact with customers, identify new prospects, gather customer and competitive information and even write new orders. The social aspects of trade show are also important as many customers use them to entertain key customers and to develop and maintain relationships. IV. IMC PLANNING: STRATEGIC USE OF SALES PROMOTION Sales promotion techniques usually work best when used with advertising. Conversely, a consumer sales promotion program can enhance the effectiveness of an ad campaign. When properly planned and executed to work together, sales promotion can provide a synergistic effect that is much greater than the response that would be generated from either promotional mix element used alone. Proper integration of advertising and sales promotion requires the coordination of several decision areas including: A. Budget Allocation—this allocation depends on a number of factors: • the promotional objectives of the campaign • the market and competitive situation • the brand’s stage in its life cycle B. Creative Themes—to integrate the advertising and sales promotion programs successfully, the theme of consumer promotions should be tied in with the advertising and positioning themes wherever possible. The WD-40 ad shown in Exhibit 13-3 provides a good example of how a sweepstakes theme is coordinated with the positioning used for the brand. C. Media Support—using a promotion without prior or concurrent advertising can limit its effectiveness and risk damaging the brand’s image. Conversely, a coupon, a premium offer, or an opportunity to enter a sweepstakes or contest can enhance the effectiveness of an ad. D. Brand Equity—The increasing use of sales promotion in the marketing program represents a fundamental change in strategic decisions regarding how companies market their products and services. However, the value of this increased emphasis on sales promotion has been questioned by many experts. Concerns include the following: • Marketers becoming too dependent on using sales promotion to produce short-term or immediate increases in sales • Investing in sales promotion at the expense of advertising and thus not building the long-term value of the brand franchise • Brands losing their perceived value from the perspective of consumers when they are purchased because of a promotional offer. This has led to concern that the increased use of sales promotion is having a negative effect on brand equity. As was noted in the Chapter 1, brand equity refers to a type of intangible asset of added value or “goodwill” resulting from the favourable image or differentiation that a brand has achieved. There are many examples of situations where a company’s have hurt the brand equity of their products by placing more emphasis on consumer and trade promotions than advertising. In many situations there is the potential for companies to fall into a sales promotion trap or spiral whereby all competitors are making extensive use of promotions. Figure 14-10 shows this dilemma which is analogous to the “prisoner’s game” as the only way out of it is for both parties to cooperate by cutting back on promotions. E. Measuring Sales Promotion Effectiveness—one framework that can be used here is based on four communications goals: attention, comprehension, persuasion and purchase. Behavioural measures include brand switching and loyalty, number of inquiries, coupon redemption and contest entries. A number of organizations measure sales promotions. MarketSource provides marketers with a basis for measuring the effectiveness of their sampling program. Teaching Suggestions In this chapter we examine sales promotion including the promotional activities directed at consumers as well as the trade. This is a very long chapter as its covers both consumer and trade sales promotion very thoroughly. We strongly suggest that this material be covered over a two-class period. The first lecture can provide an overview of the sales promotion area, reasons for the shift in marketing dollars to sales promotion and consumer sales promotion. The second lecture can cover trade promotion, the coordination of sales promotion with advertising and other promotional mix elements, and the problems of sales promotion. In covering sales promotion you may want to refer students to the discussion of behavioural learning theory that describes shaping procedures. It is very important to point out to the students the increasing emphasis many companies are placing on sales promotions targeted to both consumers and the trade. It is helpful to review some of the reasons for the increase in sales promotion and discuss whether this trend will continue. The instructor should review the various consumer and trade sales promotion techniques along with their advantages and limitations. Students should be encouraged to evaluate these techniques as strategic and tactical promotional tools and to consider the reasons why marketers use them. We also feel that it is very important to discuss how sales promotion can and should be coordinated with the advertising program. Figure 14-10 shows how the role of sales promotional agencies is changing and provides insight into how many firms are attempting to coordinate their advertising and promotional efforts. To keep abreast of development in the sales promotion area and to find some very interesting articles on, and examples of, successful promotions, the instructor can refer to sources such as Promo magazine. This magazine offers complimentary subscriptions to professors and is also available online at www.promomagazine.com. Another organization that has a lot of valuable information on sales promotion is the Promotional Marketing Association, Inc. Their website can be found at www.pmalink.org. Vignette 1. Why are consumers motivated to participate in contests like these? Two contests involve user generated content to participate. The resulting artistic work represents many interpretations of the brand from creator’s perspective. Thus, the subsequent exposure of the material provides fresh and new interpretations of the brand experience for the viewers. Presumably the many viewers would be loyal consumers so that the communication effect would be strong from an attitudinal point of view; however, new users could be equally inspired for a trial purchase with a fresh consumer view of the brand. The other contest required a visit to the pop-up store, so in all three cases, consumers put forth a degree of effort to participate suggesting strong attitudinal commitment to brand or at least strong curiosity about the brand as part of their shopping. Ultimately, the motivation is very transformational and one may suggest along the likes of intellectual stimulation or in the case of Nivea, sensory gratification or social approval via the improvement in skin. IMC Perspective 14-1 1. What is the appeal for consumers to receive discounts like this versus finding a coupon or receiving the discount in-store while shopping. One main advantage would be to reach consumers who would not normally seek coupons or other deal in established distribution channels (e.g., free standing insert). Consumers, especially younger ones, who are more technologically inclined or who have adapted many habits etc to their handheld device would likely be within this group. Heavy coupon users or very price-sensitive shoppers may also gravitate to the online versions as they are deal prone consumers that seek out discounts through multiple means. Directory type websites will likely to continue to develop (e.g., yellowpages) so that coupons and other marketing communication activities will continue to grow. IMC Perspective 14-2 1. How does Red Bull Crashed Ice help build the brand? Red Bull Crashed Ice represents event marketing much like its development of other extreme sports competitions supported by the popular energy drink that can be seen on the Red Bull website. The event attracts significant spectators and is covered on TV, so clearly there is a strong awareness effect. The excitement of the event and it notoriety produce fantastic attitudinal effect, and people drink Red Bull at the event representing both trial and repeat purchases. Interestingly, the branding does not use the imagery and slogan of the TV ads for the product calling into question the prescription of IMC experts who suggest all tools should have the same look and feel. More recent broadcasts have referred to the even as the World Ice Cross Championship, without referencing Red Bull. The Quebec 2014 event actually removed the Red Bull start imagery and only had the Championship imagery. In short RBCI is in transition for the brand, moving from event marketing to event sponsorship as the sport becomes legitimized. As an aside, the Olympics evaluated the event in Moscow for 2014 with consideration for the 2022 games. Chapter 15 Public relations Chapter Overview Public relations (PR) are how information about the organization and its products may be communicated. Like the program elements discussed thus far, marketers attempt to use this tool to benefit the firm and its offerings. At the same time, this promotional mix element is generally used in a different way that is not always designed to promote a specific product. Rather, it may be used to promote the organization as a whole, a cause or position advocated by the organization, or to create goodwill in the marketplace. In addition, it is not always within the control of the marketer. Thus, while it may be possible to affect public relations in some situations, in many others the marketer may have to assume a reactive posture. This chapter discusses and expands on the changing role of public relations and summarizes the content of a public relations plan that is consistent with other IMC tools. Learning Objectives 1. Recognize the role of public relations in the promotional mix. 2. Explain how to compile a public relations plan. 3. Examine how public relations is generated through media publicity, and argue the strengths and limitations of media publicity. 