IMPACT OF ADVERTISING ON SALES OF NEW PRODUCT

RAJESHRI A. SHINDE
HPGD/AP16/XXXX
SPECIALIZATION: MEDIA AND ADVERTISING

WELINGKAR INSTITUTE OF MANAGEMENT DEVELOPMENT & RESEARCH

Year of Submission: April, 2018

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 ACKNOWLEDGEMENT

First of all, I wish to thank my guide Tasneem Vahanvaty, Programme & Festival Manager at
National Centre for the Performing Arts (NCPA), Mumbai who has provided great help and
encouragement throughout the completion of this project she made all the efforts to improve the
quality and the layout of the presentation.

I wish to thank the Marketing team at the NCPA who provided all the required information to
complete the project also the NCPA Library which has immense source of study books which I
referred for my research work. I would appreciate the positive attitude shown by my Co-
workers, without which this project would have not come to the conclusion.

Finally, I am particularly grateful to my family for having believed in me and for their
constant support.

(XXXX XXX XXXX)

Place: Mumbai

Date: 7th April, 2018

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 CERTIFICATE FROM THE GUIDE

This is to certify that the Project work titled Impact of Advertising on Sales of New Product is
a bonafide work carried out by XXXX XXXX XXXXX (Admission No HPGD/AP16/XXXX) a
candidate for the Post Graduate Diploma examination of the Welingkar Institute of Management
under my guidance and direction.

NAME: Tasneem Vahanvaty

DESIGNATION: Programme & Festival Manager

ADDRESS : National Centre for the Performing Arts

(NCPA), NCPA Marg, Nariman Point, Mumbai – 400 021

PLACE: Mumbai

DATE: 7th April, 2018

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 UNDERTAKING BY CANDIDATE

I declare that project work entitled Impact of Advertising on Sales of New Product is my own
work conducted as part of my syllabus. I further declare that project work presented has been
prepared personally by me and it is not sourced from any outside agency. I understand that, any
such malpractice will have very serious consequence and my admission to the program will be
cancelled without any refund of fees. I am also aware that, I may face legal action, if I follow
such malpractice.

Candidate: XXXX XXXX XXXXX (Admission No HPGD/AP16/XXXX)

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 TABLE OF CONTENTS

Chapter Title Page

Number Numbers
 TITLE PAGE 1
 ACKNOWLEDGEMENT 2
 CERTIFICATE FROM THE GUIDE 3
 UNDERTAKING BY CANDIDATE 4
1 INTRODUCTION
 Definition of Advertising, Product and Sales ………… 8
 Advertising Objectives……………………………………. 9
10
 Importance of Advertising ………………………………
12
 Advertising Media………………………………………
 Types of Advertising Media…………………………… 13
2 BACKGROUND
 Origin And Development of Advertising…………….. 28
 Evolution of Advertising………………………………… 29
 Classification And Types of Advertising……………….
30
 Type of Advertising Which Will Be Used During The 31
Earlier Product Life Cycle………………………………

 Advertising and Consumer Awareness of a New Product …… 33

 Important Aspect To Consider While Launching A New
Product……………………………………………………………... 34

3 METHODOLOGY
 Literature Review…………………………………………….. 40
 The impact of pre- and post-launch Publicity and Advertising 41
on new product sales. ………………………………………..
Case Study 1…………………………………………….. 47
 Advertising Is One of Many Factors Influencing Sales…….. 49
4 CONCLUSION AND RECOMMENDATIONS…………………… 56
5 BIBLIOGRAPHY……………………………………………………. 61

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 INTRODUCTION

Adverting is only one element of the promotion mix, but it often considered prominent in the
overall marketing mix design. Its high visibility and pervasiveness made it as an important social
and economic topic in Indian society.
Promotion may be defined as ―the co-ordination of all seller initiated efforts to set up channels
of information and persuasion to facilitate the scale of a good or service.‖ Promotion is most
often intended to be a supporting component in a marketing mix. Promotion decision must be
integrated and co-ordinated with the rest of the marketing mix, particularly product/brand
decisions, so that it may effectively support an entire marketing mix strategy. The promotion mix
consists of four basic elements. They are:-

1. Advertising

2. Personal Selling

3. Sales Promotion, and

4. Publicity

Advertising

Personal Promotional Sales

Selling
Mix Promotion

Publicity

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1. Advertising is the dissemination of information by non-personal means through paid
media where the source is the sponsoring organization.

2. Personal selling is the dissemination of information by non-personal methods, like face-to-face,

contacts between audience and employees of the sponsoring organization. The source of
information is the sponsoring organization.

3. Sales promotion is the dissemination of information through a wide variety of activities other
than personal selling, advertising and publicity which stimulate consumer purchasing and
dealer effectiveness.

4. Publicity is the disseminating of information by personal or non-personal means and is not

directly paid by the organization and the organization is not the source.

What is Advertising?

Advertising is any paid form of non-personal communication about an organization or its

product to a target audience through a mass/broadcast medium by an identified sponsor. It
should be observed that for any promotional activity to be called advertisement it must be paid

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for.

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In the real sense, it is the method used by companies for creating awareness of their
products, as well as making new products known to the new and potential consumers.

DEFINITION OF ADVERTISING
Advertisement is a mass communicating of information intended to persuade buyers to by
products with a view to maximizing a company‘s profits. The elements of advertising are:
1. It is a mass communication reaching a large group of consumers.

2. It makes mass production possible.

3. It is non-personal communication, for it is not delivered by an actual person, nor is

it addressed to a specific person.

4. It is a commercial communication because it is used to help assure the advertiser of

a long business life with profitable sales.

5. Advertising can be economical, for it reaches large groups of people. This keeps the
cost per message low.

6. The communication is speedy, permitting an advertiser to speak to millions of buyers in

a matter of a few hours.

7. Advertising is identified communication. The advertiser signs his name to

his advertisement for the purpose of publicizing his identity.

DEFINITION OF PRODUCT
This can represent anything a consumer acquires or might acquire to meet a perceived need. The
need not necessarily need to be satisfactory. Some product might not satisfy their needs.

DEFINITION OF SALES

This is a process of selling something such as a product, ideas or services. It also covers the
number of goods or services sold at a given point in time.

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WHAT IS INCLUDED IN ADVERTISING?

1. The information in an advertisement should benefit the buyers. It should give them
a more satisfactory expenditure of their rupees.

2. It should suggest better solutions to their problems.

3. The content of the advertisement is within the control of the advertiser, not the medium.

4. Advertising without persuasion is ineffective. The advertisement that fails to

influence anyone, either immediately or in the future is a waste of money.

5. The function of advertising is to increase the profitable sales volume. That is, advertising
expenses should not increase disproportionately.

ADVERTISING OBJECTIVES

Each advertisement is a specific communication that must be effective, not just for one customer,
but for many target buyers. This means that specific objectives should be set for each particular
advertisement campaign.

Advertising is a form of promotion and like a promotion; the objectives of advertising should be
specific. This requires that the target consumers should be specifically identified and that the
effect which advertising is intended to have upon the consumer should be clearly indicated.

The objectives of advertising were traditionally stated in terms of direct sales. Now, it is to view
advertising as having communication objectives that seek to inform persuade and remind
potential customers of the worth of the product.

Advertising seeks to condition the consumer so that he/she may have a favourable reaction to
the promotional message. Advertising objectives serve as guidelines for the planning and
implementation of the entire advertising programme.

The basic objectives of an advertising programme may be listed as below:

 To stimulate sales amongst present, former and future consumers. It involves a

decision regarding the media, e.g., TV rather than print

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  To communicate with consumers. This involves decision regarding copy
 To retain the loyalty of present and former consumers. Advertising may be used to
reassure buyers that they have made the best purchase, thus building loyalty to the
brand name or the firm.
 To increase support. Advertising impliedly bolsters the morale of the sales force and of
distributors, wholesalers, and retailers; it thus contributes to enthusiasts and confidence
attitude in the organizational.
 To project an image. Advertising is used to promote an overall image of respect and
trust for an organization. This message is aimed not only at consumers, but also at the
government, shareholders, and the general public.

IMPORTANCE OF ADVERTISING

Generally, advertising is a relatively low-cost method of conveying selling messages to

numerous prospective customers.

It can secure leads for salesmen and middlemen by convincing readers to request more
information and by identifying outlets handling the product. It can force middlemen to stock the
product by building consumer interest. It can help train dealers salesmen in product uses and
applications. It can build dealer and consumer confidence in the company and its products by
building familiarity. Advertising is to stimulate market demand.

While sometimes advertising alone may succeed in achieving buyer acceptance, preference, or
even demand for the product, it is seldom solely relied upon. Advertising is efficiently used
with at least one other sales method, such as personal selling or point-of-purchase display,
to directly move customers to buying action.

Advertising has become increasingly important to business enterprises – both large and small.
Outlay on advertising certainly is the voucher. Non-business enterprises have also recognized the
importance of advertising. The attempt by army recruitment is bases on a substantial advertising
campaign, stressing the advantages of a military career.

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The health department popularizes family planning through advertising Labour organizations
have also used advertising to make their viewpoints known to the public at large.

Advertising assumes real economic importance too. Advertising strategies that increase the
number of units sold stimulate economies in the production process. The production cost
per unit of output is lowered. It in turn leads to lower prices. Lower consumer prices then
allow these products to become available to more people. Similarly, the price of
newspapers, professional sports, radio and TV programmes, and the like might be
prohibitive without advertising. In short, advertising pays for many of the enjoyable
entertainment and educational aspects of contemporary life.

