Advertising has been defined as “Any paid form of non personal communication about an organization, product, service, or idea by an identified sponsor” (Alexander 1965, 9). Advertising intrudes into our lives and is not always welcome. Some scholars suspect that we are being manipulated by dark arts (e.g., Packard 1957). This essay examines current practice from three perspectives: the advertiser, the consumer, and society at large.
Advertisers know, roughly, what they want to achieve and seek to do so efficiently. A situation vacant ad may be read by 1,000 people but if the firm finds one successful candidate and that was the cheapest solution, then the “waste” of the other 999 is immaterial. That is why the most often quoted adage about advertising, “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half ” (attributed to John Wanamaker and Lord Leverhulme), is so unhelpful. To understand what the advertiser can expect for the money leads to the exploration of how advertising works, how ad performance can and should be measured, and how to improve that performance.
We then take the perspective of the consumer. Advertising provides some benefits to consumers but some argue that it also encourages them to spend money on products they do not need and/or inflates the prices they have to pay. Some also argue that advertising is responsible for excessive consumption of, e.g., foods high in sugars, salts, and fats or alcohol by young people. In short, advertising produces counter-productive behavior from the consumer’s point of view, or so it is alleged. How do the positives compare with the negatives?
Finally we take the perspective of society as a whole and the extent to which advertising is a benefit or a curse. Governments are now among the largest spenders on advertising, which makes it harder for them to be generally hostile to the techniques, and yet they have to deal with malpractice, typically through regulation. This can take three forms: self-regulation by the industry, legal regulation, and “co-regulation” which has become fashionable (e.g., for broadcast media in the UK) as a compromise between the two.
Although this essay is mostly concerned with marketing communications for brands by for-profit companies, advertising is also important for individuals, notably classified, and not-for-profit organizations such as charities and governments.
History of Advertising
Since the dawn of time, sellers have been seeking to attract attention and present their wares in ways that encourage sales. A recent classified ad for a second-hand bicycle is substantively the same as an ad for a Roman chariot 2,000 years ago. Media have changed, notably broadcast and digital, and our understanding of how ads work has changed, but advertising itself has changed much less. Advertising has always provided information, used emotional appeals to sell to us, and reminded us. But it used to be less pervasive than it is today because of the limited media and the limited number of goods then available for trading (Norris 1980).
Advertising agencies have existed since at least the eighteenth century but their formal standing as experts dates from the mid-nineteenth century in developed markets and the late twentieth century in the late developers. These “full service” agencies offered the complete range of advertising services to advertisers while at the same time being paid by the media carrying the ads. Competitive pressures have eroded the fixed commission system, with advertisers now demanding, in effect, control of the media discounts and paying the agencies a mix of lower rates of commission, fees, and payment by results (Lace 2000). With increasing media complexity in the late twentieth century, most agencies have split into “creative” and “media-buying” agencies with their minor roles covered by other specialist agencies, e.g., public relations and events (Lears 1994).
The importance of small start-up agencies is as great as it ever was but globalization has also promoted mergers of the larger, more mature, agencies into perhaps half a dozen multinationals led by WPP and Omnicom, followed by a second tier of worldwide groups and partnerships (Lears 1994). But the turnover of talented individuals and the avoidance of brand conflicts have maintained stability of the sectors, in the UK at least but probably worldwide too.
By 2000, an estimated US$233 billion was spent on local and national advertising, while sales promotion expenditures increased to more than US$250 billion (Belch & Belch 2001). This is significant because with classic packaged goods, or fast-moving consumer goods, advertisers have shifted budgets from advertising to promotions, but the slack has mostly been taken up by new advertisers such as financial services and government. As a share of world GDP, however, advertising appears to have grown (WARC 2006).
Measurement techniques have become more sophisticated partly in response to advertiser demands to see quantified results and partly as advertisers and their agencies have taken a more scientific approach to understanding how advertising works (e.g., Pedrick & Zufryden 1991). Content has increased in variety with more entertainment and appeals to emotion but this has largely been driven by the wish to exploit new media. Perceptions of different advertising styles may be seen as evolutionary by those involved but the changes in style also reflect the fashion cycles that are necessary to maintain the appearance of novelty (Fox 1984; for a fuller account of the history of advertising see McDonald & Scott 2007).