4. Illustrate how public relations is managed through corporate advertising. 5. Apply the ideas of public relations within the development of an IMC plan. Chapter and Lecture Outline I. PUBLIC RELATIONS A. Traditional View of PR—the chapter begins by differentiating between the traditional role of public relations and the new role. The traditional role reflects a management function that has as its primary responsibility the goal of communicating and the gaining acceptance of the organization’s policies and programs within its various communities. B. New Role of PR—the new role assumes a much broader, and more marketing-oriented, perspective. In the new orientation, the public relations function operates in close communication with the marketing department (rather than as separate entities) to develop programs and policies. C. Publicity—publicity refers to the generation of news about a person, product or organization that appears in the media. It often is the result of a public relations effort. It typically lasts for a short period of time, and it is not always positive and under the control of the marketer. Some powerful incidents of publicity are unplanned by the marketer. II. PUBLIC RELATIONS PLAN A structured public relations plan can help ensure that PR is an ongoing process as opposed to series of disconnected one-time events. As well, a plan will facilitate the integration of PR with other IMC tools. The key elements of a PR plan are similar to other IMC tools. A. Situation Analysis—in addition to a review of the situation analysis elements from the marketing or IMC plan, people’s attitudes towards the firm, its products and/or specific issues should be assessed. Conducting attitude research has a few key benefits; provides input into the planning process, serves as an early warning system, secures support internally, increases the effectiveness of the communication. B. Determine Relevant Target Audiences—target audiences can be internal or external. Internal audiences include: employees, stockholders and investors, community members, suppliers and customers. External audiences may include: media, educators, civic and business organizations, governments, financial groups. C. Behavioural Objectives—the framework for these as discussed in Chapter 5 is readily applicable for PR. Organizations would want to consider whether the consumer interaction following the communication would be “trial” or “repeat” oriented. D. Communication Objectives—The communication objectives set out in Chapter 5 also apply to PR. Firms certainly have awareness objectives and the above point concerning attitude research indicates that communication objectives in this direction are imperative. E. Strategy—there are three elements for the PR strategy: message content, message creativity and message delivery. As in the case of regular advertising, the public relations communications have similar basic decisions. The focus of the message can have a marketing level orientation or a corporate level orientation. Public relations activities designed to support marketing are referred to as marketing public relations (MPR). Used in conjunction with other traditional marketing practices as well as IMC elements, MPR can be used in the following ways: • building marketplace excitement before media advertising breaks • creating advertising news where there is no product news • introducing a product with little or no advertising • providing information to opinion leaders • defending products at risk with a message or reassurance • constructively promoting a product Message creativity and message delivery of the PR are key variables as the purpose of the communication is similar to advertising which is to ultimately influence a target audience. F. Tactics—depend on the type of dissemination tool used including the media, direct marketing, press conferences, seminars, events and personal letters. G. Measuring Public Relations Effectiveness—the evaluation of PR can tell management how to assess what has been achieved by PR, how to measure PR achievements quantitatively and how to judge the quality of PR achievements and activities. Typical measurement tools for corporate advertising are focus groups and attitude surveys. The effects of sponsorship programs can be measured through exposure and tracking methods. III. MEDIA PUBLICITY A. Media Options—choices for communicating with various target audiences include: • press releases • press conferences • exclusives • interviews • community involvement B. Strengths of Media Publicity • credibility • endorsement • cost • avoidance of clutter • reach specific audiences • image building • frequency potential C. Limitations of Media Publicity • weaker brand or corporate identification effect • inconsistent message • timing • accuracy IV. CORPORATE ADVERTISING A firm’s advertising is not always designed to promote a specific product or service. Corporate advertising is designed to promote the firm overall—by enhancing its image, assuming a position on a social issue or cause, or seeking direct involvement from the market. This form of advertising is often considered controversial and/or of dubious benefit to the firm. A. Corporate Reputation—we highlight the decision-making process (similar to advertising) and the importance of understanding the attitudinal implications through the concept of corporate reputation. B. Image advertising—advertising designed to promote the organization’s overall image may include positioning, television sponsorship, recruitment, financial support, and advocacy. C. Cause-related advertising—a company links with a charity or non-profit organization as a contributing sponsor. Recent findings are summarized for discussion. D. Sponsorships—the marketer ties-in with a cause and/or event. Sports and entertainment events are among the most frequently used. Extensive planning issue associated with sports is presented. V. IMC PLANNING: STRATEGIC USE OF PR The concluding section suggests some interpretation on the use of PR with other IMC tools. For many organizations and brands, PR plays a critical support role or leading role depending upon the circumstances of the decision. The key point is that target audience and objectives of the role of PR needs to be clearly established for its most advantageous use. Teaching Suggestions This chapter can be supplemented and developed in more detail according to the needs of the instructor. A number of good public relations texts are available. In addition to lecturing on the topic, it is possible to generate a great deal of class discussion. A multitude of public relations and corporate advertising examples can be found, and the discussion of the impact (and examples) of PR can also stimulate a great deal of student interest. We have found that the issue of corporate advertising, particularly advocacy advertising, provides a great topic for debate. Students might be encouraged to take one position or another and discuss the issues, providing examples to support their arguments. Vignette 1. What is the redeeming characteristic of each of these award winners? Bells’s initiative featured participation from the general public. Many marketing communication activities include action so that the receiver is more involved and thus allowing stronger processing of the message. While the action is somewhat brief and transient, it is stronger than passively watching a TV ad. Campbell’s idea struck a chord with its humane treatment. All aspects of this activity appear positive which would be well received by all members of society. The other ideas are well founded and although the connection of chocolate and bicycles for Cadbury is less so. One might be concerned that Shoppers does not include everyone’s health, but since it sells many health products this domain is perfect. IMC Perspective 15-1 1. What is your assessment on how each party handled the situation? The