Advertising has become an important factor in the campaigns to achieve such societal-oriented
objectives such as the discontinuance of smoking, family planning, physical fitness, and the
elimination of drug abuse.
Though in India, advertising was accepted as a potent and recognized means of promotion only
25 years ago, its growing productive capacity and output necessitates the finding of consumers
and advertising plays an important role in this process. Advertising helps to increase mass
marketing while helping the consumer to choose from amongst the variety of products offered
for his selection.
In India, advertising as a profession is in its infancy. Because of this fact, there is a
tremendous scope for development so that it may be productively used for the benefit of
producers, traders, consumers, and the country‟s economy.

ADVERTISING MEDIA

Meaning of Advertising Media:

Advertising media are the devices by which and through which the advertising messages are
transmitted by the advertisers to the prospective and existing customers. The message regarding
the product or service is passed on to the consumers or persons concerned through the media.

In advertising, media are the facilitating functions and constitute an industry. Media are the
carriers of message of an advertiser whose aim is to reach to the public so that he and his
product

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or service may come to the knowledge of the public and in turn public may turn to him and his
product or service.

TYPES OF ADVERTISING MEDIA:

The overview of the following advertising media:

Television
Radio
Print Publications : Newspapers & Magazine
Internet
Direct Mail
Signage
Product Placement
Mobile Devices
Sponsorships
Other Media Outlets

Advertisement in such a media as print (newspaper, magazines, billboards, flyers) or broadcast

(radio, television) typically consist of pictures, headlines, information about the product and
occasionally a response coupon. Broadcast advertisement on the other hand consists of an audio
or video narrative that can range from 15seconds spots to longer segments known as
infomercials, which generally last 30 to 60 minutes. (Busari 2002)

Advertisements can also be seen on the seats of grocery carts, on the wall of airport walkways,
on the sides of buses, airplane and train. Advertisements are usually placed anywhere an
audience can easily

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 Types of Advertising Media

Press Media
Direct or Mail Advertising
Outdoor or Mural Media
Audio- Visual Media Other Media
Advertising
Specialties

Pen, paperweight Window Display Produc

, lighter,
Sales letters Fax purse, ring,
Banners belt, knife and other kitchenware, key-chain, bag, rain cap, or some extra acc
E-mail Cards Greetings Special
Circulars and Leaflets Catalogues, Radio Television – TV
Signboar Folders, Booklets and Brochures Calendars and Diaries Others
Internet Moving Slide Film or Cinema
ds Kiosk
Newspape Billboard
r s
Magazine Handbills
Other Station
Print Posters
Media Sky
Writing
Symbol of
Product
Neon Sign
Other
Outdoor

Press Media:
Press media are also called print media. Print media are popular and widely used for commercial
advertising. A number of people can be addressed by print media. Attractive slogans, statements,
words, figures, pictures, drawings, comparative statements, charts, etc., can be used for
advertising the products in colorful and artful manner. Press media mainly involves newspapers,
magazines, and other publications.

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1. Newspapers:
Newspapers are a popular medium to contact or inform a large number of customers.
Newspapers may be morning or evening; may be in English, Hindi or in other regional
languages; may be daily or weekly; may be local, regional or national; or may be routine
or special edition.
The company should consider circulation, language, geographical coverage, price, credibility,
costs of buying space, and quality of printing while selecting a suitable newspaper. Pictures,
slogans, figures, charts, etc., can be used. Company can used multi-coloured advertisement, too.

2. Magazines :

Magazines are another popular and wisely used advertising medium. It is similar to newspapers
with regard to many aspects. To consumers, magazines are treated as source of information and
entertainment. A large variety of magazines or periodicals are published weekly, fortnightly,
monthly, quarterly, half-yearly or annually.
Magazines are also published by religious and social organisations, schools, colleges, university
or educational associations, professional and commercial associations, governments, companies,
etc. Similarly, magazines are classified in forms of sex, age, profession, industry, entertainment,
and so forth. Based on customer characteristics, a proper magazine should be selected for
publishing advertising message.

3. Other Print Media:

Print media also include telephone directories, books, notebooks, reports, community and
professional directories, bus or railway tickets and timetables, and special publications on the
special events by schools, colleges, universities, local bodies, cooperative societies, companies,
or governments.
Local manufacturers, professionals, dealers, retailers, etc., mostly prefer these media to advertise
their products. This set of media is relatively cheaper.
Most of these print media are used by many people and have long life compared to magazines
and newspapers. Further, more selective advertisement is possible. Such print media are more or
less similar to newspapers and magazines.

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Direct or Mail Advertising:

Direct advertising can be defined as: Any form of advertising in which the message is directed to
specific individuals directly by the advertiser.
This medium consists of written, printed, or processed message delivered directly to the selected
buyers. This set of media is used to appeal the target market directly.
In practice, it is not suitable for a large number of customers. This type of advertisement is
mostly sent personally, or by post and courier services.
In the age of information technology, fax, e-mail, and cell phone SMS are also famous modes to
send direct mail in a limited scale.

Most commonly used methods for direct advertising are:

1. Sales letters:

The firm directly sends a written or printed letter to some or all customers. Such letters contain
message, product description, special offers, etc. Sometimes, fully addressed and dully stamped
reply envelope is also sent to get response. Sales letters can be sent to customers using different
methods like courier services, paid persons, or postal services.

2. Fax:

Catalogue, invitation, launching of new product or any message can be sent through fax
machine. However, company must know fax number of the receivers. Now, fax is used widely
for different purposes. Words, pictures, tables, charts, symbols, etc., can be sent through fax. It
can be used for limited customers, and is normally applied for industrial products.

3. E-mail:

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E-mail is relatively new and popular tool for sending message. It is sent to special customers
whose e-mail addresses are available or directly to all the account holders. For example, Hotmail
or MSN Messenger services, G-Mail, Yahoo and many others provide free messenger services.
However, advertiser has to pay for advertising his products.

4. Cards:

Cards are used to carry brief messages, acknowledge orders, remind customers, answer
enquiries, update mailing list or to make special offers. Cards may be plain or
coloured; multifold or single fold; or may be in forms of greetings or business letters.

5. Greetings:

Very popular means to establish relation with customers. The company maintaining a well-up-to-
date customer database can send greeting cards on different events and occasions. Along with
greetings, a brief message, picture of product or slogan with commercial value can be sent to
customers and dealers.

6. Circulars and Leaflets:

Mostly, they are typed or printed on one or both sides. They may be in coloured papers.
Circulars and leaflets involve description or special features of products. Many companies send
circulars or leaflets on regular basis.

7. Catalogues, Folders, Booklets and Brochures:

They contain necessary information and are sent/offered to customers. Booklets are widely used
by companies selling two- wheelers, refrigerators, television, or other technical products.

8. Calendars and Diaries:

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Companies offer calendars or diaries, specially prepared as per their requirements, free-of-costs
to customers and dealers, containing their names, symbols, brand names, slogans or pictures of
the products. Diaries are more informative and expensive compared to calendars.

9. Others:
We may include other means used for direct advertisement.

Such means or vehicle includes:

 Data cards, samples, and gifts

 SMS – Short Mobile Message through cell phone
 House organs like story books, articles, cartoons, jokes, etc.
 Pamphlets, etc.

They are in-house sources of information; they are made available to customers at their
places (home or offices). In fact, a large number of media are used for direct advertising.
Each of the media has its merits, demerits, and applicability. We will evaluate these media
jointly.

Outdoor or Mural Media:

Nowadays, outdoor advertising media are widely used for almost all types of goods and services.
Outdoor media are excessively used by manufacturers and dealers, hotels, restaurants, academic
institutions, airways, banks, insurance, etc.
Cold drinks, cements, cigarettes, petroleum products, and cosmetics products widely use these
media for advertisement. They are also known as mural media. Those companies, which are not
in position to spend huge amount on television, radio, newspapers or magazines, may opt for
these media.

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Most common outdoor advertising media have been briefly discussed below:

1. Banners:

They are used at popular places like cricket matches, tournaments, stage shows, fairs, talent
shows, and annual functions of school, colleges and universities, seminars and conferences, or
public meetings.

2. Special Signboards:

They are used at bus and railway satiations indicating route or platform number, or indicating
name of roads and directions in the city. Most cell phone service providers including
Vodafone, Idea Cellular, Airtel, etc., use this medium to popularize their name and brand.

3. Kiosk:

Square or triangle shaped boxes with written words or picture on them are hanged on electricity
or telephone polls.

4. Billboards:

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Special boards are prepared to advertise the product. Dealers or retailers put such boards nearby
their shops, showrooms, shopping malls or on the upper sides of buildings.

5. Handbills:

They are very common and too cheap. Advertisement is printed on a piece of paper of small size.
These leaflets are distributed hand to hand by a paid man, along with newspapers, or otherwise.

6. Station Posters:

Multi-coloured-printed posters with written message and pictures are stuck on walls, benches,
insides the canteens, and inside and outsides bus stations, railway stations, and airports.

7. Sky Writing:

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It is a novel and expensive vehicle to advertise the product. It is not very popular in our
country. It involves showing words, symbols, or picture through gas during the night using
plane, ballon, helicopter, or bursting.

8. Symbol of Product:

Giant size products, picture of products, or package of products are used for advertising purpose.
Cadbury, Balaji Wafers, Coca-Cola, Maruti Car, Hero Honda, Natraj Pencil, etc., use this
medium.