The Advertiser’s Perspective
This section follows the process of commissioning advertising through to assessing the results. In practice, the process is rarely as tidy as shown here: circumstances dictate changes in decisions and choices made in the “wrong” sequence. Specifically, we look at determining goals and briefing agencies, agreeing the budget, choosing and scheduling media, pre-testing (or “copy testing”) the campaign before it runs, and subsequent evaluation.
Determining Goals and Briefing Agencies
In recent years, the brief from client to agency setting out the requirements has been increasingly formalized (IPA 2003). Ideally the client should have already resolved with the advertiser’s other senior management how, preferably in quantified terms, the advertising could help achieve the corporate goals and roughly what budget would be available for the purpose. Experience from previous campaigns plays a major part in the assessment. In other words, what do we want from the advertising versus what expenditure, and is that value for money credible?
The briefing itself is an interactive process as the agency brings its own experience and negotiating skills, typically, to making the goals easier to achieve and the budget bigger. What should emerge from the process is a clear identification of the target market and the changes the advertising should achieve. These may be indicated by changes in intermediate measures such as awareness or attitudes to the brand, or changes in behavioral measures such as sales or penetration, i.e., the percentage of the market trying the brand. These goals, ideally, should be few and quantified and subsequently used for pre- and post-testing to identify achieved performance. That rarely happens in practice (Ambler & Goldstein 2003).
But the brief is a great deal more than establishing the benchmarks for later performance evaluation. It needs to motivate and excite the creatives (art and copy) to produce brilliantly productive work (Fletcher 1997). The brief should not describe the means, i.e., what the ad should contain, but the end, i.e., challenge the agency with what the campaign should achieve. Creatives love tight briefs and hate open-ended ones; one cannot solve a problem that is not there. A tight brief also proscribes what an ad must not do, e.g., use young people when advertising a brand of alcohol.
Agreeing the Budget
Apart from the horse trading mentioned above, there is no shortage of more or less scientific approaches to budget setting. Practitioners like to claim that they set the budget to maximize projected return on investment (ROI). This plays well with peers and their financial colleagues but it is a myth, and even if it could be done ROI is the wrong financial objective (Ambler & Roberts 2006).
One reason it cannot be done is that the creative content (copy) has not, at this stage, been decided and nor have the media. The copy and the media are the key factors in ad performance, and estimating not only what the advertising will achieve but the counterfactual (what would have happened without the advertising) calls for considerable confidence. Research (e.g., Low & Mohr 1999) indicates that formal models are rarely used to identify profit-maximizing budgets but when they are, they are simply treated as one input among many (West 1995).
More firms than would admit to it practice the “affordable” method, i.e., the money the company can spend without jeopardizing a respectable profit for the year. Two other methods remain popular: maintaining a constant advertising to sales ratio and doing much the same as the previous year (March et al. 1989). Nerlove & Arrow (1962) argued in favor of constant ratios if elasticities and margins are stable.
A better theoretical approach recognizes that ads work in two stages: they change brand equity (what is in consumer heads) and brand equity, at a later date, changes consumer behavior. That may imply that the goals for the ad campaign should be set by changes in brand equity (intermediate) metrics and the budget made available in those terms. In practice few advertisers formalize brand equity measurement in that way. Furthermore the correlation between intermediate and behavioral metrics can be poor so that clients typically prefer the latter, e.g., sales or penetration or profit, where advertising can measurably deliver those goals.
Choosing and Scheduling Media
Media neutral planning (MNP; Saunders 2004) waxed and waned in the UK rather rapidly in the early 2000s. It shared with the more substantive integrated marketing communications (IMC; Schultz 1993) the idea that communications should be planned from the consumer’s perspective. MNP went much further in suggesting that campaigns should be tailored first to the relevant media for the target market and creative matters considered only after that. Most other practitioners see creative and media considerations as being interactive. IMC primarily argues that communications should be consistent with each other and with what the consumer should reasonably be expected to take on board.