comments from the executive are quite expected given the circumstances. From a publicity perspective, interested parties will take a position or point-of-view in their own self-interest, a fundamental tenet of economic theory. Each of the public relations statements can be analyzed to estimate what the true meaning of the message really is. One interesting response to consider is the NHL’s since it indicates a position of strength where it signals that it could easily find a new sponsor if Air Canada decided to stop its contribution. Bell and Scotiabank’s moderate responses indicate a position of neutrality and suggest that they are taking the opportunity to move the public debate through the media in a new direction, of course in a direction that favours them. An key point to make is that even in PR, brands think very carefully about what the message content will be as it does with all other aspects of marketing communication. IMC Perspective 15-2 1. Do each of these sponsorship strategies fit the brand? Most of these examples appear to be reasonable examples of sponsorship that would be consistent with the brand image that is intended to be portrayed. The first couple of examples show the difficulty with sponsorship as competitors will try to portray their marketing communication as a sponsorship when in fact it is not actually doing any sponsorship. Instructors can use this as an example to discuss ethical issues of marketing communication. While the competitive angle is often the first criticism, a more interesting one to consider is whether it is misleading consumers by giving them the impression of sponsorship. However, these marketers are clever and never directly claim, but let the message be associated enough so that low-involvement processing would result in consumer inferring incorrectly. Chapter 16 Direct marketing Chapter Overview In this chapter we examine the role of direct marketing in the promotional mix. We discuss the objectives sought in direct marketing programs, noting that these may often differ from the communications objectives discussed earlier. We also discuss direct marketing strategies, the direct response media used to convey the communications message, and the evaluation of the direct marketing program. We also investigate loyalty programs that are typically executed via direct marketing. We conclude the direct marketing discussion with a discussion of its strengths and limitations. Learning Objectives 1. Define direct marketing and summarize the importance of a database for making marketing communication decisions. 2. Express the decisions of a direct marketing plan. 3. Describe the content of a loyalty program. 4. Evaluate the strengths and limitations of direct marketing. 5. Apply the ideas of direct marketing within the development of an IMC plan. Chapter and Lecture Outline I. DIRECT MARKETING A. Defining Direct Marketing—direct marketing is the interactive use of advertising media to stimulate an immediate behavior modification in such a way that this behavior can be tracked, recorded, analyzed and stored on a database for future retrieval and use. The execution of direct marketing uses one or more direct-response media (direct mail, telephone, interactive TV, print, Internet, mobile devices, etc.) to solicit a response from a prospect or customer. The use of direct media differs on whether the receiver’s identity is known or unknown. B. Developing a Database—an important part of the direct marketing program is the development of a database. The database is the foundation from which direct marketing decisions evolve. Figure 16-1 shows how database marketing works and 16-2 demonstrates typical database content. Key points on where to obtain a database and the need to update the files are highlighted. 1. Using databases information—databases include much information allowing marketers to send messages to those with no past purchase history and those with past purchase history. This allows marketers to; Improve the selection of market segments, stimulate repeat purchases, cross-sell, and foster customer relationship management. 2. Sources databases information—databases are compiled from company records and from various public and private sources. Some will be rich with past purchase history along with extensive profile variables. Others will be less comprehensive with basic demographic and contact information to send marketing communication. 3. Determining the effectiveness of the database—databases containing customer information need updating and monitoring to assess the success in terms of frequency and amount of purchasing. II. DIRECT MARKETING PROGRAM PLAN A. Target Audiences for Direct-Marketing—the content of the database permits direct communication to those who are both known and unknown so that messages can be customized and or personalized. B. Direct-Marketing Objectives—direct marketers seek a direct response, in terms of trial or repeat purchases. This response need not necessarily be a behavioural response, as direct marketing is now used for other purposes: to build an image, maintain customer satisfaction, and inform and/or educate customers in an attempt to lead to future actions C. Direct Response Media—direct marketers generally pursue either a (1) one-step approach or a (2) two-step approach in developing media strategies. In the one-step approach, the medium is used to directly obtain an order (for example, direct response television ads). In the two-step approach, more than one medium may be used, with the first effort designed to screen or qualify buyers and the second designed to generate the response. A number of direct response media are available to the marketer including: a. Direct mail—direct mail is used extensively for communicating with current customers for up-selling. Keys to the success of direct mail are the mailing list and the ability to segment markets. Purchased mailing lists allow advertisers to reach non-customers according to pre-defined criteria found in the database. b. Catalogues—Examples of successful catalogue retailers are described. c. E-mail—Electronic distribution of direct mail is E-mail where consumers agree to receive messages from a brand. Sign-up occurs via online or store based transactions or through visits to home pages or social media vehicles. Legitimate communication via e-mail is distinguished from unwanted “SPAM” from ruthless illegitimate “marketers”. d. Broadcast media—The majority of direct marketing broadcast advertising now occurs on TV through the use of TV Spots, Infomercials, and Teleshopping. e. Telemarketing—consumer and business-to-business telemarketing facilitates personal communication in the selling process. D. Direct Marketing Effectiveness—the typical measure is cost per order. II. LOYALTY PROGRAMS Frequency programs—Frequency programs (also referred to as continuity or loyalty programs) are promotional programs that reward customers for continuing to purchase the same brand of a product or service over time. Frequency programs have become commonplace in a number of product and service categories, particularly travel and hospitality, as well as among retailers. Many consumer packaged goods companies are also developing frequency programs that offer consumers to accumulate points for continuing to purchase their brands. The points can be redeemed for gifts such as merchandise or for discounts. Reasons for the popularity of frequency programs include; Marketers view these programs as ways of encouraging consumers to use their products or services on a continual basis and as a way of developing customer loyalty, Many companies are realizing the importance customer retention and frequency programs help them build relationships with customers, Frequency programs provide marketers with the opportunity to develop databases containing valuable information on their customers and which can be used for direct marketing purposes, Challenges associated with frequency programs include; Finding ways to make them true loyalty programs rather than just frequent-buyer programs, Using frequency programs to effectively differentiate a product, service or retail store, particularly when they are being used by competitors III. EVALUATION OF DIRECT MARKETING A. Strengths of Direct Marketing • Target audience selectivity • Target audience coverage • frequency • scheduling flexibility • personalization • costs B. Limitations of Direct Marketing • media image • target audience coverage • control for selective exposure • reach IV. IMC PLANNING: STRATEGIC USE OF DIRECT MARKETING A. Decision-Making Process Direct marketing influences trial and repeat purchase primarily at the purchase decision stage. It can also contribute to purchase-related action at any stage such as the information search stage. B. Direct Marketing and IMC Tools Direct marketing is in itself a form of advertising. Whether through mail, print, or TV, the direct-response offer is an ad. Sometimes the ad supports