9. Neon Sign:

Neon tube lights are used for advertising. Words are written by neon tubes and are place on
boards on buildings. Different coloured are used to make it attractive. This can be used only
during the night. Cinema, business firms, banks, tuitions classes, and other professionals use
neon signs to publish the advertising message.

10. Other Outdoor Media:

Other common and popular outdoor advertising media include:

1. Posters and wall paintings

2. Hoarding on the road

3. Vehicle advertising

4. Sandwich man

5. Trade fair

6. Balloons, etc.

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There may be more outdoor media than listed above. Each of these media has its merits,
demerits, and suitability. But, we will discuss merits and demerits jointly for ail the outdoor
advertising media.

Audio-Visual Media:

The media that can be seen and/or hear are known as audio-visual advertising media. In
contemporary marketing environment, these media are the most popular means to send
advertising message. Marketers are using aggressively the audio-visual vehicles to prove
superiority of their products over the competitors.
These media, though expensive, are considered as the modern and prestigious among all the
advertising media. This set of media is excessively used for all types of goods and services.
Audio-visual media mainly include television, radio, short films, Internet, moving slides,
film slides, etc.

Radio:

Perhaps it is the cheapest (in terms of per listener cost) and most pervasive among all media used
for mass communication. It crosses the literacy barriers. Countrywide or on particular regions,
the direct message is conveyed to the (desired group of) listeners.
Radio is used not only for advertising national programmes by the Government for Family
Planning, vaccination, woman education, ecological conservation, erosion of superstitions, or
any other programmes of social and national interest, but is also used by many companies for
commercial advertising.
Insurance, banks, financial institutions, and manufacturers use radio to advertise their goods/
services. Advertisements are broadcasted before, after, or during specific (regional or national)
programmes.

Some companies broadcast their own programmes or events of the social interest and get their
products or activities advertised directly. Local radio (FM radio) is excessively used by local
marketers like tuition classes, private colleges, hotels and restaurants, dealers and distributors of
distributors consumer durables, and so forth.
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Television – TV:
It is the newest, fastest growing, and most popular advertising medium. It is a powerful medium
for entertainment and advertisement. Now, television set is available at affordable price. Most of
TV channels and local cable operators carry commercial advertisements. It appeals the people
through the eye and the ear, i.e., it creates audio-visual effect. Products can be demonstrated as
well as explained.

Written words, description, and slogans can also be depicted with pictures, package, and brand
names and/or products. Now, film starts, cricketers, artists, and modeling personalities are
excessively used to advertise different types of products.

Shahrukh Khan for Santro car and Dishtv, Amitabh and Sachin for Pepsi, Sachin for TVS Motor
bike, Mathuri Dixit and Amitabh Bachhan for Himani costmatics, M. Dhoni for Milkshakti
Buscuit, and such others are popular TV advertisements.

Camera and computer can create the highly impressive and effective combination of the events,
words, slogan, and music. Advertisements appear in television during special events, like cricket
match, film, thrilling news, or similar mega events, carry a heavy impression on customers. For
example, TVS has earned the fame and sales in TVS Cup between India and West Indies in
November, 2002.

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 Internet: (Booming)

Internet is the latest medium to advertise products. Some companies put their advertisements on
their websites; some companies buy web page of the popular websites. Even, sometimes, they
place their advertising message directly on different websites.
Viewers just clicking on the name, address, picture, product, logo, brand, or slogan and can get
full detail of a product or a company. To develop their own websites on Internet is also very
common due to rapid practice of e-commerce or online transactions.
Most of the established companies, banks, insurance, and educational institutes have put their
information of Internet. In India, use of Internet for advertising purpose is on increase. More
than 100 million Indian access the Internet regularly.

Moving Slide:

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This is mostly used in urban areas. Here, moving slides are used to advertise product. They are
used for commercial or even for non-commercial purposes.
Advertising message, picture of product, or logo of company moves either alternate or in one
direction on the screen kept on private or public buildings.
Such slides are based on electricity or battery. However, use of electric circuit is very common.
Nowadays, computer-based slides are very effective.
Normally, it is a visual device. Voice is not associated. These slides are located in densely
populated locality, corners, or near public places where a maximum number of people passes
through.
Traffic points and railway crossing are among the most effective places. This medium is very
effective during the night. Multi-coloured slides attract pedestrians and people passing through
vehicles.

Film or Cinema:

Film advertisement mainly involves cinema slides and short films. A large number of people can
be exposed through this medium. Advertisements are shown at theatres or at different places by
projectors.

Short Films:

They are presented before films or during interval. Many companies use short films to advertise
its products through cinema houses. It is a similar to television medium. Main difference
between TV and short film is that film can expose only limited audience while TV is capable to
contact millions of people at time.

For example, popular advertisements are Vico cream, toothpaste and powder, Niramia detergent
cake and washing powder etc. Short films are shown along with non-commercial films during
various events or functions such as seminars and similar events.

25
Slides:

The alternate way to advertise the product in the theatre consists of slides. This medium is also
used for both commercial as well non-commercial ads.
Alike TV, it is a slide-cum-sound medium. Only demonstration of products – but not live
presentation – is possible. Here, slides consisting name of producers, products, logo, etc., are
shown in theatres and at the place of special events. Advertisements are presented in theatre
before and after film or during interval.

Advertising Specialties:

There are near about 5000 such items used for advertising products. Here, some items, either
related to products or not, are offered to customers at free-of-charge.
On such items, brand names, logo, or company name have been stamped or inscribed.
While using such products, consumers can know about name of company, brand, product, etc.
Such items include pen, paperweight, lighter, purse, ring, belt, knife and other kitchenware, key-
chain, bag, rain cap, or some extra accessories. These items can be offered to customers or
dealers as the gift.

Other Media:
Apart from the media discussed in above part, there are various media frequently use for
advertising the products.

Most widely used common advertising media are:

1. Window Display
2. Product Package
3. Counter Display
4. Special Display and Shows
5. Showrooms
6. Trade Fair and Exhibition, etc.

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Several media discussed in the former part are among popular ad media. There can be more ad
media. Any tool capable of carrying the message can be treated as advertising medium. It must
be stated that above classification of media is not very strict. Chance of duplication of one or
more media cannot be completely ignored.

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 BACKGROUND

The word advertising originates from a Latin word advertise, which means to turn to. The
dictionary meaning of the term is ―to give public notice or to announce publicly‖. The
American Marketing Association, Chicago, has defined advertising as ―any form of non-
personal presentation or promotion of ideas, goods or services, by an identified sponsor.‖

Advertising plays a key role in helping firms succeed, and thriving firms contribute to any
economy through higher tax payments and by creating more jobs. Various studies have shown
that growth in GDP is invariably linked to higher rates of investments in advertising by
businesses. Business sectors with the highest rates of investment in advertising are those where
competition, a recognised driver of growth, is liveliest. The world of advertising is evolving and
growing at an accelerated pace, even as this book takes shape. The media space and the
advertising business is changing shape from its established and familiar pattern to the exciting
‗Digital avatar‘.

New tech savvy talent is being hired rapidly to match this sudden demand of fast-paced digital
technology. Marketers have long used technology, in some form or the other, to engage
consumers. However, with the evolution of the internet, technology is now part of almost every
marketing strategy.

All of consumer communications, entertainment and transactions are converging on one

platform. Convergence will continue to be a major driving focus for the global advertising
industry. It is a virtuous circle between supply side innovation led by new technology and
demand side adoption led by consumer behaviour.

Advertising is an inescapable part of our lives and very much involved in the rapidly changing
technology of the world we live in. Advertising, in one form or another, has been with mankind
ever since trading began.

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ORIGIN AND DEVELOPMENT OF ADVERTISING

It has been wrongly assumed that the advertising function is of recent origin. Evidences suggest
that the Romans practiced advertising; but the earliest indication of its use in this country dates
back to the middle Ages, when the use of the surname indicated a man‟s occupation. The next
stage in the evolution of advertising was the use of signs as a visual expression of the
tradesman‟s function and a means of locating the source of goods. This method is still in
common use.

The seller in primitive times relied upon his loud voice to attract attention and inform consumers
of the availability of his services. If there were many competitors, he relied upon his own
personal magnetism to attract attention to his merchandise. Often it became necessary for him to
resort to persuasion to pinpoint the advantages of his products. Thus, the seller was doing the
complete promotion job himself.

Development of retail stores, made the traders to be more concerned about attracting business.
Informing customers of the availability of supplies was highly important. Some types of outside
promotion were necessary. Signs on stores and in prominent places around the city and notices
in printed matters were sometimes used.

When customers were finally attracted to the store and satisfied with the service at least once,
they were still subjected to competitive influences; therefore, the merchant‟s signs and
advertisements reminded customers of the continuing availability of his services. Sometimes
traders would talk to present and former customers in the streets, or join social organizations in
order to have continuing contacts with present and potential customers.

As the markets grew larger and the number of customers increased, the importance of attracting
them also grew. Increasing reliance was placed on advertising methods of informing about the
availability of the products. These advertising methods were more economical in reaching large
numbers of consumers. While these advertising methods were useful for informing and
reminding and reminding, they could not do the whole promotional job. They were used only to
reach each consumer personally. The merchant still used personal persuasion once the customers
were attracted to his store.

