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Wider Issues Of Marketing Communications
EVALUATION AND MEASUREMENT :
1. Accountability : Brand awareness, brand knowledge, customer satisfaction, and several such elements that drive brand equity are intangible. Thus the measurement of effectiveness is more complicated than simply collecting the sales and profit figures. One of the most important ways to meet this challenge is to measure and evaluate brand messages by observing responses from different brand messages and campaigns that are used. The following are some features : a. As marketers spend their communications money in numerous media, the need to determine the effectiveness of these expenditures become increasingly important. Both clients and agencies are continually striving to determine whether their communications are working and how well they are working relative to other options. b. Measuring the effectiveness of the promotional planning process. Research allows the MM to evaluate the performance of specific programme elements and provides input to the next period’s situation analysis. It’s a necessary ingredient to a continuing planning process, and yet it is often not carried out. c. Measurable objectives enable companies to quantify the effectiveness of MC efforts. Evaluating and measuring MC programmes are done to see whether objectives have been met and the programmes are effective. Meeting or exceeding objectives shows that the company’s money is wisely spent.
d. Accountability is a must in business today. Starting from the top- the board of directors- and extending down to the lat level of sections, there’s always someone asking the following questions : i. ii. How and why money was spent, How the spending helped generate sales and profits, and
iii. Whether the money was spent in the most effective way. e. Studies show that 70% of MMs don’t know what kind of return they get on their marketing investment. Such MMs can’t defend their budget spending, and are constantly competing internally with other departments for this. f. Apart from knowing whether the objectives are met or not, there’s another important reason is to find out why it worked or failed. Evaluation and measurement provides the feedback, and this becomes a basis for corporate learning.
g. Another important reason for measuring MC efforts is to determine the “gap” between the expectations and reality. “Gap Analysis” is an analysis of the difference between what customers expect from a brand (based on the brand messages) and what they actually experience after buying. h. Evaluation must include critical areas such as cross-functional planning and monitoring, brand message creation, media planning and buying, and listening to customers and capturing their complaints, suggestions, and compliments. These are the IMC processes that strengthen the brand relationships that in turn drive profitable brands. 1
Other objectives of E and M include : i. ii. Reducing risk, Providing direction,
iii. Determining to what extent MC programmes meet objectives, and iv. Determining to what extent MC effort is a good investment for company’s money. j. MC E and M programmes are conducted both during the development of brandmessage strategies and after the completion of a campaign. The basic objective is to predict or determine “results”- i.e., the changes in behaviour or attitudes created by an offer, a promotion, a campaign, a company response or some other type of brand message.
k. Generally speaking, MC evaluation is done primarily when companies (1) have sizable media budgets, and (2) stand to suffer significant financial losses if the brand message fails to achieve the MC objectives. Although some MMs feel their personal judgement is sufficient to evaluate brand messages and campaigns, most “smart” MMs in these situations prefer to base their “use” or “don’t use” decisions on some type of objective evaluation. l. Almost any time one engages in a project or activity, whether for work or fun, some measure of performance occurs. In business employees are generally given objectives to accomplish, and their job evaluation are based on their ability to achieve the objectives. Advertising and promotion should not be an exception. It’s important to determine how well the communications programme is working and to measure this performance against some standards.
2. Reasons to Measure Effectiveness (Benefits or Advantages) : Assessing the effectiveness ads both before they are implemented and after the final versions have been completed and fielded offers a number of advantages, as follows : a. Avoiding costly mistakes : A huge amount of money is being spent for advertising and promotion, without some understanding of how well it’s spent. If the programme is not achieving its objectives, the MM needs to know so he can stop spending money on it, or take some remedial measure by some modification. If the advertising and promotional programme is not accomplishing its objectives, not only the money spent is lost but so too is the potential gain that could result form an effective programme. Thus measuring the effects of advertising doesn’t just save money. It also helps the firm maximise its investment. b. Evaluating Alternative Strategies : Generally a firm has several strategies under consideration. Research may be designed to help the manager determine which strategy is most likely to be effective. Companies often test alternate versions of their advertising in different cities to determine which ad communicates most effectively. c. Increasing the efficiency of Advertising in general : Sometimes advertisers get so close to the project that they lose sight of what they’re seeking. And, because they know what they’re trying to say, they expect their audience will also understand the same. Conducting research helps companies develop more efficient and effective communications. An increasing number of clients are demanding accountability for their promotional programmes and putting more pressure on the agencies to produce.