the direct selling effort as a brand might run image ads to support its store and catalog sales. Direct marketing media are also employed to support all facets of the IMC program including PR, sale promotion. Teaching Suggestions As noted, direct marketing is a rapidly growing field. It is a helpful and interesting exercise to start the class with a discussion as to what direct responses students are familiar with, and to point out the fact that some very large, reputable firms are engaging in this form of marketing. It is also useful to spend some time discussing the increased use of databases. Seemingly every organization either now has, or is in the process of establishing a database from which to market. Students will probably be able to identify which databases their names might appear on by the fact that the lists are often sold. It is easy to track who is buying lists from each other, as noted in the text. Vignette 1. Why are loyalty programs different across different product categories? Brands customize their marketing mix for their target market based on the nature of their product, competition and market factors. Essentially, a firm’s situation analysis will dictate its marketing mix and so logically, a loyalty program will be customized for a brand since it is within the scope of the brand’s marketing mix. Within a product category we may see less differentiation since brands within a competitive space often go head-to-head on a number of characteristics, so it would be expected to see similar systems for the point collection and use of the points. Interestingly, recent competition has focused not so much on the systems but the service logistics of claiming the prize. An interesting exercise related to this would be an evaluation comparing loyalty programs. IMC Perspective 16-1 1. What are the similarities and differences among these loyalty programs? Similarities: each knows the identity of the consumer, each bases its reward on the amount or level of purchase, each offers a reasonably valuable reward, each offers a rewards consistent with what is sold, each are moving towards mobile apps. Differences: each is customized to the shopping experience of it customer, levels are seen in some but not others, branding and messaging is unique for each, the redemption rates are likely much different given the frequency of purchase. 2. Could any of them be adapted given what occurs with the others? Scene could consider levels, as heavy users of movies might enjoy alternate or more valuable rewards. The remaining three could follow the lead of Aeroplan with a higher profile communication. Other ideas from students are welcomed. Chapter 17 Internet media Chapter Overview Internet media has been hailed as major breakthrough for marketing communication and a threat to established media as a means of delivering messages. We have taken a much more conservative view. We see the Internet as an extremely valuable tool for marketers and an important part of the IMC program. In our opinion, there are advantages and disadvantages of Internet media just as there are for other media and the astute marketer will know how and when to employ this medium. The chapter starts off with an overview of Internet communication by looking at the users, web-site communication along with its objectives, and website strategy. Advertising via Internet media is examined next by covering the different advertising formats; display ads, paid search ads, classified and directory ads, video & audio ads, and mobile ads, which are related to the idea of Internet media vehicles. Subsequently, the next section investigates social media along the lines of social networking, content communities, blogs, and collaborative projects, which related to the notion of social media incentives. Methods of measuring effectiveness are then summarized and strengths and limitations of the Internet follow. We conclude with a brief summary of the strategic use of Internet media. Learning Objectives 1. Describe the general characteristics of Internet users and explain website communication. 2. Identify the advertising formats of Internet media. 3. Illustrate how to use social media in an IMC plan. 4. Define measures of Internet effectiveness. 5. Evaluate the strengths and limitations of Internet media. 6. Apply the ideas of Internet media within the development of an IMC program. Chapter and Lecture Outline I. INTERNET COMMUNICATION The initial section provides a general overview of Internet with respect to marketing communication. The Internet is both a communications and direct response medium. We make the point that we initially want to consider the communication role of the Internet as opposed to its selling role as this former perspective is in keeping with the scope of the book. A. Internet Users—Current Canadian summary statistics in the first four figures are provided. B. Website Communication—This preliminary section highlights the point that websites are a primary Internet tool that contributes to marketing communication objectives such as; develop awareness, disseminate information, build a brand image, and facilitate interaction. C. Website Strategy—The Website is the home of the information the company provides via Internet media. It is also an experiential medium with much transformational properties as seen in TV advertising. Developing and maintaining a successful site is costly and time consuming. However, to attract new visitors and retain current visitors, it is essential that sites be continually updated. The development of interactivity and the idea of website advertising are emphasized. Research of attitude ad and attitude to brand is as applicable to attitude to website and attitude to brand. In this regard, all branded company websites can be viewed as one big ad, and that the content of these websites are constructed to carefully influence the audiences’ brand attitude. II. ADVERTISING Promotional planners use Internet media as an advertising tool in a variety ways in order to reach their audiences. In most cases, the delivery is similar to other media in terms of a print messages, video message or audio message. In some instances, each offers specific opportunities to reach an audience with particular characteristics and act as a media vehicle. There are a number of advertising formats that resemble other media as well. A. Display Ads—banner ads are the most common form of advertising and moved to a new standard known as Universal Ad Package (CAUP in Canada). Rich media ads are growing with a new standard known as Rising Star Display Units. Research shows these are substantially more effective with their interactive capabilities. Other rich media ads are Pop-ups/Pop-unders which are small message boxes that appear on one’s screen. Interstitial ads appear while content is downloading. Similarly ads shown when a viewer arrives at a website are splash page ads. B. Paid Search Ads—search engine prompts of key words provides links to related web-sites. These links are essentially an extremely primitive form of a display ad that encourages additional action of the user desiring to process the message further at website or any social media vehicle potentially. C. Classified and Directory Ads—a substitution of ads from newspapers (e.g., classifieds) and directory books (e.g., Yellow Pages) occurred over the past decade. General (e.g., Kijiji) and specialty websites (e.g., Autotrader) offer advertisers similar targeting options like other media. D. Video and Audio Ads—streaming of video messages via internet media increased with broadband growth and penetration giving rise to greater advertising opportunities. Online Video Ads—television-like commercials are available for viewing in many locations such as webs-sites and web-portals. Video available for viewing can include television-like ads that users can view prior to receiving the content. These ads are seen without TV show like content. Digital Video Ads—commercials are placed within programming on major TV networks like CTV. In this respect, consumers view the ads as the “cost” of seeing content not paid for. Podcasting—audio communication is sponsored by advertisers with the effect simulating radio ad. E. Mobile Ads—penetration level of smartphones provides a growth opportunity for advertisers for short message service (SMS), display, search, and apps. In many respects, each of these is the portable manifestation of what occurs in advertising when one accesses Internet media via a non-mobile device with the exception of apps perhaps. F. Internet Media Vehicles—all aspects of Internet media are available for dissemination of a marketing message necessitating the need to consider how to organize the options. Figure 17-19 applies existing media terminology to illustrate how planner can evaluate different media vehicles for ad placement. A book by the Advertising Research Foundation suggests targeting by context behaviour, geography, and time of