From whichever place one begins, the target market should ultimately determine the relevant media both in terms of readership and in providing the appropriate context for the copy. An ad depending on high fashion and addressed to young women should clearly not appear in the Sporting Life which is read by middle-aged men more interested in horses than fashions. Thus media considerations are less driven by reach (how many people see it), frequency, or the cost per 1,000 readers (or viewers) than the relevance of the media and whether, in that context, the message is likely to work.
This in turn leads to the question of how the ads might be expected to work. For a new product or brand, the primary aim is, typically, achieving awareness. Thereafter advertising works mostly through two approaches, broadly classified as either active or central processing, involving argument and logic, or passive peripheral processing, which relies on cues. Other scholars have reached similar, but not identical, conclusions that advertising persuades the viewer to do something they would not otherwise do (the strong theory) or merely reinforces existing habits (Jones 1996).
Pre-testing (or “Copy Testing”) the Campaign
Pre-testing is a contentious topic. Predictiveness is dubious and ads are rarely pre-tested against the particular goals for the campaign. Specialist agencies, such as Millward Brown, more usually test with their standard metrics which has the advantage, of course, of using other campaign tests as benchmarks (Ambler & Goldstein 2003). Even if pretesting is poor value in assessing campaign proposals, it has advantages such as gaining top management approval. Protagonists for pre-testing include Pieters & Wedel (2004).
Post-campaign assessment, on the other hand, is not contentious in principle although there are various competing approaches. Specialist research agencies, once again, tend to use their standard metrics rather than the original campaign goals. Post-campaign assessment usually takes the form of “tracking,” i.e., the key brand equity metrics are consistently monitored over time, for example, on a monthly basis (for a summary see White 2005).
A key factor is that the advertiser is looking for changes in brand equity, in other words brand effects, not advertising effects. According recognition and recall of the ad may lead to brand effects but they are not valuable effects in themselves.
The Consumer’s Perspective
From as early as the first half of the nineteenth century, there has been public ambivalence toward advertising (Nevett 1982). It is seen as manipulative, intrusive, and seeking to persuade us to buy what we do not need (such as lottery tickets) or to buy what is bad for us (such as alcohol, tobacco, or fatty foods). Because brand leaders are typically more expensive than their private label equivalents, some argue that advertising causes us to pay more than we should.
On the other hand, advertising pays for the media we enjoy such as television, newspapers, and the Internet. Quite often we enjoy the ads themselves which enter into general parlance such as “It does what it says on the tin” (Ronseal). Calfee (1997) has made the case for the defense, as has the Advertising Association in the UK and the equivalent trade associations in other countries. Advertising provides information and reminds us, quite often, of what we have bought before and may intend to buy again.
The Social Perspective
Opponents of advertising claim that it commercializes culture, undermines values, and leads to less happiness as society is reminded of what it cannot afford. Supporters argue that advertising merely mirrors society as it is (Fox 1984). They see it as a necessary part of a healthy market and contend that it has contributed to the growth of GDP and widespread prosperity (O’Guinn & Faber 1991).
The truth, as always, lies somewhere in between. Advertising in itself is neither good nor bad, but it can be good or bad in the way it is used. Accordingly, most countries have developed regulation as a means to control “bad,” or potentially harmful, advertising while allowing “good” advertising a reasonably free rein. Regulation, much of it self-regulation, has grown rapidly since the 1960s to meet increasing cultural sensitivities but also to dissuade governments from interfering. Self-regulation is seen as being more flexible and responsive to consumer protection than legal rules, but governmental wish to control the industry has led to “co-regulation,” i.e., government retaining the right to intervene when they deem it necessary. For example, the Code of Advertising practice in the UK is administered by a trade committee with an independent chairman which can, and does, amend the Code when the need arises, rather than following the lengthy and cumbersome process of changing UK law.
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