d. Determining if Objectives are Achieved : In a well designed IMC plan specific objectives are established. If objectives are attained, new ones need to be established in the next planning period. An assessment of how programme elements led to the attainment of the goals should take place, and / or reasons for less-than-desired achievements must be determined. 3. Reasons Not to Measure Effectiveness (Limitations or Disadvantages): Companies give a number of reasons for not measuring the effectiveness of advertising and promotion strategies, as given below : a. Cost : Perhaps the most commonly cited reason for not testing (especially for smaller firms) is the Cost or Expense. Good research can be expensive in terms of both time and money. Many MMs decide that time is critical and they must implement the programme while the opportunity is available. Many others believe that the money spent on research could better be spent on improved production of the advertisement, additional media buys and the like. b. Research Problems : A second reason is that it’s difficult to isolate the effects of promotional elements. Each variable in the marketing mix affects the success of a product or service. Since it’s difficult to measure the contribution of each marketing element directly, some MMs get frustrated and decide not to test at all. c. Disagreement on what to test : The objectives sought in the promotional programme may differ by industry, by stage of product life cycle, or even for different people within the firm. For example, the sales manager may like to see the impact of promotions on sales, top management may width to know the impact on corporate image, and those involved in the creative process may wish to assess recall and/or recognition of the ad. Lack of agreement on what to test often results in no testing.
d. The Objection of Creative Group : It has been argued by many (and denied by others) that the creative department doesn’t want its work to be tested and many agencies are reluctant to submit their work for testing. Ad agencies’ creative department argue that i. ii. Tests are not true measures of the creativity and effectiveness of ads, Applying tests and measures stifles their creativity,
iii. The more creative the ad, the more likely it is to be successful. And they want permission to be creative without the limiting guidelines the MMs may impose. e. Time : A final reason given for not testing is the lack of time. MMs believe they already have too much to do and just can’t get around to testing and measurement. For this planning and organising time may help. 4. The Evaluation Process : Evaluation generally takes a lot of money, effort (staff time) and other expensive resources. The main idea is to find out the probability of success before the money is spent. Or in technical terms the marketers want to know whether the level of success will be high enough to justify the programme’s cost. This is an analysis that gives the Return on investment (ROI). The more is at risk, the more complex and rigorous evaluations and measurements need to be done. a. The Cost-Value Factor : Evaluations always have costs in their various stages. But some MC measurements, however has very little cost. For example, the “split run” of ads in magazines can be done with a very little extra money, for two 3
different offers, localities, or messages, etc. Evaluations should be done for the areas or attributes that can be made easily, or with less effort, time or cost. Obviously, spending lots on measuring things which aren’t likely to be modified is a waste of all types of resources. b. Information Already Existing : Many companies have enormous amount of data that can be used for evaluation and measurement purpose. But these companies don’t use them. On the other hand several companies gather a lot of information during the study, which they don’t use it purposefully. These kinds of situations should be avoided. c. When should the Evaluation be Conducted : Evaluation can be done at several stages during the development and execution of the MC programmes, as given below : i. Idea Generation : The first stage is MR for customer perception to determine whether the brand’s position needs reinforcing, changing or repositioning. Several ideas for the theme are then generated. Concept Testing : Then after message ideas have been generated comes the “concept testing”. This consists of the tests that measure the effectiveness of the rough ideas that become brand and campaign messages.