day are relevant approaches with Internet media. III. SOCIAL MEDIA A. Social Media Classification—Social media is an Internet-based application that allows the creation and exchange of user-generated content resulting in six social media classes; collaborative projects (e.g., .wiki, social bookmarking), blogs, content communities (e.g., YouTube), social networking sites (e.g., Facebook), virtual game worlds, and virtual social worlds. This chapter summarizes the first four for advertising and marketing communication purposes. Advertisers are interested in consumers’ online brand-related activities (COBRAs) along the lines of consuming, contributing and creating. With a vast array of possible activities, it is no surprise to see almost an infinite number of potential social media classes and social media vehicles as shown in Figure 17-22. While there is no doubt that certain social media vehicles dominate (also true with established media), these illustrations imply that much of social media is fragmented and that target audience coverage is minimal when placing ads, thus necessitating careful planning and application of existing media knowledge. The extensiveness of social media has heightened existing ideas of “owned” media, “paid” media, and “earned” media implying that clarity in what occurs in a “social media advertising campaign” is paramount. B. Social Networking—two media vehicles are summarized, Facebook and Twitter, for availability of all three views of media (owned, paid, earned). Depending upon the objectives, a promotional planner can (i) own a brand page/account to deliver message, (ii) pay to have a message placed within the media, or (iii) foster digital word-of-mouth communication of the brand. C. Content Communities—two types of media vehicles are summarized, video (i.e., YouTube) and photo (i.e., Flickr). As with the previous section, these media are reviewed for all three purposes for marketing communication of brands.s D. Blogs—are usually the personal writings of an individual, although company and brand versions exist and represent the “owned” media in this media class. Blogs often reflect the “earned” media of brands as individuals will post their experiences while using goods and sservices. Blogs are also an avenue for “paid” media as bloggers will accept ads to support their costs. Blogger owned by Google is one option for bloggers to accept ads and for brands to place ads. E. Collaborative Projects—illustrates the ultimate in social media since consumers are contributing and perhaps to some degree creating as a COBRA. This characteristic makes the distinction (e.g., paid, earned, owned) murky as it is difficult to know who is posting what material, and whether they were paid or not. Moreover, the blurring of content and advertising is become enriched with the movement of content from one domain to another like Pinterest. Instructors can raise an interesting discussion on this point with material from Chapter 18 where ASC shows that the identity of an advertiser should be known. F. Social Media Incentives—examples of social media are illustrated where the exchange is in reality a sales promotion and not an ad or content. Instructors can raise a discussion on the merits of this point to gage student reaction. IV. MEASURING INTERNET EFFECTIVENESS Most of this can be done electronically and specific measures include: 1. Audience Measure—determination of audience sizes remains challenging with a lack of consistent standards and established procedures. 2. Exposure and processing measures—hits, viewers, unique visitors, clicks, click-through rate and impression/page views 3. Communication effects measures —online measuring of recall and message retention; use of surveys and panels to assess attitudinal effects. 4. Measures of behaviour—repeat visitor percentage, frequency, recency. V. EVALUATION OF INTERNET MARKETING A. Strengths of the Internet as a media include: 1. Target audience selectivity 2. Involvement and processing time 3. Control for selective exposure 4. Creativity 5. Costs B. Limitations of the Internet as a media include: 1. Target audience coverage 2. Clutter 3. Reach 4. Media Image VI. IMC PLANNING: STRATEGIC USE OF INTERNET MEDIA The section identifies the tremendous communication opportunity of Internet media on many fronts. It works with any of the other IMC tools and various manifestations of the Internet media act as if they are unique IMC tools within it. With its print, video, audio characteristics, Internet media can have virtually all sixteen media characteristics summarized in Chapter 10 as strengths with the right combination of applications. Its pervasiveness allows it to achieve any communication objective for any target audience at any point in the consumer decision-making process. Thus, when one decides to use the Internet, the manager needs to be very specific with respect to the strategic intent or else valuable resources can certainly be wasted. Teaching Suggestions This chapter may be one of the most interesting chapters in the text for students. At the same time, it may be one of the more difficult for instructors to teach. Much of the difficulty will come from the fact that the Internet media is changing so rapidly that by the time something is committed to print, it has changed. Another factor that makes the chapter difficult to teach is the high level of knowledge and interest of the students. Many of them will know more about the working of the Internet than we do. We recommend getting the students involved in the discussion from the beginning. Showing examples of effective websites—as defined by the communication objectives—is a good starting point. A review of all the advertising avenues is warranted to see the similarity and differences with advertising on TV or print mediums. It is also instructive to make a link to the media concepts from Chapter 10. For example, the idea of media class and media vehicles can be applied to internet media, as social media may be viewed as a media class and Facebook viewed as a particular vehicle. Vignette 1. Do social networking sites work better for attracting new customers or communicating with current customers? Brands can likely use social networking sites both purposes and it will depend on the message and whether the media class is used as “owned” media, “paid” media or “earned” media. A strategy could be mapped out for all six combinations with accompanying media vehicles. This point illustrates the complexity of planning for digital advertising that may in fact be more challenging that advertising in established media. IMC Technology Perspective 17-1 1. What are the essential differences between an ad display network and an exchange for buying and selling display ads? An ad display network operates more like established media buying and selling, the three steps described and the start correspond to what occurs with broadcast media (inventory, sell ad space, deliver ad to publisher/broadcaster). Ad exchanges are a negotiating tool to ensure greater economies for the buyer and seller much like a stock exchange. In this case the buyers and sellers are interacting with one another but in the ad network, the mediator facilitates the transaction between advertiser and content publisher. IMC Perspective 17-1 1. How are apps an effective method for marketing communication? This perspective highlights a positive and a negative story with respect to apps. A key distinguishing feature of the two is the situation and timing of the app use. In the Poynt example, people are using the app with a clear motivation directed from an underlying need to shop to fulfill a consumption need. This is marketing at its finest where there is communication willingly adopted based on need. In the Ford example, the ad is requesting participation for which there is no discernable motive for anyone on the audience. Marketers have to be careful about getting too excited about their brand since not all consumers want to participate in marketing gimmicks for no reason when relaxing or socializing with family and friends. Chapter 18 Regulatory, ethical, social, and economic issues for IMC Chapter Overview This final chapter evaluates the regulatory, social, ethical and economic issues of advertising. Advertising is a very powerful and influential force in our society, and this text would not be complete without considering the perspectives and criticisms regarding its effects. The first section of the chapter focuses on the regulation of advertising in Canada. This is followed by summarizing the criticisms of advertising from ethical and societal perspectives. Attention is then given to appraising the effects of advertising on the economy including its effect on consumer choice, competition, and product costs and prices. Perspectives regarding the economic effects of advertising are summarized by considering two schools of thought: the Advertising = Market Power and Advertising = Information perspectives. Learning Objectives 1. Describe the advertising regulation system in Canada. 