29
The invention of hand press increased the potentialities of advertising. By Shakespeare‟s times,
posters had made their appearance, and assumed the function of fostering demand for existing
products. Another important event was the emergence of the pamphlet as an advertising medium.
The early examples of these pamphlets disclose their sponsorship by companies want to generate
goodwill for their activities. The low cost of posters and handbills encouraged a number of
publishers to experiment with other methods.

EVOLUTION OF ADVERTISING

The ability of Advertising and Promotions to communicate with large audiences has made them
vital to the growth of business. To understand contemporary advertising, we need to know the
context of its origins. Practitioners know that advertising is not a single function but a
coordinated collection of promotional tools ranging from the simple to the sophisticated.

Mankind has communicated the availability and source of goods from prehistoric times. Earliest
known evidence of advertising, from around 3000 BC, was found in the form of a clay tablet
which bears inscriptions for an ointment dealer, a scribe, and a shoemaker. The early Egyptians
used papyri (a writing material from the papyrus plant) to offer rewards for the return of runaway
slaves. Advertising came to be practiced by royalty, who sent drummers to make announcements
or communicate the will and desires of the monarch to his people.

Advertising as a form of transmission of information dates back to ancient Greece and Rome.
The Greeks relied on town criers to chant the arrival of ships (public announcements) and to
announce what cargoes they carried.

The Roman merchants used signs engraved in stone or terra cotta to advertise what they were
selling. The Pompeiians used wall signs to sell their wares. The oldest advertising professionals
were the town criers (who are still found in smaller towns during elections and to spread
messages local in content). Signs, symbols and pictures were used because many people could
not read. Over the years, the evolution of advertising has been closely tied to social, economic
and technological developments. Many factors contributed to the growth of advertising – an
educated and aware consumer, a consumption culture, industrial development, mass production,
growth in per capita income, and a good transportation which was essential for the distribution of
goods. Previously, trade was limited to local or regional areas. By 1920, the convergence of the

30
availability of branded products, the ability to provide national distribution and a growing middle
class, gave birth to the advertising industry

CLASSIFICATION AND TYPES OF ADVERTISING

1. Product – Related Advertising

A. Pioneering Advertising
B. Competitive Advertising
C. Retentive Advertising

2. Public Service Advertising

3. Functional Classificaiton
A. Advertising Based on Demand Influence Level.
o Primary Demand (Stimulation)
o Selective Demand (Stimulation)
B. Institutional Advertising
C. Product Advertising

o Informative Product Advertising

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 o Persuasive Product Advertising
o Reminder-Oriented Product Advertising
4. Advertising based on Product Life Cycle
o Consumer Advertising
o Industrial Advertising

5. Trade Advertising
o Retail Advertising
o Wholesale Advertising

6. Advertising Based on Area of operation

o National advertising
o Local advertising
o Regional advertising

7. Advertising According to Medium Utilized

TYPE OF ADVERTISING WHICH WILL BE USED DURING THE EARLIER

PRODUCT LIFE CYCLE

In this project I have covered the type of advertising which will be used during the earlier
product life cycle

Product – Related Advertising

It is concerned with conveying information about and selling a product or service. Product
advertising is of three types, viz,

A. Pioneering Advertising :
This type of advertising is used in the introductory stages in the life cycle of a product. It is
concerned with developing a ―primary‖ demand. It conveys information about, and selling a
product category rather than a specific brand. For example, the initial advertisement for black
– and – white television and color television. Such advertisements appeal to the consumer‘s
emotions and rational motives.

Advertising Based on Demand Influence Level.

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A. Primary Demand Stimulation
Primary demand is demand for the product or service rather than for a particular brand. It is
intended to affect the demand for a type of product, and not the brand of that product. Some
advertise to stimulate primary demand. When a product is new, primary demand stimulation
is appropriate. At this time, the marketer must inform consumers of the existence of the new
item and convince them of the benefits flowing from its use. When primary demand has been
stimulated and competitors have entered the market, the advertising strategy may be to
stimulate the selective demand.

A. Informative Product Advertising:

This form of advertising tends to characterize the promotion of any new type of product to
develop an initial demand. It is usually done in the introductory stages of the product life
cycle. It was the original approach to advertising.

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ADVERTISING AND CONSUMER AWARENESS OF A NEW PRODUCT

The increase of a new product‘s sales is usually attributed to consumers becoming informed
about the existence of the product.

Advertising can accelerate the consumer awareness process. The estimates show that advertising
reduces the three year it takes for the information diffusion of a new product to half as long.

The term product life is a description of what happens to product sales over time.
According to Gort and Klepper (1982) the standard product life cycle consists of four
stages: introduction, growth, maturity and decline.

During the first stages (the introduction and growth stages), sales increase as a result
of consumers becoming informed about the existence of the new product. In the maturity stage,
the proportion of consumers aware of the product is stable, and later, in the decline stage, sales
decrease due to the entry of improved competing products.

Advertising can accelerate the information diffusion process for a new product, by informing the
consumers of product existence.

Notice that the effect of advertising on sales is dynamic, since advertising will affect the
proportion of consumers aware of the product in the future, and therefore will affect future sales.
Usually, firms advertise their products the most at the beginning of the life cycle.

Evidence of such common strategy is found in the Spanish automobile market. The estimated
effect of age on market share confirms the existence of the product cycle in this market and
shows that model sales typically increase in the first two years. This result suggests that the

34
information diffusion of a new Product in the Spanish automobile market takes place mostly in
the first two years. The expenditure of advertising a product during this period is higher, even
though sales are lower than in subsequent periods.This behavior is especially remarkable in the
first years when the average expenditure on advertising is around 15.1% higher than in the fourth
year, while the average sales of a model are approximately 24.6% lower. Therefore, products are
heavily advertised during the period when their information diffusion takes place.

These facts are consistent with two important ideas:

First: The existence of a consumer awareness process for a new product

Second: An important role of advertising in the information diffusion for a new product.

Important Aspect To Consider While

Launching A New Product

This project however, centers on the impact of advertising on the sales volume of a product. This
work will shed light on how advertising can really affect a consumer‘s buying decisions in a
growing economy like that of India and how successful advertising can keep businesses going
even in the midst a tough competition.

35
More so, advertising as a promotional tool also tends to remind, reassure and influence the
decisions of the consumers because an advertisement itself enlightens, educates, and
persuades consumers on their acceptability of the product offering.

New ideas for products and services are conceived every day — yet many of them fail
because they weren‘t properly introduced to the market. Market research helps ensure both
that the product launch will hit the ‗right buttons‘ in the consumer, and ensures that the
product idea itself addresses the (often unspoken) desires of the customer.
In general, we can speak of ten different steps in the pre-launch research process: understanding
the market and the competition, targeting the customer, devising a unique value proposition,
determining marketing strategy, testing the product and overall approach, rolling out the
campaign, and keeping track of the overall lifecycle.

Let‘s consider these steps of market research before launching a new product in more detail.

36
Step 1: Know your market — and your competitors

Market research often reveals counter intuitive facts about your market, even if you think you are
already well acquainted with it.

Example : research has shown that ‗snacks‘ are often used as a meal substitute, and that
therefore successful confectionery-type snack products tend to be more ‗foody‘ than one
might expect: ingredients like cereal, peanuts, biscuits, and fruit which help break up
the overall chocolate are very well received by customers.

Similarly, the beginning of a product launch also means understanding your competitors,
and what products and services they have on offer. Though you might believe there‘s
currently no competition for your new product, put yourself in the shoes of your customers
and consider what they could buy instead of what you‘re planning to offer.

Review those competitors‘ marketing materials, and evaluate how your new offering will stand
up against what‘s available. Where will you excel? Which companies or products are the greatest
threat to a successful launch?

Step 2: Target your customer

In order to get maximum results form your marketing with minimal cost, it‘s crucial to focus on
those prospects most likely to buy from you. Perhaps they are currently buying a similar
product and will appreciate your new offerings added features.

The best customers perceive they have a need for your product, have the ability to buy it, and
have already demonstrated a willingness to make the purchase (perhaps by buying from the
competition). In general, it‘s much easier to fill an existing need than it is to create a new one.

37
Step 3: Devise your Unique Value Proposition

Why will customers want to purchase from you, compared with the competition? What are you
offering that makes you stand out?

Not only does your new product or service have to be unique and meet your customers‘ desires
and needs, but you must be able to communicate why and how it does so.

This is your Unique Value Proposition, and an excellent way to come up with one is by speaking
with customers to see what they value

Step 4: Determine your marketing strategy

At this point you will have enough information on your market to understand how to best market
and sell your product.

What channels should you use — via retailers? Catalogues? Online? Using multiple channels is,
as most marketers are aware, an excellent idea. Also remember to consider direct response
marketing, which can offer extreme levels of ROI.

Step 5 : Test your product and overall approach

How will your product fly when your customers have it in their hands? Ultimately the
customer‘s response will determine which features to emphasise and which marketing approach
to use, so product testing is crucial. Product testing can be as simple as having a research
participant test a single product (monadic testing) and fill out a survey on the ―key performance
indicators‖ like likelihood of purchase. Or, it can go into the various sensory qualities
(appearance, flavour, etc) and make use of sophisticated video recording and observational
techniques.

38
You should also test your marketing message and marketing materials. With all the money
you‘ll be spending on advertising, it‘s worth making sure your ads and graphics and packaging
will be well-received by the customers.

Testing here might range from traditional focus groups to mall intercept studies and online
research. Whatever methods you use, you should not finalise your marketing materials until
testing is complete.

Step 6 :Roll out your marketing campaign

Once it comes time to launch, you‘ll want to employ both advertising and public relations to
maximise the impact of your new product launch.

