New Approaches to Advertising - Essay Example

New Approaches to Advertising Due to the new technologies that emerge within the marketplace on a seemingly daily basis, advertising as it has been understood to work previously is extinct. TiVo and the digital recording revolution has killed the effectiveness of advertising on broadcast television, and the effectiveness of print advertising died long ago, with the invention of the personal computer. To be sure, consumers and businesses are using other forms of communication to gain the information that was once formally provided by advertising. Furthermore, globalization in the marketplace has not only altered the way the world does business, but effectively altered the way in which business communicate with their more globally aware consumers. To understand these shifts in the paradigm for advertising, one must first understand how advertising works in the first place, and apply this understanding of the industry to the shift in the way that it is working today. How Advertising Works: An Overview Advertising is unlike the direct communication between two people which involves a give and take experience. It is a one way exchange that is impersonal in format. People can selectively notice or avoid, accept or reject, remember or forget the experience and therefore confuse and bewilder the best of advertising plans (Vaughn, 1980). Advertising has always been a seemingly inescapable part of western life. It is the ultimate tool that corporations use to communicate to consumers. Through television, radio, newspapers, billboards, and the internet, corporations have benefited from advertising through increased sales. The effects of advertising have appreciably increased the quality of life of consumers. Finally, the communication potential of advertising has made it essential to the function and well-being of today's market. Advertising is an effective function of the economy that is an asset to both corporations and consumers. Corporations have made every effort to submerge consumers in their advertising since the beginning of modern civilization. They money that corporations are willing to spend delivering ads has doubled since 1976, and continues to grow by over 50% every ten years (Olson & Reynolds, 2001). Corporations and businesses are willing to devote such an enormous investment of money simply due to the fact that if done properly, advertising will more than pay for itself. Although most market experts agree that advertising is an exercise in communication and not sales generation, it is without a doubt that the ultimate goal of producing the ad is to increases sales and profits, either directly or otherwise. Throughout the years, advertising has proven effective in attracting consumers and increasing sales directly. This is achieved is two main ways. First, advertising allows businesses a chance to communicate to the consumer in order to persuade and offer reasons as to why their product would be desirable. This raises consumer interest in the product and can eventually result in increased sales. Next, advertising can be used to raise consumer awareness about special events, promotions, or discounts available or to simply remind prospective customers that the business is open and ready to offer goods and services. Advertising effects businesses by helping to build consumer confidence in an advertiser's product. People have been known to buy brands that they know of and in which they have confidence. Advertising helps to achieve this by connecting corporations and their products to consumers. This process is called "branding". Ads can help the corporation make their product known, and to create an image or reputation for the product through the content of the ad. "At Volvic 10 per cent of the buyersof the buyers of this brand of mineral water are regular and loyal and represent 50 per cent of the sales. The reputation of the brand is a source of demand and lasting attractiveness, the image of superior quality and added value justifies a premium price," (Kapferer, 1997). Advertising of this sort can act as a device to help people feel good about buying their products, since the good points of the product are constantly reinforced and reiterated through advertising. Repeat customers and customer loyalty are also built up though advertising since they are constantly being told about how good the product is, and why they need more of it. Additionally, this example shows just how advertising effects product pricing; by establishing a reputable brand, and creating loyalty to that brand, corporations are able to increase demand for their product, thereby allowing them to charge a higher price, and increase their profits. Branding works when a corporation can provide a reliable product, and make it last-not only in the marketplace, but in the minds of the consumers themselves. As Kapferer argues, "A brand is both the memory anf future of its products," (1997). This means that consumers adherence, or loyalty to a brand is not only dependent upon their cumulative memory of the brand's performance in the past, but the promise of what that brand may do for them in the future. It is interesting to note here, that brand loyalty begins at a surprisingly young age. Within any given generation, people continue throughout the course of their lives, to prefer the breands that they grew to trust between the ages of 7 and 18, (Guest, 1964; Fry, 1973; Jacoby and Chestnut, 1978). This provides an explanation as to why well-known car manufacturers, such as BMW, and Cadillac have begun manufacturing and marketing bicycles to youth and teens. By tapping into this loyalty to their brand at a young age, the companies hope to sell their cars to these individuals as adults. The idea of extending one's brand into another market is certainly not a new one, however. Corporations have long since enjoyed the benefits of expanding their brand into another market to either diversify their own product line, or to surround their consumers with consistent brand knowledge. This brand elasticity is important in the face of the chaning environment for advertisers; by relying on loyalty towards their brand, rather than new, costly ad campaigns that may or may not work, corporations are able to grow their business despite the fact that most traditional forms of advertising are extinct. "Given that some estimates suggest that new customers cost five times more than existing customers or, put another way, that selling to existing customers can be five times more profitable than winning new customers, you can see how it pays to know and love your customers, particularly the loyal and profitable ones," (Smith, 1993). That said, the size of advertising elasticity may also depend upon a number of factors. Brand