Advertising Decisions

 Introduction to ad
copy design
 Enhance hair
conditioner
 ADCAD system

ME Advertising 2006
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 Advertising

Advertising interacts with other mix elements:

 Personal selling (especially for industrial products)

 Branding (advertise the brand/company?)

 Price (increase or decrease price elasticity?)

 Distribution (who are the targets for advertising?)

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Sales Response to Advertising

Shape: S-shape? Linear? Decreasing

returns? Saturation point?
Threshold?

Dynamics: Growth and decline equal?

Delay/carryover effects?
Hysteresis?

Interaction: Advertise in strong (or weak

markets)?

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 Hysteresis Example

1.4
Average during
1.2 Heavy Advertising
Pretest Average
1

0.8
Sales
Rate 0.6
Heavy
0.4 Advertising

0.2

0
10
12
14
16

20

26

30
2
4
6
8

18

22
24

28

32
34
Time (4-week periods) ME Advertising 2006
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 Response Shape Example

Radio Equipment in Newspapers Service Recruiting in Newspapers

300 1,200

250 1,000

200 800
Response Response
Units 150 Units 600

100 400

50 200

0 0

1,000

1,500

3,000
1,000

2,500

500

2,000

2,500
500

1,500

2,000

3,000
0

Advertising Units Advertising Units

(a) (b)
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 The Timing of
Advertising Response

6
Standard
Error

Sales
Increase 2

(%)
0

-2
0 1 2 3 4 5
Advertising Pulse
Months

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What Do We Know About
Advertising Response?

1. Sales respond dynamically upward and downward,

respectively, to increases and decreases of advertising and
frequently do so at different rates.

2. Steady-state response can be concave or S-shaped and will

often have positive sales at zero advertising.

3. Competitive advertising affects sales.

4. The dollar effectiveness of advertising can change over time

as the result of changes in media, copy, and other factors.

5. Products sometimes respond to increased advertising with a

sales increase that falls off even as advertising is held
constant (Little, 1979, p. 644).

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Advertising Budgeting in Practice

 Affordable method

 Percent of sales

 Competitive parity method

 Objective/task method

 Model-based approaches
 Response models
 Shared experience

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Response Model: Theoretical Idea

discounted sum over

markets & time of sales
Max Profit = (advertising levels &    margin – advertising
competition, other mix spending
levels)

Need to know:
 Sales response for each
market area, over time.
 Competitive responses.
 Interactive effects.

Examples:
 Rao & Miller
 ADBUDG
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 Rao and Miller

Idea:

 Use natural variations in changes in

advertising versus changes in sales
across markets to develop a response
function.

 Use response function to optimize

advertising spending.

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 Relationship between Marginal Sales Created by
Advertising and Average Advertising-Expenditure Levels
for Brand B

37.5
District 10

30
District 9
Y 22.5
District 8 District 11
District 7
District 4 District 6
Y = Change in sales dollars District 5
per 1,000 persons per 15
year for a $6 change in District 3
District 1
advertising dollars per
1,000 persons per year
7.5

District 2
0
0 4.5 9 13.5 18 22.5 27

X
X = Advertising dollars per 1,000 persons per year

ME Advertising 2006
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 Advertising Response Function
for Brand B

37.5
District 11

30

Sales Dollars 22.5 District 7

District 10
per 1,000 District 1
District 5
Persons per 15 District 6
District 8
Year District 4

7.5 District 9

District 2 District 3

0
13.5

22.5
4.5

18

27
0

Advertising Dollars
per 1,000 Persons per Year
ME Advertising 2006
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 ADBUDG Model Assumptions

 If advertising is cut to zero, brand share will decrease, but there

is a floor (min), on how much share will fall from its initial value
by the end of the period.

 If advertising is increased a great deal, say to something that

could be called saturation, brand share will increase but there is a
ceiling (max), on how much can be achieved by the end of one
period.

 There is some advertising rate that will maintain initial share.

 An estimate can be made by data analysis or managerial

judgement of the effect on share by the end of one period of a
20% increase in advertising over the maintenance rate.