Media relations, for example, can help you get articles and press coverage on the new product, or
build buzz that drives interest in the new item.
Whichever you choose, of course, be sure the product is completely available for purchase — if
the product is not yet in stock when the coverage hits, consumers may be disappointed.

Market research plays a role here too, of course: especially in the first few weeks, you‘ll
want to monitor the results of your campaign and adjust your techniques to focus on those
that work best.

Step 7: Monitor your product lifecycle

Finally, as your product matures you‘ll start to see points of diminishing return that mean it‘s
time to alter your marketing message, revise the packaging, alter the product itself, or even start
to phase it out to make room for your next big idea.

Step 8 : Test your new product repeatedly

You really need to have done this several times beforehand. Nothing will kill your product
launch quicker than launching to market with something that doesn‘t work properly or
breaks upon opening.

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Don‘t frustrate your target audience with something that should be 100% error-free upon launch.

Step 9: Seek reviews

In today‘s consumer-led world, it is important to get reviews – positive ones will always work in
your favour – but equally important is to find out what can be improved. It may be something
you need to slightly tweak that will make all the difference to it being successful or not.

Step 10 : Be strategic and patient

Not every product flies off the shelf immediately. You may need to re-work your marketing
strategy, alter your price or even re-launch because of a change in circumstances.

Having a strategic and flexible marketing strategy will enable you to successfully keep
changing tack slightly if need be to ensure you the ultimate product success.

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 METHODOLODY

LITERATURE REVIEW

From Frances and Stephen (2006), Promotion mix is the direct way in which an organization
attempts to communicate with various target audiences. It consists of five main elements:
Advertising, sales promotion, personal selling, public relation and direct marketing.

Kotler and Armstrong (2006) viewed promotion as activities that communicate the merits of the
product and persuade target customers to buy it. Promotion mix can be seen as the specific blend
of advertising, sales promotion, public relation and direct marketing tools that the company uses
to pursue its marketing objectives.

Promotional strategies include all means through which a company communicates the benefits
and values of its products and persuades targeted customers to buy them (Kotler and
Armstrong, 2004).Promotion is the company strategy to cater for the marketing communication
process that requires interaction between two or more people or groups, encompassing senders,
messages, media and receivers (Lager, 1971).Promotion represents all of the communications
that a marketer may use in the marketplace.

Promotion has four distinct elements: advertising, public relations, personal selling and sales
promotion. A certain amount of crossover occurs when promotion uses the four principal
elements together, which is common in film promotion. Advertising covers any communication
that is paid for, from cinema commercials, radio and Internet adverts through print media and
billboards. Public relations are where the communication is not directly paid for and includes
press releases, sponsorship deals, exhibitions, conferences, seminars or trade fairs and events

To Bamigboye (2001), promotion is any marketing effort whose function is to inform

potential customers about the merits of given product or service for the purpose of inducing a
consumer either to start purchasing or to continue purchasing the firm‘s product or

41
service.

42
Kotler and Armstrong (2004) were of the opinion that promotional strategies include all means
through which a company communicates the benefits and values of its products and persuade
targeted customers to buy.

To Lazer (1971), promotion is the company‘s strategies to cater for the marketing
communication process that requires interactions between two or more people or groups
encompassing senders, messages, media and receivers. Conclusively it is agreed that an
organization should apply strategies to its promotional mix in order to effectively communicate
favorably with the target market.Without creating effective awareness of the organization and
the products through communication, it will be difficult for an organization to achieve its stated
objectives.

When companies launch new products, they need to understand the impact of publicity and
advertising on sales. Publicity is defined as ―editorial space in media for promotion purposes
that does not identify the message sponsor‖ (Eisend & Küster, 2011, p. 906). In contrast, the
sponsor is clearly identified in advertising. As many managers consider publicity to be more
advantageous than advertising, companies increasingly prefer to stimulate publicity instead of
advertising (Ries & Ries, 2002). The rationale is clear: many consumers feel overwhelmed by
advertising messages (specifically, 65% of consumers according to Porter & Golan, 2006) and
therefore choose to avoid traditional marketing communication (Hann et al., 2008). Publicity in
the form of editorial messages offers consumers seemingly objective and unbiased content that
has been endorsed by a third party. In contrast, advertising produces communications that are
obviously paid for and endorsed by a company. As a result, many consumers regard these
communications with skepticism and consider them to be less credible (Kotler & Keller, 2011).
There is a long tradition of research on the effectiveness of publicity and advertising. Since
Preston & Scharbach‘s (1971) seminal paper on this topic, several studies have investigated the
trade-offs between publicity and advertising and provided valuable insights into the effects of
publicity and advertising on consumers. Studies of the effects on consumer attitude (Wang,
2006), credibility (e.g., Straughan et al., 1996), attention (e.g., Lord & Putrevu, 1998), and
cognitive response (e.g., Chaiken & Maheswaran, 1994) help elucidate the fundamental

43
psychological processes that occur as a result of both types of communication. Despite the
progress that the literature has made regarding the effects of advertising and publicity on mindset
metrics such a Consumer attitudes, no study to date has analyzed their effects on sales.

This leaves a number of key issues unresolved: Is there a difference between pre- and post-
launch advertising and publicity effectiveness (in terms of elasticities)?

What is the relative effectiveness of advertising and publicity on sales? Do they strengthen each
other (have a positive interaction effect) or weaken each other (have a negative interaction
effect)?

The objective of this study is to extend the knowledge on the effects of advertising in terms of
the dependent measure considered (sales), in terms of their timing (pre- versus post-launch) and
in terms of their combined(Advertising and Publicity) use (interaction effects).

The distinction between pre- and post-launch effects is especially relevant for industries with
short life cycles in which many different new products are frequently introduced.

New products in these industries (e.g., movies, video games, books, music or new technological
devices such as the iPad) often experience a peak in demand that occurs immediately after the
launch of the product. This peak is then followed by a strongly declining sales curve

e.g., Ainslie et al., 2005; Beck, 2007; Jedidi et al., 1998; Tellis et al., 2003

The specific diffusion pattern is the result of a pre-release ―shadow diffusion‖ (Goldenberg et
al., 2007). This shadow diffusion is initiated by pre-launch awareness of an innovation, which is
triggered by advertising activities before the product enters the market. Thus, consumers
may decide to adopt a new product even before it is available, but have to wait until the product
is introduced to the market.

For products with these types of diffusion patterns, it is particularly relevant to effectively utilize
pre-launch advertising and publicity to drive overall demand, which is substantially
influenced by the product‘s performance during its launch period .

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In summary, this study contributes to the literature in three ways. First, we provide
insights into the relative effectiveness (elasticities) of advertising on a managerially
relevant measure of success: sales.

Second, we extend previous knowledge by distinguishing between the pre- and post-launch
elasticities of publicity and advertising. We observe a substantially stronger effect on first-week
sales for pre-launch phase Publicity than for pre-launch phase advertising. This result is reversed
in the post-launch phase:

After the product launch, Advertising is more effective than publicity. Third, we account for
the effects of a combined-format strategy. Interestingly, we observe a negative interaction effect
in the pre-launch phase (and an insignificant interaction post-launch), which means that publicity

becomes less effective when it is accompanied by higher levels of advertising for the same
product.

The results allow us to provide recommendations regarding the focus of marketing campaigns
(advertising or publicity) before and after the launch of products

Although the dynamic effects of advertising are well documented (e.g., Bruce et al., 2012; Frison
et al., 2014), little knowledge exists on the dynamic effects of publicity on sales, particularly
with respect to the relative effectiveness of these communication formats during the pre-launch
and post-launch phases. In both phases, consumers lack reliable information on the

product. This is particularly the case for entertainment products and other hedonic products, for
which consumers will only be able to truly judge their enjoyment of the product in question after
they have consumed it (Hirschman & Holbrook, 1982).

Considering this high consumer uncertainty, which demands credible sources of information, we
expect to observe differences between advertising and publicity. According to attribution theory,
different sources may lead recipients of messages to attribute (product-related) information to
external factors (e.g., Kelley & Michela, 1980). Because consumers might Attribute advertising
claims to a profit motive (an external factor) rather than the provision of neutral product
information (Lord & Putrevu, 1998), the credibility of advertising is negatively affected.
Conversely, consumers are less likely to question the motives of publicity, and its Source
credibility would therefore remain intact. Because source credibility may serve as a

45
peripheral

46
cue (in the elaboration likelihood model; Miniard et al., 1988), the perceived credibility of the
source would be transferred to the message, thereby positively affecting the consumers‘ attitudes
towards the product (Lord & Putrevu, 1993).

Consequently, compared with advertising, publicity is associated with higher levels of expertness
and independence and with lower levels of intention to persuade (Hallahan, 1999). Thus, we
argue that publicity has a greater uncertainty-reducing potential and is perceived to be more
credible than advertising. Therefore, publicity is likely to be more effective than advertising in
reducing the preconsumption uncertainty regarding a new product, especially during the pre-
launch phase, when the product is not yet in the market.