elasticity, however, has been found to be higher for new brands compared with established brands. This research suggests there might be life cycle effects whereby advertising effectiveness diminishes as the product matures, (McDonald, 1993b). That is to say that a brand that has been around for a decade may have more luck at expanding their brand that one that has been around for half a century. This leads to another interest that corporations may have in advertising: the claiming and holding of market share. Because advertising helps to generate awareness and loyalty of a certain brand, failing to advertise while competitors do will result in the loss of market share to the competitor who will consequently have a more popular brand, resulting in higher profits. With no advertising, customers may become so convinced by the advertising of competing brands that they may decide to switch brands or to try new products presented by other ads. In a sense, ads can be used to counteract the effects of the competitor's ads so that no market share is lost. As a device for increasing sales, building consumer confidence and attaining market share, advertising is an invaluable tool to corporations. However, because western society seems to be one of immediate gratification, advertisers often ignore the long-term effects of advertising, focusing instead upon the short term effects. This results in a lack of optimization of their resources. Due to modeling limitations, long-term advertising effects are often either completely ignored in an evaluation, or counted as some sort of "invisible bonus" or "added values" (McDonald 1993a, p. 55). The effects of long term advertising are becoming increasingly important in relation to the shifting paradigm for advertising. Because the consumer often sees advertising as a necessary evil, or avoids it altogether, loyalty to longstanding brands should be seen as a more important resource than ever before. McDonald argues that if one only considers the short-term impact of advertising, then we ignore the impact of advertising on brand equity thus putting advertising on par with promotion and direct marketing as a marketing tool. Advertising should be treated as a continuous brand investment and should not be judged in isolation from the brand's history. Ultimately advertising is an investment in consumer behavior and must be measured accordingly (1993a). In 1898, E. St. Elmo Lewis suggested the Attention-Interest-Desire-Action model of how advertising works (Haynes, 2003), which stipulates that advertising works by changing brand attitudes. This model posits that the attention or awareness of a brand precedes the interest one has in it, which in turn dictates the desire for the brand and finally the behavior or action that results. The model assumes that the individuals mind is a blank slate and that awareness of a brand eventually leads to action by eliciting the right emotions, desires or interests in the brand. However, what this model fails to take into account is that the consumer's mind is not just a blank slate waiting to be imprinted upon by advertising but contains conscious and unconscious feelings, memories or desires acquired from previous product purchasing and usage. No matter how it works, we see that advertising does in fact, effect consumer behavior. Proof of advertising's effect can be seen in the example of Canadian tobacco legislation. In 1995, Canada enacted sweeping legislations that drastically restricted the tobacco industry's ability to advertise. As a direct result, sales of cigarettes have declined steadily by 2 per cent per year , proving that advertising is effective in increasing sales. While it is the corporations and suppliers that create and swamp all forms of media with advertisements, it is their target audience, the consumers that are most affected by advertising. While it is the intention of the corporations to inject their persuasive arguments promoting their product into consumers, it is likewise the intention of consumers to buy products and spend the money they have. Advertising benefits consumers in many ways. Advertising gives consumers a choice of products. It makes new products known to them and gives them incentives for buying them. Consumers can have a chance to experience and view the products at their ease without having to make a special effort to inquire. Comparisons can be made by consumers, making it more convenient and easier to decide where to spend and what brand to buy. It lets the consumers know that such a product is available. Without advertising, the existence of the product might not even have been known, limiting the selection of the consumer. Advertising helps consumers buy by offering reasons for buying, such as why that product is bigger, better and less expensive than the next. Since misleading advertising is illegal, most advertisements can be a real help in helping consumers to buy a product. Additionally, advertisers have played a significant part in building the life and culture of consumers, and have increased the quality of life for consumers in many ways. Advertisers cannot exist without the consumers and consumers depend on advertisers. With this cycle of appreciation, the economy as a whole is affected in many ways. First, as advertising is mostly effective in increasing sales, the aggregate spending of consumers will increase to achieve a continual rise in the gross domestic product of the country. Advertising has the potential of increasing economic activity and even inflation in minute ways. On a demand graph, effective advertising will shift to the right a demand curve, indicating that more items can be sold without increasing or decreasing the price. Another benefit to advertising in the increase in competition it creates. Fierce advertising between different brands will help reduce prices and increase innovation and quality of the products. Suppliers will make every effort to improve their product so that when it is communicated to the pubic in the form of advertising, it will appear to be a better product that that of its competitor. Advertising also brings up many choices for consumers, creating an environment where advertisers will have to fight for the consumer's attention and loyalty both to the ad and to the product. Finally, advertising is essential to the functioning of the free market system that is in use today. The free market system attempts to satisfy consumer needs, but assumes that consumers will always know what they want and will spend money accordingly. With the enormous amount of freedom that is granted to consumers in the free market system, people need to be guided to make the right decisions. Advertising is the key that helps to solve this market imperfection. Consumers may not always