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 Input—Calibrating Sales Response
to Advertising Function
Max share at end
with saturation AD
Saturation
advertising

+20% advertising End share

with +20% AD
Share
Initial Maintenance advertising
Share
Zero
advertising

Min share at end

One period

Time ME Advertising 2006

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 Share Response vs Advertising
in 1 Period

Max

Share
Min

Maintenance +20%

Advertising

Share Response = min + (max – min)(adv)c / [d + (adv)c]

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Effective Advertising

adv = [media efficiency (t)]

 [copy effectiveness (t)]

 [adv dollars (t)]

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 Adding Time Delays/Carryover

 In the absence of advertising, share would eventually decay to some

long-run minimum value (possibly zero)

 The decay in one time period will be a constant fraction of the gap
between current share and the long-run minimum, that is, decay is
exponential

Long run min =lowest share possible in the long run

Persistence =fraction of the difference between

“long run min” and amount of share
retained with zero advertising

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 The Full Model

Sharet =Long Run Minimum (LRM)

+ Persistence  (Sharet–1 – LRM)

+ Share Response

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 Advisor

 Goal: Develop norms for levels

of spending for the marketing
communications mix (PS, TS and
ADV).

 Relate norms to product, market,

environmental characteristics.

 Use results to develop guidelines,

auditing procedures for portfolios
of products.
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 The ADVISOR Model Concept

• • •

{ }
• • •
• • • •
Norm • • • • •
xyz Norm • • • • Individual
Range • •
• • •
• •
• •• • • Firm Data
• • • •
• • •
• • • • •
• •
••
• • • Advisor
Marketing • •
• • •
Model
Spending • • •
•
• • •
• • •
•
• •
• • •
•
•

Product xyz
# Customers
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 Media Decisions

Requires:
1.The objective function, which assigns a value
(profit/effective exposures, etc.) to an insertion schedule.
2.The solution strategy (heuristic, optimization, etc.).
3.The constraints (budget, other).

Main components of the model:

1.The vehicle exposure measure—used to measure the net
reach, schedule exposure or GRPs.
2.Repetition effect—what is the relative impact of
successive exposures on the same person?
3.The forgetting effect—what forgetting occurs between
exposures and what is the nature of the decay?
4.The media option source effect—what is the relative
impact exposure from a given source?
5.The segmentation effect—who is exposed and what is the
fraction of the audience that represents target segments?
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 Media Decisions (cont’d)

Approaches
Linear Programming: (Charnes & Cooper 1960s)

Mediac: (Little & Lodish)

Includes market segments, sales
potentials, diminishing marginal
returns, forgetting, timing.

Other: Solem (Bimm & Millen)

Admod (Aaker)
Urban’s Model

Current Models: DSS/What-if tools

(Maximize weighted sum of
reach and frequency)
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 A Key Challenge in Ad Copy
Decision Making

 Integrating message strategy (What to say?) and the

message execution (How to say?) so they work together
to enhance brand/company:
 If strategy overpowers the creative idea, then the message will
be dull and not remembered.
 If the execution overpowers the strategy, then it may be
remembered, but the intended message may have no impact.
 The purpose of today’s session is to explore a systematic
way to develop the appropriate message strategy.
 The case exercise will require you to transform the
message strategy into an ad.

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 Advertising Copy Development

Many ways to develop ads:

 Brainstorming
 Relying on experience
 Using creativity templates (Use templates based on past
successful ads, especially those that have won awards)
 ADCAD

Do copy testing to select good ads:

 Attention  Persuasion
 Understanding  Purchase

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 Systematic Approach to
Ad Development

 Ads should be developed based on sound

marketing and advertising strategies
 Ads should be part of an integrated marketing
communication program
 Good ads are developed based on a knowledge of:
 advertising concepts and theories
 market, product, and audience characteristics
 philosophies of client and ad agency

ME Advertising 2006
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 Typical Sequence of Steps in
Ad Design

Marketing Strategy Desired Consumer

Response
 Objective
 Target audience  Beliefs, feelings, or
behavior
 Creative strategy
Advertising Strategy
 Link to marketing Primary Benefit
strategy
 Find unique brand  Message/support
opportunity  Executional elements

ME Advertising 2006
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 Johnson Wax (Enhance) Map:
Conditioning vs. Clean
I
0.60
Sassoon
Agree
Br. Clean
Loreal
Clean Fx.inst
Tame Enh.Post
0.00
W.Balsam
Enhance
Herb.ess
Condition
Suave

F.Fawcett
–0.60
–1.00 0.00 1.00

Enhance =Before use Conditioning

positioning
Enh.Post =After use ME Advertising 2006
positioning 27
 Johnson Wax (Enhance) Map:
Conditioning vs. Effects