iii. Copy Testing : Then comes “copy testing”, which is the type of research that evaluates the brand message execution in a rough form before they’re finally produced. iv. Concurrent Testing : Then there is “concurrent testing”, which is the testing that tracks the performance of messages as they are run. v. Evaluative Testing : Finally there’s “evaluative testing” which is the testing that measures the performance of brand messages against their objectives at the conclusion of the programme. Some companies test only at only one stage, others at more than one, depending on how much the company wants to invest in minimising risks. The closer a message is to its finished form and the more realistic the environment is, the more predictability a measurement has. d. Critical Role of Objectives : An effective marketing communication programme is the one that meets its objectives. MC planners must set measurable objectives. The more closely they are set to relate the sales and profit, the better they are. But this is very difficult to achieve like this, because of emotional or subjective factors, except of course for direct marketing and personal selling. There are basically two sets of parameters which need evaluation. They are rational (objective) and emotional (subjective). Normally the rational factors are short term and the emotional ones are long term. Hence both the factors should be taken into consideration. And similarly both types of evaluations and measurements must be adopted to know the results. i. Baseline : Another important factor in setting objectives is knowing the “baseline”, which is the beginning point where things stand before an MC programme starts. For example, if the current level of brand awareness is 50%, and the objective is to increase to 60%, then the objective statement should be “The objective is to increase the brand awareness level form 50% to 60%, an increase of 20% within a year’s time”.
Brand Strategies and Evaluation Methods :
The success or failure of the promotional campaigns depends on various parameters. So the companies base their measurement programmes on these parameters. There are three broad categories of them - (1) the test variables, (2) the timing of the test, (3) the location of the test. 1. Identify the Test Variables : Marketers must track customers’ reactions to the MC messages to measure marketing effectiveness. The first step is to identify the variables in each campaign that need to be evaluated and measured and set the level of achievement that are expected. a. Message Variables : As we have learnt earlier, the message must be clear, strong, precise, short, comprehensive, and above all persuasive. For example, ICICI Bank’s slogan “Hum Hain Na”. Some messages may have high recall value, but they don’t generate enough sales. b. Source Variables : This is similar to the credibility of sources. The message delivery must be done by a credible source having much influence and persuasive power. In due course of time if the degree of credibility or the influence decreases then the source needs to be changed. For example, when Cadbury Chocolate has 15% decline in its sales in 2003, it got Amitabh B to endorse its products that yielded good results. c. Delivery channels are an important parameter, which need to be evaluated and chosen - the media, the medium and the media vehicle, the reach and frequency etc. are all to be decided critically. Another factor that comes to play is the “vehicle option source effect” which is defined as the differential impact that the advertising exposure will have on the same audience member if the exposure occurs in one media option rather than another. People perceive differently depending on their context.
d. Budget Decisions : Cost and budget is of course very critical and control all the above factors, there’s no straight correlation between the size of the budget and the effectiveness and it’s very difficult to measure as several subjective parameters or marketing mixes are involved. 2. Decide on the Timing of the Test : Almost all the test measures can be classified according to when they are conducted- Pre-tests, and Post-tests. A promotional campaign goes through the various stages of the production, like concept generation, rough copy, pre-finished art, commercial pre-setting and market testing, etc. a. Pre-test : If the evaluation of a promotional campaign at any of these above mentioned stages occur then it’s called the pre-test. It can check before the MC spending whether it would yield any results. So a corrective method can be applied beforehand, or the plan can be changed outright. But this is not easy to do, because the simulation of the actual marketplace through an artificial environment may not be representative, and the response that is obtained from the test may not be as close as desired. The advantages are that these are inexpensive and can prevent unproductive expenses. Different marketers use different methods, such as focus groups, mail, home interviews, and others. b. Post-test : These are the tests that are done after any process has taken place, or the campaign is already released into markets. These tests are more expensive and time consuming but can give accurate results. These are designed to (1) determine is the campaign is accomplishing the objectives sought, and (2) serve as an input for the next period’s situation analysis. A variety of methods are available such as recall tests, survey research methods, etc. 5
3. Decide on the Location of the Test : The places where the tests are conducted are the locations of the test. There are two basic types of places- the natural environment where the field tests are conducted, and the artificially controlled environment where the laboratory tests are conducted. a. Laboratory Tests : In laboratory tests people are brought to a particular location where they are shown ads and commercials. The testers either ask questions about them or measure participants’ responses by other methods, for example, eye tracking, pupil dilation, etc. i. The major advantage of the laboratory setting is the control it affords the researchers. Changes in copy, illustration, formats, colours, and the like can be manipulated inexpensively and the differential impact of each assessed. This makes it much easier for the researchers to isolate the contribution of each factor. The major disadvantage is the lack of realism. This has an effect of “testing bias”. When people are invited to the test laboratory they inadvertently develop some bias, i.e., they become more conscious, hypersensitive etc. The natural noise, interruption, disturbance etc. are not present as in normal life. But overall the advantages are more than the disadvantages.