realize differences in product quality or what products are available. Suppliers may not know how to reach potential customers. Advertising helps to provide the consumer with the information they need to make their purchasing decisions. The Changing Face of Advertising With its many roles and impacts on society, advertising plays an essential part of the economy. It has been wisely said that "advertising is the mother of commerce" , as it is true that advertising has become an inseparable part of life, business and the economy. While advertising remains a tool for corporations to reach and sell goods and services to consumers, it has attained several new roles as well. Playing a irreplaceable part in western culture, advertising as become a complement to entertainment. And as a deliberate link in the free market imperfections, advertising is a communication and information device that is vital to the functioning of the economy. Advertising is indeed effective and its countless implications on the free market cannot be denied. However, "marketing and the marketing communications mix are changing. New insights, new tools, new opportunities, and new challenges are emerging," (Smith, 1993). That is to say that as markets go global, so too must advertising. The great influence of globalization has developed during the last centuries due to the impact of different driving forces within the economy, which have caused businesses to become internationalized and then globalized. At the same time, the internationalization has been a slow process for most companies and it has often been a question of gaining experience of other countries step by step. When the home market limits the opportunities it might be necessary for expansion into other market areas. In this situation it has been necessary for the company to attempt to reduce uncertainty by exporting to neighboring markets. Economic and technological developments are driving the world towards a global marketplace. With current economic changes making international trade more accessible and increased technology making communication more possible, the issue of effectively implementing international marketing strategy is becoming increasingly important. Given the need to implement more effective marketing strategies, a better understanding of the globalization process is needed. The dynamic nature of the global economy has prompted marketing managers to consider a number of factors when implementing global marketing strategy. "Globalization is not just a product-orientated corporate push for growth, but more of a market-orientated reaction to the emergence of common global lifestyles and needs," (Smith et al, 1997). This means that although the drive towards globalization is consumer-based, it will be the corporations and businesses who have to adapt their marketing strategy in the face of international competition for their loyal consumers. This, in turn means that corporations will have to look towards new methods of advertising, as local television, radio, and print adverts become an increasingly less viable or appealing option. Thus, the face of advertising is leaning in a few different directions; customer retention has become more important than customer acquisition, one on one guerilla marketing has morphed into an industry of its own, and prime real estate for adverts on the internet are becoming the new and important way for advertisers to get their messages out to consumers. "The internet can certainly help an organization to penetrate new markets as it crosses borders with ease and extends the reach of the organization across the world within minutes," (Smith, 1993). This is an excellent opportunity for those companies and corporations which are either internet savvy, or have the budget to potentially pay an outside source for their technology expertise. In fact, it had done quite a bit of good for the global economy by allowing those with a bit of entrepreneurial spirit and know-how to access not only a wealth of information, but large numbers of consumers within minutes. For those that have neither the know-how, nor the funds, however, the internet presents a challenge, as competitors can potentially reach millions of more consumers at the click of a button. Advertisers with a quality product to sell have long since enjoyed the benefits of word of moth advertising; this is certainly nothing new. "People talk about organization, their products, their services, and their staff. Whether it is a complaint, admiration, or an endorsement, products and services are often a source of conversation," (Smith, 1993). This obviously works in favor of those organizations with a quality product, and against those with less quality, as word of mouth recommendations tend to be even more powerful than other forms of advertising. However, it seems that only in recent years have organizations attempted to take control of their word of moth advertising through what might be called guerilla marketing campaigns. The best example of this can probably be seen in the example of the Red Bull Corporation, which, though it began in the United States only four years ago, has already become a global brand. The Red Bull Corporation was able to achieve this, not through television or radio advertising, but through sending associates into universities, bars, and nightclubs in order to promote the product. Now, though there are over 100 such energy drinks on the market globally, Red Bull maintains more than half of the market share. Certainly, new technologies will cause globalization, which will in turn force advertisers to continue adapting their marketing strategy in order to get their product into the hands of consumers. This is not however, an impossible task. The shifting global marketplace presents small challenge for businesses, but not an insurmountable obstacle. Advertising, as we have seen it in the past may in fact, be extinct, but this only provides more opportunities for growth in the future. Works Cited Fry, J N et al (1973), 'Consumer Loyalty to Banks: A Longitudinal Study,' The Journal of Business 46, 517-525. Guest, L (1964), 'Brand Loyalty Revisited: A Twenty Years Report,' Journal of Applied Psychology, 48 (2), 93-97. Haynes, W. D. (2003). Psychology of the Media Notes. University of South Australia. Jacoby, J and Chestnut, R (1978), Brand Loyalty and Measurement. John Wiley, New York. Kapferer, Jean-Noel (1997), Strategic Brand Management. Kogan Page, London. McDonald, C. (1993a) How Advertising Works: A Review of Current Thinking, The advertising association and NTC, London. McDonald, C (1993b) 'Point of view: The Key to Understanding Consumer Response,'Journal of Advertising Research, September/October, 63-69. 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