0.60 I
Loreal Condition
Fx.inst Sassoon
F.Fawcett
Effect on
Hair 0.00
Agree Enhance
Herb.ess W.Balsam
Br. Clean Enh.Post

Tame
–0.60 Suave
–1.00 0.00 1.00

Conditioning
Enhance =Before use
positioning Note: The poor Enh.Post position ME Advertising 2006
Enh.Post =After use suggests a need to revise copy. 28
 ADCAD System Overview

Background information Knowledge Base

(problem definition; • Published theory
brand, competitor, • Published empirical findings
product, and audience • Cumulative agency experience
characteristics)

ADCAD Reasoning Process

Questions, definitions, Market Assessment
and explanations
Information
from Marketing Objectives
Target audience
Marketing selection and
Research User other marketing Advertising Objectives
and decisions
Databases
Communication Approaches
Recommendations Positioning Message
and rationale Characteristics
• Benefits • Message arguments
• Comparisons • Ad format
• Message sidedness • Educational
techniques
“What if”
sensitivity Presenter Characteristics Message Emotion
analysis • Attractiveness • Strength
• Similarity • Direction
• Expertise • Mood
• Objectivity
 Past & present
Nature of product usage
product
Past & present
Product usage brand usage
rate
Marketing
Objectives Brand
Product life
cycle stage market
share
Current
Product
brand loyalty
purchase
interval

Brand purchase New brand

motivation uses
Brand type Product purchase
motivation
Package visibility
and recognition at Advertising
POP Objectives Decision
Current brand involvement
recognition
Current top- Time of brand
of-mind decision
awareness ME Advertising 2006 30
 Creative
Strategy
Presentation
Comparisons
Techniques

Message
Decision processing
involvement Decision
Product motivation
Consumer involvement
knowledge
education
Brand
level
Message Performance Benefit knowledge
Sidedness evaluation Presentation Benefit
Product ability
Brand awareness
knowledge Benefit
attitude Benefit
Conflicting delivery Benefit uniqueness
information importance

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 Marketing Objectives

 Stimulate primary demand

 Reinforce primary demand

 Stimulate brand trial

 Stimulate repeat purchase or loyalty

 Increase rate of brand usage

 Attract trier-rejectors

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 Advertising Objectives

 Create/increase brand recognition

 Create/increase top-of-mind awareness
 Communicate category image/mood/lifestyle
 Communicate brand characteristics
 Communicate brand image/mood/lifestyle
 Maintain brand recognition
 Maintain top-of-mind brand awareness
 Reinforce category beliefs
 Reinforce brand image/mood/lifestyle
 Communicate brand changes/enhancements
 Communicate new brand image/mood/lifestyle
 Communicate new brand uses

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 Format

 Demonstration of product in  Fantasy, exaggeration, or

use or by analogy surrealism
 Demonstration of results of  Musical
using the product  Comedy or satire
 Endorsement by  Serious drama
celebrity/authority
 Vignette
 Testimonial by product user
 Unusual/extreme
 Customer interview
 (Announcement)
 Slice-of-life
 (Case-history)
 Problem-solution
 (Brand
production/preparation)
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Presenter Characteristics

 Species
 Age
 Sex
 Identity
 Recognizability
 Credibility (Expertise, Objectivity)
 Attraction (Likability, Similarity)

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 Presentation Techniques

Package-closeup Familiar scenario

Color illustration General humor
Long package display Product humor
Jingle/rhyme/slogan Incongruent elements
Questions Animation/cartoon/rotoscope
Brand name repetition Hidden-camera
Personal reference Implicit conclusion
Music and/or singing Explicit conclusion
Visual/verbal integration Climax presentation
Visual stimuli/imagery Anti-climax presentation
Quantitative arguments Strong arguments
Surrogate indicators Capture consumer emotions
Front-end impact Message sign-off
Short copy Short headline
Nouns in headline
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 Emotion in Ad

 Sanguine
 Phlegmatic
 Melancholic
 Choleric

Anger then relief Convenience

Relief Dullness then elation
Fear then relaxation Elation
Relaxation Boredom then excitement
Fear then trust Excitement
Trust Apprehension then flattery
Moderate or high fear Flattery
Disappointment the optimism Tension, discomfort, threat
Optimism Surprise
Annoyance then convenience Nostalgia

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 Recommended Benefits

 Price/economy  Guarantees or warranty

 Value  Nutrition or health

 Quality
 User satisfaction or loyalty
 Challenge
 New product or option
 Enjoyment
 Safety  New brand uses
 Status  New solution
 Convenience
 (Dependability)