b. Field Tests : Field tests are the tests of ads and commercials done in the natural backdrop of a market place, a home, with all the natural noise, interruption, disturbance, distractions and comforts of home. Field tests take into account the effects of repetition, programme content and even the presence of competitive messages. i. The major disadvantage is the lack of control. It may be impossible to isolate the causes of viewers’ evaluations. If any unusual or irregular events occur during the test, they may bias the results. Competitors may attempt to sabotage the research. These tests generally take more time and money to conduct.
4. Testing Methods (How to Test) : Now we shall discuss the actual methods generally used for the tests. Conducting evaluative research is not easy. There are some guiding principles. a. The Guiding Principles : Twenty-one of the largest US ad agencies have endorsed in 1982 a set of principles aimed at the following : i. ii. Improving in the research used in preparing and testing ads, Providing a better creative product for clients,
iii. Controlling the costs of TV commercials. b. PACT (Positioning Advertising Copy Testing) : These give rise to a set of nine principles called the PACT, which defines copy testing as research which is undertaken, when a decision is made about whether advertising should run in the marketplace. Whether this stage utilises a single test or a combination of tests its purpose is to aid in the judgement of specific advertising executions. The Nine principles are : i. ii. Provide measurements that are relevant to the objectives of advertising. Require agreement about how the results will be used in advance of each specific test.
iii. Provide multiple measurements (because single measurements are not adequate to assess performance). 6
iv. Be based on a model of human response to communications- the reception of a stimulus, the comprehension of the stimulus, and the response to the stimulus. v. Allow for consideration of whether the advertising stimulus should be exposed more than once. vi. Require that the more finished a piece of copy is the more soundly it can be evaluated and require, as a minimum, that alternative executions be tested in the same degree of finish. vii. Provide controls to avoid the biasing effects of the exposure context. viii. Take into account basic considerations of sample definition. ix. Demonstrate reliability and validity. 5. The following are several test methods described : a. Recognition : Recognition refers to the feeling that something present has been encountered before. This feeling or the ability to recognise things is used to test the effectiveness of an advertisement. Recognition tests are designed to measure a target audiences’ awareness of a brand, points in the ad copy or the advertisement itself after they have been exposed to it. In the basic form of recognition test, an advertisement is shown or described to the respondent and his verbal responses are noted. i. Mail Surveys : A questionnaire containing a description of an advertisement and a few questions regarding the advertisement is mailed to the target audience. The brand name is not revealed in the description; the respondent has to identify it. Respondents are requested to fill the questionnaire and mail back the filled forms. Normally some incentive is given for doing all this. The respondent with the positive reply is asked to identify the brand name and the parts of the copy which reminded them of the brand name. Starch Test : The Starch test is a popular post-test, and was invented in 1923 by Daniel Starch, a physiologist to measure the effectiveness of print ads. The pre-condition for a starch test is that the respondent should have already read the same issue of magazine in normal conditions as a regular reading. During the test, the respondent is asked whether he has seen or read a particular advertisement before. Depending on the responses the advertisements are divided into the following three categories : 1. Read Most - the respondents read half or more of the copy. 2. Seen Associated - the respondent read only that part of the advertisement which describes the brand or service. 3. Noted - the respondent remembers seeing the advertisement. However, there are some concerns regarding bias of the respondent, as he may give positive responses to impress the interviewers. b. Recall : Recall is defined as the process of remembering something or recovering information by mental effort. It’s based on the theory that the commercial leaves an impression on the mind of a person who has seen it. Recall tests are designed to test an advertisement’s impact by asking the respondents to recall a particular component of it. Depending on the help given to the respondents to recall, the recall is classified as “Aided” or Unaided”. In unaided recall the respondent is not prompted with elements of the ad. (For example, “Name the soft drinks you know?”). In aided recall the respondent is not prompted with the brand name or 7
some picture of the commercial. (For example, “Have you heard of a soft drink called mountain dew?”). i. Day-After-Recall (DAR) : This rest was designed by George Gallup in 1940. This test is conducted after 24-72 hrs of exposure to an ad or a TVC. The respondent is selected randomly and contacted through telephone for asking a few simple questions, like if they remember any ad in this product category, any words or pictures, the brand name etc. The advantages are that it’s a field test and conducted in the natural setup like the home. But the disadvantages are that the sample size has to be very big to be realistic or accurate; and it’s not suitable for evaluating the emotional or psychological appeal. Portfolio Test : It’s a Laboratory test method in which the respondents are exposed to a portfolio of control and test advertisements. Ads that yield the highest recall are the most effective. The result is normally correlated with the actual scores when the ad is placed in the field. In spite of the shortcomings this method is quite popular. This test is generally used for pretesting the print advertisement. It can also be used to sequence the advertisements in such a way as to facilitate the maximum recall.