2. Evaluate the ethical perspectives of advertising. 3. Explain the social effects of advertising. 4. Examine the economic role of advertising and its effects on consumer choice, competition, and product costs and prices. Chapter and Lecture Outline I. INTRODUCTION Because of its high visibility and pervasiveness, along with its persuasive character, advertising has been the subject of a great deal of controversy and criticism. Various parties and scholars have attacked advertising for reasons including its excessiveness, the way it influences society, the methods used by advertisers, its supposed exploitation of consumers, and its effect on our economic system. The role of advertising in society is a controversial one and a discussion of the topic would not be complete without considering the regulations affecting advertising and the criticisms regarding its ethical, social and economic effects as well as the responses to these charges. Advertising is subject to considerable criticism because it is judged by groups with different norms, values, and ethical standards. Arguments on both sides of controversial ethical, social, and economic issues will be presented in this chapter. However, students may have to draw their own conclusions as to which position is right or wrong. II. ADVERTISING REGULATION IN CANADA Regulation occurs through government and self-regulation. A. Canadian Radio—Television and Telecommunications Commission (CRTC) – It regulates over 5900 broadcast media organizations and is guided by the Broadcasting Act. B. Competition Act—contains guidelines for misleading advertising and is monitored by Industry Canada. C. Regulations on Advertising to Children—In this province it is illegal to direct commercial messages to persons younger than 13 years of age. D. Advertising Standards Canada—the mandate of this industry body is to create and maintain community confidence in advertising. The ASC’s activities encompass: 1. Canadian Code of Advertising Standards—the Code is used as the criteria to assess whether a complaint is legitimate 2. Gender Portrayal Guidelines—these attempt to ensure that women and men are portrayed appropriately in advertising 3. Complaint process—the ASC’s Standards Division handles consumer complaints, special interest group complaints and trade disputes 4. Complaints report—each year the ASC publishes a comprehensive complaint report 5. Complaints for debate—the most significant decisions of the ASC are summarized for class debate. 6. Clearance process—the ASC provides clearance services for advertisements for alcohol, cosmetics, non-prescription drugs and food. It also provides these services for ads directed to children outside Quebec. III. ETHICAL EFFECTS OF ADVERTISING While many laws and regulations determine what advertisers can and cannot do, not every issue is covered by a rule or guideline. In many situations, advertisers must make decisions regarding appropriate and responsible actions based on ethical considerations rather than what is legal or within industry guidelines. Ethics are moral principles or values that govern the actions and decisions or an individual or group. While a particular action or practice may be within the law, this does not necessarily mean it is ethical. Ethical issues must be considered in making integrated marketing communication decisions as a lapse in ethical standards or judgment can result in actions that are highly visible and can be damaging to a company’s reputation and image. Much of the controversy over advertising stems from the ways it is used by many companies as a selling tool and because of the impact advertising has on society’s tastes, values, and lifestyles. There are a number of criticisms of specific techniques used by advertisers as well as charges against its impact on society in general. A. Advertising as Untruthful or Deceptive—one of the major attacks against advertising is that ads are misleading or untruthful and end up deceiving consumers. The issue of what constitutes deception is a very difficult one. However, a concern of critics is the extent to which advertisers are deliberately untruthful or misleading in their advertising. Most large companies are unlikely to risk their reputation and image or subject themselves to prosecution by regulatory groups by making overtly false or misleading advertising claims. Many of the companies involved in outright fraud or deception are often smaller companies using high-pressured direct marketing tactics to push their products. However, national advertisers will test the limits of industry and governmental rules and regulations and make claims that may give their brands an advantage in highly competitive markets. Critics of advertising question whether consumers are receiving proper information to make an informed choice since advertisers usually only present information that is favourable to their brands. They feel that advertising should be primarily informative in nature and not be permitted to use puffery or embellished messages. Others argue that advertisers should have the right to present the most favorable case for their products and services. They note that most consumers can protect themselves from being persuaded against their will and that regulatory bodies and mechanisms are sufficient to keep advertisers from deceiving or misleading consumers. B. Advertising as Offensive or in Bad Taste—another common criticism of advertising, particularly by consumers, is that ads of certain products and particular types of appeal are offensive, tasteless, irritating, boring obnoxious, and so on. 1. Product Type —consumers can be offended or irritated by advertising in a number of ways. Some are offended that a product or service is even advertised at all (such as contraceptives or personal hygiene products). A research study of prime time commercials found a strong product class effect with respect to the type of ads consumers perceived as distasteful or irritating.. 2. Fear appeals—often the inappropriate use of fear appeals receives criticism. This arises from the exploitation of human anxieties of our shortcomings physically or intellectually. Social marketing campaigns have used extreme scenes depicting the consequences of undesired behaviour such as drinking and driving. 3. Sexual appeals—the type of advertising appeals that have received the most criticism for being offensive or in poor taste are those using sexual appeals and/or nudity. These techniques are often used, as ways of gaining consumers’ attention and in some cases may not even be appropriate to the product being advertised. Even if the sexual appeal is appropriate for the product, many people may still be offended. Advertisers who use nudity and sexual suggestiveness argue that their ads are not offensive and are consistent with contemporary values and lifestyles that are more accepting of this type of advertising. Another common criticism of sexual appeals is that they can be demeaning to women and men by depicting them as sex objects. 4. Shock appeals—while not used extensively, certain advertisers use shock to draw attention to their ads. Moreover, the surrounding publicity with such a strategy often ensures even greater exposure. Despite the criticism surrounding this type of advertising, its reoccurrence suggest that in the face of criticism, some advertisers perceive stronger benefits. This could be a source for energetic debate among students who usually are interested in the more unusual aspects of advertising. C. Advertising and Children—one of the most controversial topics advertisers must deal with is the issue of advertising to children. Concern has also been expressed over marketers’ use of other promotional vehicles and techniques such as radio ads, point-of-purchase displays, premium offers, and the use of commercial characters as the basis for television shows. Arguments can be presented on both sides of this controversial issue. The Broadcast Code for Advertising to Children recognizes the debate to find a balance between these two points of view. First, arguments against advertising to children include: • Children, especially young ones, are vulnerable to advertising because they lack the necessary experience and knowledge to understand and evaluate the purpose of persuasive advertising appeals. • Children cannot differentiate between commercials and television programs, do not perceive the selling intent of commercials, and cannot distinguish between fantasy and reality. Arguments in favor of advertising to children include: • Advertising is a part of life and children must learn to deal with it as part of the consumer socialization process of acquiring the skills needed to function in the marketplace. • Greater market knowledge of the marketplace gives teens a basis on which to evaluate ads and makes them more likely to recognize the persuasion