 (Self-expression)
ME Advertising 2006
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 Marketing Objectives Rule
Example in ADCAD

Marketing Objectives (11 rules)

IF product life cycle stage = introduction
AND innovation type = discontinuous
THEN marketing objective = stimulate primary demand

IF brand usage = none

THEN marketing objective = stimulate brand trial

IF current brand usage = some

AND (brand switching = high OR product usage rate = fixed)
THEN marketing objective = stimulate repeat purchase/loyalty

IF current brand usage = some

AND brand switching = low
AND product usage rate = variable
THEN marketing objective = increase rate of brand usage
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 Positioning Rule Example
in ADCAD
Positioning (24 rules)
IF ad objective = convey brand image or reinforce brand image
AND brand purchase motivation = social approval
AND brand usage visibility = high
THEN possible benefit = “status” (c.f. Holbrook & Lehmann 1980)
IF ad objective = convey brand information or change brand beliefs
AND perceived differences between brands = small or medium
AND perceived relative performance = inferior or parity
AND relative performance = superior
AND current brand loyalty = competitor loyal
THEN message comparison = direct comparison against competition
(Gorn & Weinberg 1983)
IF ad objective = convey brand information or reinforce brand beliefs
AND conflicting information = likely AND education = college or
graduate
AND product knowledge = high AND involvement = high
THEN message sidedness = two-sided (McGuire & Papageorgis 1961)
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 Message Characteristic Rule
Example in ADCAD
Message Characteristics (80 rules)
IF ad objective = increase top-of-mind awareness
THEN technique = jingle, rhyme, or slogan (MacLachland 1984)

IF ad objective = convey brand information or reinforce brand beliefs

AND market share = large
AND brand switching = high
AND product type = existing
THEN technique = sign off (Stewart & Furse 1986)

IF ad objective = convey brand information or change brand beliefs

AND message processing motivation = low
AND message processing ability = low
THEN ad format = problem solution (Schwerin & Newell 1981)

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 ADCAD Consultation: Output
Output: Marketing and Advertising Objectives
Market objective = stimulate brand trial
Output: Communication Approaches
Positioning:
Featured benefit = quality (user replaced
recommend benefit = “value”)
Benefit claim = extremely positive
Message Characteristics:
Format = demonstration of product in use,
endoresement by celebrity, vignette
emotions
Presenter/Principal Character:
Identity = celebrity
Identification in message = early
Message Emotion:
Strength = high
Tone = apprehension/flattery
Advertising objectives = create/increase brand
recognition,
communicate brand image/mood/lifestyle
Message comparison = none
Message sidedness = one-sided
Number of benefits = few
Technique = closeup, color illustrations, long package
display, music, visual stimuli/imagery, surrogate
indicators of performance, capture consumer
Sex = female Likability = high
Attraction = high Recognizability = high
Direction = positive ME Advertising 2006
Authenticity of portrayal = high 42
 Benefits of ADCAD System

 Flexible representation and processing of

advertising knowledge using AI methods
 Separate knowledge from its processing
 Verbally rich models that are closer to the way
people normally tend to think -- incorporating
qualitative elements relevant to a situation
 Improved explanatory features
 Deliver knowledge when and where decisions
are made

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 Limitations of ADCAD
Knowledge Base

 Unclear specification of the context in which a rule is

valid

 No clear assessment of the degree of uncertainty

associated with a knowledge element

 Much of the knowledge is not empirically verified in

a scientific sense

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 Initial Ad Agency Reactions

Creating an advertisement is like making an

omelette—easy to do but difficult to do well!
Do you know any computers that can make
an omelette?

Computers and creatives? Forget it!!

What do you think?

ME Advertising 2006
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 Potential Application Areas
of Knowledge-Based Systems
 Too much information
 Systems to interpret information and generate insights for
managerial actions. Example: Interpretation of log files from
web servers
 Too many options to consider and evaluate
 Systems to reduce the number of options to a few important ones
Example: Design of TV commercials
 No single individual has all the relevant
skills/knowledge
 Systems incorporating multiple sources of knowledge and
expertise. Example: New Product Development screening

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 Potential Application Areas
of Knowledge-Based Systems
 Routine problems with highly variable input data
 Systems to automate problem solving. Examples: credit card
authorization, product configuration
 Shortage of skilled employees/frequent turnover
 Systems that embed procedures and plans. Example: Help desk
 Need “just-in-time” knowledge to solve a management
problem
 Network of expert systems available on demand

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Sample Ads