Persuasion : In short persuasion is the act of influence intended to bring about a change in attitude and buying behaviour of a consumer in favour of the brand. The following two tests are used : i. Theatre Test : This test is designed to measure persuasion effects. These are tests in which people are invited to a local location for the purpose of say, rating a particular TV programme, but actually evaluating their response to a brand message. Before the show the participants are given a questionnaire to fill about a brand preference, and some demographic data. The show contains several ads along with the ones that are to be tested. And, after the show one more questionnaire is given to the respondents for filling up information regarding the ad recall. Also another questionnaire is given for filling the information regarding brand preference, the results of which are compared with the first one to get the score about the change in attitude and behaviour. On-Air Test : In case of the on-air test the commercial is broadcast in one to four test markets. Depending on the profile of the target market, the respondents are contacted before and are given some incentives to watch the test commercial. They are asked about their brand preferences in a product category. The next day after the broadcast of the test ad the respondents are contacted again and asked questions to find out their brand preferences. These two results are then compared to find out the recall and change in brand preferences.
6. Essentials of effective testing : Good tests of MC must address the nine principles established by “PACT”. One of the easiest ways to accomplish this is by following the decision sequence model in formulating promotional plans, as given below : a. Establish communications Objectives : Except for a few instances (most specifically direct response advertising), it is nearly impossible to show the direct impact of advertising on sales. So the marketing objectives established for the promotional programmes are not good measure of communication effectiveness. For example, it is very difficult (or too expensive) to demonstrate the effect of an advertisement on brand’s share on sales. On the other hand, attainment of communications objectives can be measured and leads to the accomplishment of marketing objectives. 8
b. Use a Consumer Response Model : One can use the hierarchy of effects model and cognitive response models, which provide an understanding of the effects of communications and lend themselves to achieving communications’ goals. c. Use Both Pre-tests and Post-tests : From the cost stand point- both actual cost outlays and opportunity costs- pre-testing makes sense. It may mean the difference between success and failure of the campaign or the product. But it should work in conjunction with post-tests, which avoid the limitations of pretests, use mush larger samples and take place in more natural settings. Posttesting may be required to determine the true effectiveness of the ad or campaign.
d. Use Multiple Measures : Many attempts to measure the effectiveness of advertising focus on one major dependent variable- perhaps sales, recall or recognition. Advertising may have a variety of effects on the consumer, some of which can be measured through traditional methods, others that require updated thinking. For a true assessment of advertising effectiveness, a number of measures may be required. Most of the big and reputed companies employ multiple measures to track the effects on communications objectives. e. Understand and Implement Proper Research : It is critical to understand research methodology. What constitute a good design? Is it valid and reliable? Does it measure what we need it to? There is no short cut to this criterion, and there’s no way to avoid it if you truly want to measure the effects of advertising.