techniques used by advertisers. IV. SOCIAL EFFECT OF ADVERTSISING Concern is often expressed over the impact of advertising on society, particularly with respect to its influence on values and lifestyles. Opinions regarding the value of advertising as an important social influence agent are often very negative and it is criticized for a number of reasons. A. Advertising Encourages Materialism—many critics claim that advertising has an adverse effect on consumer values by encouraging materialism, which refers to a preoccupation with material things rather than intellectual or spiritual concerns. Advertising can create materialism in many ways such as: • creating needs rather than showing how a product or service fulfills them • surrounding consumers with the images of the good life and suggesting that acquisition of material possessions leads to contentment and happiness and adds to the joy of living • suggesting that material possessions are symbols of status, success, and accomplishment and/or will lead to greater social acceptance, popularity, sexual appeal, and so on. The criticism of advertising on the basis of creating materialism assumes that materialism is undesirable and done at the expense of non-materialistic goals. Even if one assumes that materialism is undesirable, there is still the issue of whether advertising is responsible for creating and encouraging these values. This brings up the classic argument as to whether advertising is a major force contributing to society’s values, such as materialism, or whether advertising merely reflects or mirrors the values of society and does not mold or shape them. B. Advertising and Persuasion—another common criticism of advertising is that it has the power to manipulate consumers and make them buy things they do not need. Persuasive advertising, which plays on consumers’ emotions, anxieties, and social and psychological needs and desires, is viewed as undesirable. This type of advertising is seen as going beyond basic needs or necessities in appeals to sell products and services. Only informational advertising, which reports factual, functional information such as price performance, and other objective criteria, is viewed as acceptable and desirable. Defenders of advertising offer a number of rebuttals to these criticisms. They argue that a substantial amount of advertising is essentially informational in nature and that it is difficult to separate desirable, informational advertising from undesirable, persuasive advertising. They also note that most lower-level needs in our society are satisfied and it is natural for consumers to be concerned with higher order needs, and for advertising to appeal to these wants and desires. They also note that advertising cannot make consumers do things against their will and they can defend themselves against advertising. Consumers do have a choice and can ignore ads for products and services that they do not really need. C. Advertising and stereotyping—advertising is often accused of creating and perpetuating stereotypes thorough its portrayal of certain groups including women and visible minorities. 1. Women—advertising has received a great deal of criticism for its stereotyping of women. Critics charge that advertising generally depicts women as being preoccupied with beauty, household duties, and/or motherhood or shows them as decorative objects or sexually provocative figures. Critics also argue that advertisers have failed to acknowledge the changing role of women in society. While sexism and stereotyping of women still exist, advertising’s portrayal of women is improving in many areas as many ads recognize the changing role of women in our society and the importance of portraying them realistically. 2. Visible minorities—recent Canadian trends and commentaries by practitioners suggest that the portrayal of minorities – particularly Chinese, South Asians and Blacks can be improved in Canadian advertising even though there has been an improvement in the recent past. D. Advertising and the media—since advertising plays such an important role in financing the media has led to concern on the part of many that advertisers can influence or even control the media. 1. Arguments supporting advertiser control of the media: • The media’s dependence on advertising revenue makes them susceptible to various forms of influence such as exertion of control over editorial content, biasing editorial opinions, limiting coverage of controversial topics or stories, and influencing the program content of television. • Newspapers and magazines receive a substantial percent of their total revenue from advertising, whereas commercial television and radio derive nearly all of their income from advertising. Thus, the media may be reluctant to carry stories detrimental to companies who purchase large amounts of advertising time or space. • There have been situations where advertisers have brought pressure to the media and influenced content or programming decisions. Some of these situations have been in response to pressure or the threat of boycotts from consumer groups opposed to program content. 2. Arguments against advertiser control: • It is in the best self-interest of the media that advertisers not influence them too much. To retain public confidence, they must report the news fairly and accurately and not be perceived as biased or attempting to avoid controversial issues. Media executives point to the vast amount of topics they cover and the investigative reporting they do as evidence of their objectivity. • It can be argued that advertisers need the media more than the media need any individual advertiser, particularly when the medium reaches a large audience or does a good job of reaching a specific market segment. The Canadian media are basically supported by advertising and allow consumers to enjoy them for a fraction of what it would cost without advertising. Although not perfect, a system of advertising-supported media provides us with the best option for receiving information and entertainment and is probably more desirable than the alternatives of paying higher subscription costs, pay-per-view, or having government-supported media. E. Advertising and social benefit—negative opinions regarding advertising have been around just as long as the field itself, and it is very unlikely that they will ever disappear. It is important that the advertising industry remains cognizant of, and continually addresses the various issues and concerns over, the effects of advertising on society. Advertising is a very powerful institution, but it will only remain so as long as consumers have faith and trust in the ads they see and hear every day. It is important to note that advertising and other integrated marketing communication tools, such as direct marketing and public relations, are also used to promote worthy causes and to deal with problems facing society such as drinking and driving, drug abuse, and are used to raise funds for a variety of humanitarian efforts. V. ECONOMIC EFFECTS OF ADVERTISING Considerable attention has been given to examining the economic impact of advertising. Advertising plays an important role in a free-market system such as that found in Canada and other countries by making consumers aware of products and services and providing them with information that can be used to make purchase decisions. However, advertising’s economic role goes beyond this basic function of information provision, as it is a very powerful force that can affect the functioning of an entire economic system. It is viewed by many as a positive force that encourages consumption and fosters economic growth. On the other hand, many critics of advertising view it as having detrimental economic effects by not only failing to perform its basic function of information provision adequately, but also adding to the costs of products and services and discouraging competition. A number of major issues regarding the economic effects of advertising are considered. A. Effects on Consumer Choice—some critics argue that advertising has a negative effect on consumer choice as large advertisers use their power to limit our options to a few well-advertised brands. Economists argue that advertising is used by large national advertisers to achieve differentiation and brand loyalty, usually at the expense of smaller brands. These large companies often end up charging a higher price and are able to achieve a more dominant position in the market than smaller companies that cannot compete against their large advertising budgets. When this occurs, advertising restricts choices and becomes a substitute for competition based on price or product quality. Defenders of advertising argue that it does not create brand monopolies and reduce the opportunities for new brand or product introduction. The opportunity to advertise gives companies the incentive to develop new brands and improve existing ones. Advertising is instrumental in helping