This reasoning leads to the following hypothesis:

The elasticity of pre-launch publicity for first-week sales is larger than the elasticity of prelaunch
advertising. However, after a product has been launched, consumers can base their evaluations
of the product on others‘ experiences with the product as it becomes increasingly well-known in
the marketplace Thus, in addition to advertising and publicity, a third source of information,
word- of-mouth, becomes available. Given the higher source credibility of perceptions of
individuals relative to more distant sources such as advertising and publicity .we expect that the
effectiveness of advertising and publicity is lower in the post-launch stage than in the pre-launch
stage:

The sales elasticities of publicity and advertising are lower in the post-launch phase than in the
pre-launch phase. An important question concerns whether the presence of word-of-mouth in the
post-launch stage has a more negative effect on the effectiveness of publicity or on the
effectiveness of advertising. We argue that it reduces the effectiveness of publicity to a greater
extent. Whereas consumers perceive advertising as a commercial source of information, word-
of-mouth and publicity are both categorized as non-commercial sources of information
(Hennessey & Anderson, 1990). In that sense, publicity and word-of-mouth are understood as
closer information substitutes than are advertising and word-of-mouth. Based on the similarity
principle (Tversky, 1972), when word-of-mouth from non-commercial sources close to the
consumer becomes available, it substitutes for the information previously provided by the
similar (noncommercial) source of publicity to a greater extent than the more dissimilar
(commercial) source of advertising. Thus, we expect that the decline in the effectiveness of
publicity is
47
relatively strong in the post-launch phase: Moving from the pre-launch phase to the post-launch
phase, the decrease in the publicity elasticity is stronger than the decrease in the advertising
elasticity.

In the event that the two formats convey information that is largely complementary, there will be
a synergistic effect of publicity and advertising. Arguments along this line can also be drawn
from the encoding variability theory (Lord & Putrevu, 1998). According to this theory,
consumers who encounter information in more than one context have multiple retrieval cues
available, leading to stronger, clearer, and more accessible information (Stammerjohan et al.,
2005). Such synergies may, of course, evolve from submitting similar information through
different formats because one of these formats can produce greater reach, whereas the other
format can produce higher communication frequencies (Vakratsas & Ambler, 1999). However,
it is not only the repetition but also the variation of the message content that, according to the
repetition-variation theory, affects the consumer (Schumann et al., 1990). As a consequence of
the exposure to both formats, the likelihood that the information will be recalled correctly is
higher, and we thus can hypothesize the following for their combined use:

The interaction effect (elasticity) between publicity and advertising on sales is positive.
Conversely, the combination of advertising and publicity might also have an antagonistic effect,
leading to a decreasing efficiency of both formats. This effect might occur if the frequent
exposure to information of both formats negatively affects their perceived source credibility. For
instance, consumers might discount the credibility of publicity that is received in temporal
proximity to an advertisement (e.g., publicity and an advertisement within the same issue of a
magazine). In that case, consumers might question the credibility of the publicity if they attribute
the same profit motive to the publicity (attribution theory; e.g., Kelley & Michela, 1980). As a
consequence, the information processing that normally favors publicity with respect to source
credibility (Lord & Putrevu, 1993) would not differ from advertising. Following the theory of
reactance (Brehm, 1966), an even more negative reaction to combination could emerge. For
instance, consumers could perceive an extensive, simultaneously run publicity and advertising
campaign as a deliberate effort to persuade them and, hence, start regarding the information
sources negatively. Equivalently, higher levels of publicity may reduce the news value and
therefore the effectiveness of advertising. Moreover, the marginal effect on demand could
48
decrease at high levels of communication for either advertising or publicity due to a saturation
effect. Considering these lines of thought, we can also hypothesize:

H4b. The interaction effect (elasticity) between publicity and advertising on sales is negative.

How does the interaction effect change when moving from the pre-launch to the post-launch
phase? We expect that the availability of word-of-mouth as an information source during the
post-launch phase will not only reduce the effectiveness of publicity and advertising (H2), but it
will also attenuate the interaction effect. That is, once word-of-mouth becomes available,
consumers devote relatively less attention to publicity and advertising. This weakens the
reasons for synergistic effects between these sources (e.g., less complementarity due to
information substitution provided by word-of-mouth) but also the reasons for antagonistic
effects (e.g., less consumer attention devoted to deliberate attempts to persuade them). Thus, we
argue that:

H5. The interaction effect between publicity and advertising on sales is stronger in magnitude
during the pre-launch phase than it is during the post-launch phase.

Data and measures This study uses longitudinal data on 3,336 products released between 2004
and 2009 in the video games market to investigate the dynamic effects of pre- and post-launch
publicity and advertising. The market for video games is particularly suitable for analyzing the
relative performance of these two communications formats for three reasons. First, the
consumption of video games involves multisensory, fantasy, and emotive aspects; therefore,
video games provide high levels of hedonic benefits (Hirschman & Holbrook, 1982). Such
hedonic markets for entertainment goods typically demonstrate strong market dynamics in
which many different new products are frequently introduced. Video games also possess
relatively short life cycles. Consequently, the market for video games not only provides the
opportunity to analyze a large number of new releases but also permits tracking the performance
of these products over the course of their entire life cycles.

a sales volume of USD 93 billion in 2013, the market for video games is one of the largest
entertainment industry markets in the world (Entertainment Software Association, 2014). The
video game market is also one of the fastest growing entertainment industry markets globally

49
(the growth rate from 2009 to 2012 in the U.S. was 10%; Entertainment Software Association,

50
2014). This market is highly competitive and dynamic; in particular, the industry releases an
average of more than 1,000 new video games per year (see www.vgreleases.com). Thus, we
consider data that not only include information on the amount of publicity and advertising
regarding a product that occurs after the product‘s launch and its subsequent sale but also allow
us to consider the pre-launch marketing activities in both communication formats. The study‘s
sample consists of all PC and console games (e.g., PlayStation or Xbox) that were released in
Germany between 2004 and 2009 and were listed at least once in the Top 200 weekly sales
charts. This approach results in a sample of 3,336 games. Collected data for these games for the
26 weeks before and the 26 weeks after the launch of each game.

In total, wehave 86,620 observations for model calibration: 3,336 games times 26 weeks of sales
per game for nearly all of the games. The first week‘s sales range from 0 to 382,482 units,
indicating that the sample captures both blockbusters and poor-selling games. We use the weekly
sales of each examined game over the course of the 26 weeks after its launch as the key success
metric for this study. We observe that games sell on average 2,462 units (SD: 10,822) in the first
week, amounting to average revenues of EUR 112,036 (detailed information regarding the
variables is displayed in Table 1). To capture the post-launch impact of publicity and advertising,
we use the weekly sales from week 2 to week 26. During this time, the average weekly sales per
game are 513 units (SD: 1,255). The games in the sample exhibit the typical steeply declining
diffusion pattern of sales that has been found for comparable media products, such as movies
(Sawhney & Eliashberg, 1996; Ainslie et al., 2005), music (Moe & Fader, 2002), and books
(Beck, 2007).

Case study 1:

Increasing our sales through advertising - Black Circles

Michael Welch started his business, Black Circles, in November 2001. The company, based in
Scotland, links more than 700 independent tyre fitters across the UK. When contacted through its
call centre or website, it locates the customer's nearest and cheapest tyre fitter. Here, Michael
explains why advertising is so important to his business.

What I did?

Find the right media

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"We needed to start advertising from day one to attract customers. I started by looking for places
to advertise which I thought would reach our target market, such as car magazines like Revs and
Max Power. The readers of these types of magazines are a captive market - as fast-car
enthusiasts and owners, they need to buy tyres regularly.

"I got the circulation figures and the demographics of the people that were reading these
magazines. This included information such as their salary, age and the type of car they drove. I
then broke our potential customers down into similar categories and decided which magazines
would target them best. With advertising, your approach should always be targeted, never
random."

Make the most of the budget

"At the moment we spend around £25,000 to £30,000 a month on advertising and our turnover is
£3 million. We manage to convert about 70 per cent of our advertising spend into sales.

"After a few months of a particular campaign we analyse how it is working and then either pull it
or continue to do more. Our sales team always ask each new customer how they heard of us so
we can tell which advertisements work.

"When they start out, many businesses don't think they can compete with larger firms when it
comes to advertising, but they can. As long as you're clear about the message you want to get
across and know which media is right to reach your target market, a small business' advertising
can be as successful as anyone else's."

Write a good advertisement

"We use an advertising agency but I oversee all of the work they do. In the early days I thought
that they were the professionals and they would know best but ultimately you need to have
control of the advertising messages and your brand image. In the beginning our unique selling
point was that we were cheap but we wouldn't sell at those prices now. Our unique selling points
now are excellent customer service and value and all our marketing is designed to reflect this.

"Our strapline is 'Think tyres, think Black Circles' and all of our advertisements are black and
white. We try to keep it simple because in general the industry is synonymous with being a bit of
a rip-off. We did have some campaigns that weren't as successful in the beginning because we
didn't have much experience. Now we have the luxury of having the time, money and knowledge
to be able to experiment and find out what works. The key is not to bet too much on one
campaign but to build up slowly. I would definitely like to do some radio and TV advertising in
the future because it will expose us to a much bigger market."

What I'd do differently

"Perhaps I would have extended the magazine advertising sooner and thought about brand
development earlier. However, the cost of advertising means that what you would do in an ideal
world isn't always possible in the beginning."

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Michael Welch - Black Circles

Learnings:

Don't get carried away without analysing which media people are responding to.
Focus on your customers' requirements.
Make sure you have good financial controls in place to get the best value from your
advertising spend

ADVERTISING IS ONE OF MANY FACTORS INFLUENCING SALES

Advertising objectives, like organizational objectives, should be operational. They should be

effective communication tools, providing a line between strategic and tactical decisions.