LEGAL AND ETHICAL CONSIDERATIONS OF PROMOTIONAL STRATEGIES :
Ethics in Marketing Communications : In the words of Ivan Preston, Professor Emeritus of University of Wisconsin, “Ethics begins where law ends”. Every society has certain ethics, moral and value standard that act as a behavioural guidelines. The ethics of organisations and of individuals within a society form the standard of determining what is right and wrong in different situations. Unlike Govt. laws and regulations, which are explicitly stated, ethical codes are generally not written down. Rather, they are held in the social consciousness of an organisation or a population, and what constitutes ethical behaviour is determined by public attitudes and feelings. Ethics are important in IMC because they provide the basis for the moral choices that individuals and organisations must make in their relationship with each other. Marketing practices should be guided by an organisation’s ethics. Marketers should also ask whether brand messages and programmes are aligned with the ethics of the brands stakeholders. Establishing what is or what is not ethical is not always easy. Everything a company does and sometimes what it doesn’t do can send a brand message. The types of policies a company sets down for its employees communicate that company’s beliefs to its stakeholders and to the public at large. The following are several types of problems of ethics we encounter in MC : 1. Stereotyping : As our society has become more aware of its diversity, people have become sensitized to cultural, ethnic, gender and other differences. Although stereo types sometimes contain grains of truth that may be useful in segmenting a group, the challenge for brands is to develop message that strike a chord with targeted audiences without reinforcing negative stereotypes. Sometimes companies are able to use messages that can be interpreted favourable by different audiences. Companies can avoid making some groups on comfortable or even energy by carefully screening their brand messages and selecting highly targeted media for delivery. 9
2. Targeting Vulnerable Groups : As the population as a whole has become more educated about marketing strategies and tactics, concern has been increasing about message specifically directed to captive audiences, as well as to less educated or unsophisticated consumer groups. Feeling that companies take “persuasive advantage” of vulnerable or disadvantaged groups some critics have mounted efforts to ban the promotion of certain types of products from certain media targeted to certain audiences, such as children, the elderly, minorities, the people in developing countries, etc. a. Children : Marketing to children is criticised on several grounds. Some critics worry about children being bombarded with consumer image that glorify the buying of products. Parents see children becoming brand savvy at an early age and demanding certain products and brands. Although some might argue that children need to learn consumer skills, the issue raised by this proliferating consumerism is whether children who are too young to have developed the critical skills needed to separate advertising from other types of directions are being unfairly manipulated. Marketing to children has some under question because even the more vigilant parents find it hard to screen all, or even a fraction, of the commercial messages their children see. In general, parents prefer to be the ones to shape their children’s buying decisions. But companies are free to advertise in and around schools, during children’s programming on TV, at sporting events, on product packaging and point-of-purchase displays, on the internet, and in movies and at the movie theatres. And parents can’t possibly be on hand to help their children interpret all of these brand messages. The more children’s tastes appear to be shaped by commercial messages rather than by parental influences, the support there is for regulation. b. The Elderly : Consumer affaires office and reporters are often alerted to questionable sales and marketing tactics aimed at the elderly. Some marketers use hard-sell pitches with puzzling details for this target audience. The elderly are often the targets of tele-marketing frauds involving prize promotions, lottery clubs, charity solicitations and advertising offers. c. Minorities : Commercial messages are often targeted to different ethnic groups. For example, several years ago, R J Renaults announced plans to introduce uptown, a cigarette designed to appeal to black smokers. The US Secretary of Health and Human Services at that time charged that the company was “cynically” targeting a group already suffering from smoking-related illness.