companies inform consumers about their new products. B. Effects on Competition—one of the most common criticisms economists have with advertising concerns its effect on competition. They argue that large firms with huge advertising budgets create a barrier to entry, which makes it difficult for other firms to enter the market. This in turn leads to less competition and higher prices. Large advertisers enjoy certain competitive advantages such as economies of scale in advertising, particularly with respect to factors such as media costs. While advertising may have an anticompetitive effect on a market, there is no clear evidence that advertising alone reduces competition, creates barriers to entry and thus increases market concentration. Defenders of advertising note that it is unrealistic to attribute a firm’s market dominance solely to advertising, as there are a number of other factors to consider such as price, product quality, distribution effectiveness, production efficiencies, and competitive strategies. While market entry against large established competitors is difficult, companies with a quality product offered at a reasonable price find that advertising actually facilitates their market entry by make it possible to communicate with consumers. C. Effects on Product Costs and Prices—A major area of debate among economists, advertisers, consumer advocates and policymakers concerns the effects of advertising on product costs and prices. Critics offer several reasons why advertising results in higher prices: • The large sums of money spent on advertising and promotion are an expense that is passed on to consumers in the form of higher prices • Advertising increases product differentiation and adds to the perceived value of the product in the mind of the consumer, which allows advertised brands to command premium prices • There are often large differences in prices between national brands and private label brands that are physically and functionally similar, which is evidence of the added value created by advertising. Consumers pay higher prices for this added value. Proponents of advertising offer several counter-arguments to the claim that advertising increases prices: • Price insensitivity and brand loyalty can be created by a number of non-advertising factors such as product quality, packaging, favorable usage experience and market position • Advertising can actually result in lower costs by helping firms achieve economies of scale in product and distribution and helping stimulate demand among mass markets • Advertising can make a market more competitive, which often leads to greater price competition. Several studies have found lower consumer prices in markets permitting advertising for a product versus those that did not. D. Summarizing Economic Effects—Economists’ perspectives regarding the effects of advertising can be divided into two principal models or schools of thought, each of which makes different assumptions regarding the influence of advertising on the economy: 1. Advertising Equals Market Power—this model reflects traditional economic thinking and views advertising as a way of changing consumers’ tastes, lowering their sensitivity to price, and building brand loyalty among buyers of advertised brands. This results in higher profits and market power for the large advertiser, reduces competition, and leads to higher prices and fewer choices for consumers. Proponents of this viewpoint are generally negative in their assumptions regarding the economic impact of advertising. 2. Advertising Equals Information—this model takes a more positive viewpoint of advertising’s economic effects, as it views advertising as providing consumers with useful information, increasing their price sensitivity, which moves them toward lower-priced products, and increasing competition in the market. Advertising is viewed as a means of communicating with consumers and telling them about a product and its major features and attributes. More informed consumers put pressures on firms to lower prices and improve quality. Proponents of this model assume that the economic effects of advertising are favorable and view it as contributing to efficient and competitive markets. These two perspectives take very divergent views regarding the economic impact of advertising as shown in Figure 18-6. It is unlikely that the debate over the economic effects of advertising will be resolved soon. Many economists will continue to take a negative view of advertising and its effects on the functioning of the economy, while advertisers will continue to view it as an efficient way for companies to communicate with their customers and an essential component of our economic system. Teaching Suggestion In this final chapter we evaluate advertising from a societal, ethical and economic perspective. Advertising is a very powerful institution in Canada and has been the target of considerable criticism regarding its social and economic impact. Much of the criticism of advertising concerns the specific techniques and methods used by advertisers, as well as advertising’s effect on societal values, tastes, lifestyles and behaviour. We examine these various criticisms of advertising along with the responses of advertisers to these attacks. It is important to recognize that there are usually two sides to each of these issues and we try to recognize the arguments of the critics as well as of the advertising industry. For example, one of the classic debates over the social impact of advertising concerns the issue of whether advertising is responsible for creating undesirable consumer values, such as materialism, or whether advertising merely reflects or mirrors the values of society rather than molding or shaping them. Arguments can be made on both sides and it makes an interesting topic for student discussion. A very good exchange of arguments regarding this issue can be found in articles by Richard W. Pollay, “The Distorted Mirror: Reflections on the Unintended Consequences of Advertising,” Journal of Marketing, April 1986 and Morris B. Holbrook, “Mirror, Mirror on the Wall, What’s Unfair in the Reflections on Advertising,” Journal of Marketing, July 1987 and a rejoinder by Pollay, “On the Value of Reflections in ‘The Distorted Mirror,” which also appeared in the July 1987 issue of JM. Stephen Fox’s book, The Mirror Makers: A History of American Advertising and Its Creators (New York: Morrow 1984) also provides an excellent discussion of arguments concerning the impact of advertising on society. Vignette 1. Are these issues of accuracy in ads relevant for the products purchased by the average student? These examples open the door with a discussion about what is appropriate or inappropriate content for an advertising message. It will be interesting for instructors to assess the reaction of the students to suicide and infidelity. Instructors might want to have someone predict what the vote might be before taking one to see varying points of view. Some students might bring religious points of view into the discussion, so some caution may be necessary. Ethical Perspective 18-1 1. What limits or controls do you believe should be in place for children of varying ages? The online exposure of ads to children will likely be a topic of concern for regulators in the coming decade. As the consumer understanding of Internet media matures, many will realize that much of the www is a repository of extensive advertising as this story shows, the websites children visit are in fact advertising. Thus far the Federal Government has been reluctant to control Internet media the way it has with broadcast media for decades, however, the starting point will likely be with messaging to children as it is a target for which most people will find little reason to question. Instructors should draw students’ attention to the guidelines suggest and assess whether these are reasonable and how they could be implemented. Instructors might also begin the discussion on whether students feel as if they have been corrupted unduly influenced by online advertising as children. Ethical Perspective 18-2 1. Do you think these fines will ensure that Canadians receive accurate price information in ads in the future? Heated opinions should likely arise if students read and discuss this story. As users of smartphones, this is one product that they will have extensive experience compared to many other product categories. It will be interesting to see if any student determines how significant or insignificant the penalty is for the companies. In fact a simple speeding ticket for a student on a budget is possibly more painful than the money given by the telcos. Despite this, hopefully students will appreciate the fact that the government is acting upon fraudulent messages from major brands. Instructor Manual for Advertising and Promotion: An Integrated Marketing Communications Perspective George E. Belch, Michael A. Belch, Michael A. Guolla 9780070891302