A convenient and enticing advertising objective is immediate sales or market share. However,
an increase in immediate sales is not operational in many cases for two reasons:

(1) Advertising is one of many factors influencing sales, and it is difficult to isolate its
contribution to sales. The other forces include price, distribution, packaging, product features,
competitive actions, and changing buyer needs and tastes.

(2) The second reason involves the long-term effect of advertising on sales. If advertising
generates a substantial lagged effect on sales, then the impact of an advertising campaign may
not be known until an unacceptable length of time has passed.

For example, an important contribution of a 6-month campaign might be its impact 12 months
hence. If immediate sales of not the basis of operational objectives, how does to proceed? The
answer to the following questions will yield useful and effective objectives.

1. Who is the target segment?

2. What is the ultimate behavior that advertising is attempting to precipitate, reinforce, change,
or influence?

3.What is the process that will lead to the desired behavior and what role can advertising play
in the process?

4. Is it necessary to create awareness, communicate information about the brand, create an

image or attitude, or associate feelings or a type of user personality with a brand? - Identify the
target audience. The specification of the target audience should be a part of the marketing
objectives. - The analysis of the ultimate desired behavior such as trial purchases of new
customers, maintenance of loyalty of excising customers, creation of a more positive use
experience,

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reduction of time between purchases, or the decision to visit a retailer use experience,
reduction of time between purchases, or the decision to visit a retailer.

An analysis of the communication and decision process the will affect the desired behavior. It
might be that the key variable in inducing a new customer to try your brand is to inculcate
high levels of brand awareness.

The best way to maintain loyalty is to strengthen an attitude. Which intervening variables
provide the best link to the desired behavior and which can be influenced economically by
advertising are to be determined.

An analysis of market dynamics can lead to behavioral measures that by themselves can provide
the basis for operational objectives.

If the advertising‘s target is new customers, the goal may be to get new customers to try a
brand for the first time.

The results would be measured by the number of new customers attached. The use of behavioral
measure as objectives is often appropriate in retailing (store traffic measures), direct marketing,
and sales promotion and in lead generation for salespeople. It is useful to analyze the
communication and decision process relevant to the desired behavior and to identify intervening
variables on which to base objectives. Some situations could dictate the joint use of intervening
and behavioral objectives.

ADVERTISING BUDGET

The size of the advertising budget can have an impact upon the composition of the advertising
mix. In general, a limited promotion budget may impel the management to use types of
promotion that would not be employed otherwise, even though they are less effective than the
others.

Industrial firms generally invest a larger proportion of their budgets in personal selling than in
advertising, while the reverse is true of most producers of consumer goods.

Organizations with small budgets may be forced to use types of advertising that are less
effective than others. Some marketers find it necessary to restrict their efforts primarily to
personal selling and publicity.

There are organizations with small promotion budget which take the opposite course of action.
They concentrate on advertising and sales promotion, and neglect other methods.

Some marketers advertise in expensive ways (through classified advertisement in newspapers

and magazines) and spend virtually nothing on personal selling. There is universal difficulty of

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relating advertising expenditures to sales and profit results. Determining the results of
advertising and consequently the amount of money to be allocated in advertising budget are
complicated by several major difficulties as follows:

(i) The effects of external variables such as population, or income, changes on

economics conditions and competitive behaviour

(ii) Variations in the quality of advertising

(iii) Uncertainly as to the time-lag effect of advertising

(iv) The effect of the firm‟s other marketing activities, such as product improvement
and stepped-up personal selling.

The above complexities make the companies resort to more than one method of determining the
size of their advertising budget.

Advertising Budget involves the allocation of a portion of the total marketing resources to the
advertising function in a firm. The size of the budget allocation should be based on the potential
contribution that advertising can make.

Advertising budgeting should be based on a careful analysis of the opportunity for using
advertising.

Marginal analysis approach

The marginal analysis approach to the allocation of resources provides a useful framework. How
much should a firm spend on advertising? A firm may choose to spend promotion funds up to the
point where marginal cost equals marginal revenue.

Such analysis may be used for advertising budget decision. The allocation procedure is to
increase advertising expenditure until each rupee of advertising expense is matched by an
additional rupee of profit. This marginal analysis results in the maximization of the productivity.
The difficulty arises in the identification of this optimal point. The following table illustrates this
point.

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Marginal Analysis for Advertising Budgeting

Alternative Marginal Net Revenue Marginal Total Profit Marginal

Advertising Advertising Revenue Profit
Expenditure Costs (Rs. in
Thousands)
30 - 20 - -10 -1
35 5 24 +4 -11 -1
40 5 30 +6 -10 +1
45 5 40 +10 -5 +5
50 5 55 +15 +5 +10
55 5 77 +22 +22 +17
60 5 88 +11 +28 +6
65 5 95 +7 +30 +2
70 5 98 +3 28 -2
75 5 99 +1 24 -4
80 5 99 0 +19 -5
85 5 97 -2 +12 -7
90 5 95 -2 +5 -7
95 5 90 -5 -5 -10
100 5 83 -7 -12 -7

This analysis assumed that the management desires to maximize the profit contribution from
advertising. It is not feasible to spend on advertising in increments of less than Rs.5,000. The net
revenue refers to sales minus all the non-advertising costs which are based on a pre-determined
non-advertising marketing mix. At lower levels of advertising (less than Rs. 5,000), the company
cannot generate sufficient sales to cover all the costs. So, Rs. 5,000 represents the absolute
minimum advertising budget for the company to make any profit at all. According to the
Marginal analysis the management must select performance objectives for advertising
expenditures.

Marginal analysis relies on sales and profitability, which are important to assess the potential
contribution of advertising expenditures.

For advertising decisions for a new product introduction, the management may determine a
minimum budget level and then asses the different levels above this. Implementing the marginal
analysis is a difficult task.

Advertising is not the only factor affecting product performance. It is also difficult to predict the
time pattern of the contribution, for it cannot be assumed that advertising will have an immediate
impact.

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All these factors make it difficult for us to assess precisely the net sales marginal revenues, or
other performance contribution estimates.

To cope with the realities of advertising budgeting, a variety of procedures have been adopted,
which vary considerably when compared with the marginal analysis framework.

Advertising Budget Allocation by ―Rule of Thumb‖

Under this approach, the decisions on the amount to be spent are made by advertising managers
in co-operation with advertising agency. Many companies resort to more than one method of
determining the size of their advertising budgets. Some methods which are in common use are
as follows:-

1. Profit Maximization:

The best method for determining advertising expenditure is to identify a relationship

between the amount spent on advertising and profits, and to spend that amount of money
which maximizes the net profits. Since the effects of advertising may be reflected in
future sales too, the advertiser maximizes the present value of all future profits at an
appropriate rate. Therefore, a very few advertisers are able to implement the profit-
maximizing approach to determine their advertising expenditure

2. Advertising as a Percentage of Sales:

Advertising Allocation = %  Rs. Sales

A pre-determined percentage of the firm‟s past sales revenue (or projected sales
revenue) is allocated to advertising. But the question is - What is the relationship between
advertising expenditure and sales revenue? Though it lookssimple, it is not an effective
way of achieving the objectives. Arbitrary percentage allocation fails to provide for the
flexibility. This method ignores the real nature of the advertising job.

It is not necessarily geared to the needs of the total marketing programme. But this
method is widely used. Its wide use reflects the prevailing uncertainty about the
measurement of advertising effectiveness. It is an easy way of minimizing the difficulties
of annual budgeting negotiations. It is also safe method as long as competitors use a
similar method. The fixed sum per unit approach differs from the percentage of sales
approach in only one respect that it applies a pre-determined allocation to each sales or
production unit.

3. The Objective and Task Approach:

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 The most desirable method is the objective and task approach. It is goaloriented. The
firm agrees on a set of marketing objectives after intensive market research. The costs of
advertising are then calculated. When the resulting amount is within the firm‟s financial
means, it is the advertising budget. It involves the following two steps:

(a) First, the organization must define the goals the promotional mix is to accomplish.
For example, a 5 per cent increase in market share, or a 10 per cent rise in gross sales, or
a 3 per cent addition to net profit, or more likely, a combination of several items.

(b) Second, it must determine the amount and the type of promotional activity required
to accomplish the objectives set. The sum of these becomes the firm‟s promotion budget.

A crucial assumption underlies the objective and task approach is that the productivity of each
advertising rupee is measurable.

The task approach starts by asking what the objectives of the advertising campaign are.

The ―advertisability‖ of the product is more sharply defined. This approach requires that
assumptions about media, copy, and all the other parts of a campaign be co-ordinated to achieve
a specific set of objectives.

The task approach has special merit in the introduction of a new product. The main problem
with this approach is that it is not easy to determine the cost of fulfilling an objective or to
decide whether an objective is worth fulfilling. The task method forces advertising managers to
engage in advance planning.

4. Competitive Parity Approach

This approach ties its budget to the rupees or percentage of sales expended by its competitions.
This approach tries to match the competitor‟s outlays and meet competition either on absolute or
relative basis. It involves an estimate of industry advertising for the period and the allocation of
an amount that equal to its market share in the industry.

Meeting competition‟s budget does not necessarily relate to the objective of promotion and is
inappropriate for most marketing programmes.

It is a defensive approach. It assumes that the promotion needs of the organization are the same
as those of its rival and makes it easy for analyzing the realities of its own competitive situation
and to ignore the possibility of other strategies. But the needs will never be the same.

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 It also assumes that budgets arrived at by competitors are correct, but they may have arrived
at in a haphazard manner. Besides, their marketing strategies may also be different from our
organization. Therefore, this method may be recommended only as a supplement to others.