3. Puffery : Brand messages that are unclear or subject to interpretation are more difficult to regulate. Calling product the “finest” may be an exaggeration that can’t be proved, but the use of such words is rarely challenged because it is considered to be a legal form of boasting called puffery. Puffery is the use of hyperbole or exaggeration to promote a brand. Some experts, such as Ivan Preston, disagree and argue that even though the law presumes that people don’t believe puffery, research repeatedly finds that consumers actually do believe these claims are true. 4. Fraud : Generally, Govt. agencies aggressively pursue companies that knowingly mislead the public. Companies that have no track record of providing legitimate goods and services are also targeted. Companies engaging in fraud face criminal penalties. One of the most common types of MC fraud is the selling of brand knockoffs - goods that carry a popular brand name but are made by another company and generally are of lesser quality than the brand that has been counterfeited. Most likely to be counterfeited are the products that are widely used, such as drugs, cigarettes, perfumes, etc. 10
5. Bad Taste or Offensive Messages : People have different liking and taste. The same thing appeals differently to different people and even offends another. Messages involving violence, obscene pictures, cruelty, vulgarity, excessive graphic details are not liked by most. 6. Promotion of Unhealthy Products : Advertisements of junk food, tobacco products, alcohol, restricted drugs, contraband materials, gambling, etc. come under this category. The general public and Govt. think this is not only unethical, but also instrumental in spoiling the society. 7. Regulations : Because of the above situations, some control or regulation is necessary. The MCS has to comply with local, state national level rules and regulations. Regulations make sure that the claims made by the company are verifiable and don’t offend people. They are framed to ensure the promotional activities are ethical. The main purpose of regulations is to promote healthy competition and guard customers from economic or physical harm. They cover areas regarding deceptive or unfair content, the delivery of the advertisement and protection of susceptible groups (like children, elders and minorities). Different countries have different regulations. a. Self Regulation : People involved in preparing a promotional campaign manufacturers, advertising agencies, media - come together to ensure that the communication is authentic and ethical. Some companies believe that self regulation is better as interference from Govt. or other regulatory bodies will make the rules more stringent. Self regulation has been successful to some extent in curbing mal practices in communication. The three levels of self regulation are self discipline, pure self regulation and co-opted self regulation. As it is not mandatory for companies or agencies to abide by rules emerging from self regulation, Govt. regulations are also required. i. Self Discipline : At this level of self regulation, the organisations (marketers, ad agencies, and media) make their own guidelines, standards and policies and abide by them. The marketer and the agency talk to each other and decide what kind of promotion they want to do, so as not to offend customers. Pure self regulation : When companies from an industry come together to form regulations, it’s termed pure self regulation. Such regulation is generally followed by industries whose promotions are likely to face controversies.
iii. Co-opted self regulation : In co-opted self regulation the ad industry voluntarily comes together to form a regulatory body. Non-industry people are also part of the regulatory body, which is responsible for the development, application and enforcement of roles. b. As we know, it’s not compulsory for advertisers to follow rules set by self regulatory bodies. So, the Govt. has formed regulatory agencies like the Monopolies and Restrictive Trade Practices Commission (MRTPC), through an act passed in 1969. MRTPC is applicable in following situations : i. ii. When wrong information is conveyed to the customer either in writing or oral communication. This includes advertisement, warranty, guarantee, etc. When there’s an element of deception at the time of actual sale.
iii. When there’s an element of deception in promotional schemes, like free gifts and contests. iv. When any law regarding consumer protection is violated. 11
v. When the seller manipulates the sales to increase the prices.
Budgeting And Financial Implications :
1. Setting the Budget : Marketing and MC departments (and their campaigns) are allocated a fixed amount of money for a fixed period of time. In other words it is a budget. Marketing Dept. competes with all other corporate departments (such as finance, production, HR etc.) for its share of the total corporate budget. The management then allocates a portion of the overall corporate budget to each De[t. based on what management feels is the best combination of spending to maximise profits. The more political power certain managers or departments have, the more likely they are to receive more than their objective share. The more others in the company, especially top management, know that the marketing dept does and accomplishes, the more political support it is likely to have. Once marketing receives its budget, it then needs to allocate the money to the various MC functional areas which, like the departments, compete among themselves for what they feel is necessary to run their programmes. 2. Cost or Investment : From an accounting prospective, MC spending is an expenseone of the many costs necessary to run a business. Most marketers, however, prefer to think of MC spending as an investment. The difference in these two philosophical perspectives is that “costs” are necessary evils but “investments” provide something called a return on investment (ROI). The better the investment is- the smarter marketers and their agencies are about how MC many is spent- the greeter is the return on the MC investment. 3. How much to spend on MC : many factors, both internal and eternal, can affect sales and how customers respond to MC, nevertheless, most marketers agree that the relationship between MC spending and sales roughly follows an “S” curve. a. The “S” Curve : The relationship between MC spending is not linear- i.e., increases in money spent don’t guarantee a constant increase in sales. The curve has three parts- A, B, and C. i. Part A : In situation A when the company under-spends there’s little impact on sales. Under-spending is relative to competitors’ MC spending and means the brand’s advertising and promotion are not enough to have a presence and therefore have little impact. Part B : The middle part of the S curve (situation B) is the ideal spending range- incremental spending produces incremental sales.
iii. Part C : At the top of S curve (situation C) the return from additional spending has a decreasing affect on the increasing sales. This indicates that the market is saturated. Beyond this point persuading customers will not be costeffective to do so. iv. Determining Spending Level : This level corresponds with the situation B where the company gets the best returns on MC spending. But again the “right amount” of spending is dependent on product category and even the brand. b. Percentage of Sales Budgeting : This method is based on the sales forecast for the coming year and the costs for making and selling the product. This percentage is found in a brand’s functional process forma, which is a breakdown of forecasted sales on a per-unit basis.
ROI Budgeting : Return on Investment is a ratio of income to spending. Top management likes this method because it comes closest to telling to what extent the company will profit from the many allocated. There is an old adage : “you have to spend money to make money”. Though be profitable, however, a company must make more money that it spends. One of the top managements’ major responsibilities is to maximise the return on the monies the company spends. Therefore, the more an MC dept. can promise and support a high level of return, the more likely it is to receive the budget it requests.
d. Objective-and-Task Budgeting : This method starts with zero-based planning which determines the MC objectives and the “tasks” that need to be done to accomplish each objective. An objective-and-task budget is an estimate of the cost of each MC task identified by zero-based planning. Suppose one objective is “to increase customer retention 10%”, and it’s decided that the most costeffective way to do this is to spend each customer a new year’s thank-you basket of candy. e. Share-of-Voice Budgeting : Share-of-voice spending is a brand’s portion of total media spending in that brand’s product category. Many marketers assume that share-of-voice spending should be fairly closed to the brand’s share of market. Thus, if total media spending in the small battery category is 300 M a year, and Duracell is spending 100 M, then Duracell’s share of voice spending should be around 33%. If Duracell’s share of market is 45%, most advertising agencies would say that the brand is under-spending. If a brand wants to significantly increase its share of market, it must be prepared for share-of-voice spending to be greater than its current share of market. 4. The Economic Effects of Advertising : Advertising has both good and bad economic effect. Some think that advertising gives more information and knowledge to consumers, while some others think that it gives more power to the marketer. Advertising focuses on the advantages of the product or how the product is superior and how using the product will improve the consumer’s lifestyle. As through consumer is aware of the various options available, he can make better purchase decisions. Critics say that promotion or advertising leads to extra consumption of products. The following are some factors : a. Consumer Choice : Some critics say advertising hampers consumer choice, as large advertisers use their power limit our options to a few well advertised brands. Economists argue that advertising is used to achieve : (1) differentiation, whereby the products or services of large advertisers are perceived as unique as or better than competitors’, and (2) brand loyalty, which enables large national advertisers to gain control of the market, usually at the expense of smaller brands. b. Competition : One of the most common criticisms economists have about advertising concerns its effects on competition. They argue that power in the hands of the large firms with huge advertising budgets creates a barrier to entry, which makes it difficult for other firms to enter the market. This results in less competition and higher prices. Economists note that smaller firms already in the market find it difficult to compete against large advertising budgets of the industry leaders and are often driven out of business. c. Product Cost and Prices : A major area of debate among economists, advertisers, consumer advocates and policymakers concerns the effects of advertising on product cost and prices. Critics argue that advertising increases the prices consumers pay for products and services. First, they say the large sums of money 13
being spent on advertising a brand constitute an expense that must be covered and the consumer ends up paying for it through higher prices. Several studies show that firms with higher relative prices advertise their products more intensely than do those with lower relative prices.
© Himansu S M / Written Oct-2006, Published Feb-2010