However, the imitate-competitors strategy is most applicable in industries where competition is

in order to prosper and even to survive. In a way, is better than 39 the per cent of sales method as
it recognizes that the competition as a key element in marketing and promotes stable
relationships

Competitive parity budgets can be determined in several ways; but all are based on spending
approximately the same amount or percentage of sales as one‟s competitors. Some of the ways
include:

(a) Spend the same rupee amount on advertising as a major competitor does.

(b) Spend the same percentage of sales on advertising as a major competitor does.

(c) Spend the same percentage of sales on advertising as the average for the entire industry.

(d) Use one of these ―rules of thumb‖ in a particular market.

All these have one common characteristic, that is, the actions of competitors determine the
company‘s advertising budget. But under this situation, a company faces several risks.
Sufficient information may not be readily available to estimate the competitor‘s advertising
budget.

Such information is derived from secondary sources for some products than others.

When only partial information can be obtained, such as expenditure on media, competitive parity
may be misleading. It implies that all firms in an industry have the same opportunities but not so
in practice. For example, a company introduces a new product to compete with a competitor‘s
already established brand; the opportunity for advertising for these two brands would be entirely
different.

5. All the Organization can afford approach

It involves the income statement and the balance sheet. It asks how much is available to the
firm. This question is partially answered by anticipated sales and margins. The decisions based
wholly on them ignore the requirements of the advertising. The basic weakness is that it does not
solve the problem of ―how much should we spend‖ by asking: ―What can we profitably spend?‖
In some instance, companies adopt pricing policies or others strategies intended to yield more
advertising rupees. Some may spend whatever rupees are available for promotion, the only limit
being the firm‟s need for liquidity. This approach does ensure that advertising expenditures are
assessed in the light of the profit objectives. It does put advertising in perspective with other
corporate functions as contributors to the achievements of objectives.
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6. By Using Judgment

This method relays upon the judgment of experienced managers. Over the years, some of these
individuals develop a feel for the market that permits them to arrive at appropriate decisions,
given the organization‟s objectives and limitations. It is a vital input for the determination of the
budget. When the management uses other methods, it should temper them with the judgmental
evaluations made by experienced managers. Judgment is subject to error and bias. Other
methods should supplement this technique. To conclude, promotion may be viewed as a long-run
process. Joel Dean has indicate that advertising should be seen as a business investment, in the
same sense as opening a new plant or spending additional funds on improved package design.

CONCLUSIONS AND RECOMMENDATIONS:

What is the Advertising-To-Sales Ratio: The advertising-to-sales ratio is a measurement of the

effectiveness of an advertising campaign that is calculated by dividing total advertising expenses
by sales revenue. The advertising-to-sales ratio is designed to show whether the resources a firm
spends on an advertising campaign helped to generate new sales. A high advertising-to-sales
ratio indicates that advertising expenses were high relative to sales revenue; this could mean the
campaign was not successful. A low ratio indicates that the advertising campaign generated high
sales relative to the advertising expense.

BREAKING DOWN 'Advertising-To-Sales Ratio'

Businesses often run a variety of marketing campaigns on different mediums (newspaper,

websites, radio, etc.) at one time, which can make it difficult to determine which campaigns,
if any, were responsible for new sales. Close tracking of promotions can show which
mediums perform better, and the advertising-to-sales ratio can show the effectiveness of the
advertising spending. Some companies do not require as much advertising, such as utility
companies, so comparisons should be made between similar companies. Some advertising
campaigns are designed to foster long-term support, so a low advertising-to-sales ratio might
not reflect the long-term benefits.

Advertising can be anything from your shop sign or a website, to an advertisement in a trade
magazine or a 30-second radio slot. Advertising can provide basic information such as your
contact details and website address increase sales by telling potential customers about your
product or service tell customers about changes to your service, new product launches and
improvements increase your short-term sales with a specific one-off message - informing people

60
of a special offer or a particular benefit of your product prompt specific action - perhaps getting
customers to visit your premises or website, or use a discount voucher by a specified time remind
existing customers about your business change people's attitudes and perceptions of your
business help to create or develop a distinctive brand for your business to help you stand out
from your competitors make your business first choice for customers, ahead of your competitors
generate awareness of your business develop a particular market niche or position.

Decide whether your target audience is local or regional, national or international, or a mixture.
Remember that a local business might benefit from national advertising, particularly if it is
looking to expand into new territories.

You can advertise in a wide range of different media. Using a media mix can help to reinforce
the message or information you want to communicate.

Before selecting a particular type of media, you should find out from the media business and
other independent sources about their circulation or audience figures and what the audience
penetration, or 'reach', of their product is. Basically, you need to know how many, where and
who to. Figures can normally be broken down into age groups, average income and other useful
indicators.

Don't be tempted to buy advertising space in a certain type of media just because you read, see or
hear it yourself - it should always be focused on your potential customers.

Also remember you have a duty to ensure that your advertising is legal, decent, honest
and truthful. The launch of a new product will almost certainly require you to step up
your advertising

Many businesses launch advertising campaigns simply to boost sales or increase brand
awareness.

New businesses will want to consider some form of advertising just to let people know they
exist. You could consider an introductory offer to give people an incentive to visit or call.
You may be able to design and produce a straightforward advertisement for printed media
yourself - see how to write an advertisement. However, most print advertising organizations‘
have in-house services if you can't do it yourself.

If your advertising needs are more demanding than an occasional, low-priced local
advertisement, it may be worth outsourcing your advertising to an advertising
agency.
See choose and manage an advertising agency. This is only suitable if you are prepared to pay
the extra cost, but in any event, it is advisable to have your adverts professionally designed to
ensure maximum impact.

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Mitchell Habib, Nielsen‘s operations and innovation chief, told attendees that disruptive
innovation was critical to lasting business success and outlined ways it could open new markets
in emerging economies. Deepak Gulati, CEO of Tata Docomo, and Banoja Acharya, Nielsen
India‘s VP, Client Services, shared specific examples and innovation strategies for India.

Launching New Products in India is a Long-Term Play

To succeed in India‘s dynamic market, fast-moving consumer goods companies (FMCG) are
investing in innovation to take advantage of the rapidly evolving retail landscape and the
changing purchasing behavior of consumers.

While new consumer product launches and innovations have proliferated in India over the past
decade, FMCG companies can better ensure successful launches with three-to-five year
launch plans. ―The truly innovative products, have a longer gestation period, need
significantly higher investment and usually guarantee slower, but higher returns in the long
run,‖ said Acharya.

Logistical Challenges

Distribution logistics in India hamper first-year sales, as availability levels to Indian consumers
are between 75–200 percent lower than in fully developed markets. And, significant marketing
support is required, as product launches in India generally require sustained high levels of
advertising spending to reach the necessary threshold number of consumers for ROI targets.

After year one, and into years two, three, four, and beyond, however, successful new products
and categories reach an inflection point when sales and volume start to rise exponentially. While
it takes time to achieve inflection points, the benefits of waiting are certainly sweet—especially
once new launches reach their maxima.

However, not all categories are alike. A Nielsen analysis of 100 new product launches shows
that the growth curve is different across categories. New launches in the impulse food category
have a shorter purchase cycle and typically generate higher interest among consumers. As such,
they reach their point of maxima fastest—in as little as three–to–four months. Loyalty plays a
big part in personal care products as consumers are less willing to switch brands. These products
take the longest to develop—anywhere from seven to 24 months depending on the category. And

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household care products reach their maxima somewhere in between as these products are
driven largely by benefit rather than emotion.

A Different Kind of Competitive Advantage

A unique phenomenon exists in a consumer-driven market like India where competition is not
necessarily bad for new brands within the same category. ―If multiple brands are introducing
similar products with proper marketing support, the new category experiences a larger share-of-
voice in the minds of Indian consumers,‖ said Acharya. ―When this occurs, the category—and
all the brands within it—can reach the inflection point much quicker on the product launch
timeline.‖

For example, as several brands entered the anti-aging category, ad spends combined to create a
multiplier effect in share-of-voice, significantly boosting sales volume for the category and all
the brands in it.

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Serendipitous competition will not always be the case, and even when it exists, the product
innovation timeline in India takes longer than in developed countries. To compete in India,
FMCG companies must plan their launches and marketing budgets accordingly, availing
themselves of all available tools to ensure their products—whether food/beverage, household, or
personal care products—resonate for the long term.

Play to Strengths – Don‘t Ignore Weaknesses

Whether launching a new product in India—or anywhere else in the world—you are only as
strong as your weakest link. Based on Nielsen research and development over a five-year period
of new product launches, there are 12 things that every new product must do to succeed. And
while a product does not need to exceed expectations across all factors, it must do well enough
on all to ensure success.

1. Offer true innovation

2. Get noticed
3. Land your message
4. Communicate with focus
5. Be relevant
6. Be better
7. Be credible
8. Limit the battles
9. Be in the right places
10. Win the value equation
11. Deliver on product promises
12. Be strong in the long run

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 BIBLIOGRAPHY

Books:

Advertising and Sales Promotion Management by Prof. Priyanka Mathur Dhingra

ReWork by Jason Fried and David H. Hansson

Ogilvy on Advertising

Positioning: The Battle for Your Mind – Ries & Trout

Wikipedia ….Advertising Effectiveness ... (Online)

Wikipedia …Advertising & Marketing (Online)

Site referred http://www.nielsen.com

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