The Data Institute Acquisition Manual

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Volume 10

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Corporate Development
Product Management
Overseas Development
Product Distribution & Service
Advertising + P.R.
New Technology Primers
Physical Process & Orders
Competition Analysis
Product Perceptions
Customer Perceptions
Data Grids
World MDB
Research MDB
Product MDB
Corporate MDB
Reference MDB



Advertising & P.R. Department Management

Media spending is largely wasted by most companies as money is applied to nonexistent or saturated targets. The objective and planned application of the Company advertising budget is a catalyst which will ensure success; and this is especially the case during and after an acquisition battle when the customer base is unsure about the Company.

Endeavouring to obtain maximum benefit from advertising and P.R. spend must be the base goal of advertising management and in this regard the Company must use the sophisticated analytical tools available and which are described in this section of the manual.

During a contested acquisition it is imperative that the investor, whose equity or funding one is seeking, is addressed at the same time as the customer base. New advertising campaigns are useful to fulfil objectives other than the normal objective of communications with the customer.

In this part of the Acquisition Manual all the calculations, analysis and issues pertinent to the efficiency and productivity of the Company Advertising and P.R. is shown. The section looks at the effects of expenditure over time, the effects of competitor spending, and the effects of good and bad choices of media and message.

Advertising Agencies are frequently left in sole and unhindered charge of advertising budgets and this is an extremely unwise practice. Whilst the bulk of the routine and creative work should be done by advertising agencies a strict control of coverage, sales response and sales decay must be exercised by the management at the Company. This section provides the controls, systems and tools for the job of ensuring the cost-effectiveness of the Company Advertising & P.R. Department.

  1. Advertising Strategy  

  2. Message Generation

  3. Media

  4. Communications

  5. Advertising Strategy Scenarios



Advertising Strategy:




Advertising (the use of paid media to present the ideas of the industry and their products, services, or organization), is the most potent promotional tool available to the Company.

The size of the advertising budget is commonly determined in a number of ways; according to what can be afforded, or as a regular percentage of the company's sales revenue, or to match competitors' expenditures, or by defining the cost of accomplishing specific communications goals.

The four types of available decision models for setting the advertising budget are

  1) sales-response and decay models,

  2) communication-stage models,

  3) adaptive-control models, and

  4) competitive-share models.

The effectiveness of the advertising spend will also depend upon the development of good message development and execution. The advertising copy must be placed in the most effective media, a problem that is increasingly being assisted by computerized media-selection models. The budget must be set over the business cycle, the seasons, the months, and even the days, with a careful consideration for delays in impact and the psychology of repetition. A continuous effort must be made to research the communication and sales effects of advertising programmes before they are run, while they are running, and after they are terminated.

Advertising is one of the four major tools by which the industry directs persuasive communications to target buyers and public. It consists of non-personal forms of communication conducted through paid media under clear sponsorship.


1. Advertising Purpose

People have sought for years to define the purpose of advertising; one definition is:

"Only the very brave, or the very ignorant,  can say exactly what advertising does in the marketplace".

It is fairly clear, however, what advertising is supposed to do. In ultimate terms, advertising is undertaken to increase company sales and/or profits over what they otherwise would be. Advertising, however, is rarely able to create sales by itself. Whether the customer buys also depends upon the product, the price, the packaging, the personal selling, the service, the financing, and other aspects of the marketing process.

More specifically, the purpose of advertising is to enhance potential buyers' responses to the organization and its offerings. It seeks to do this by providing information, by trying to channel desires, and by supplying reasons for preferring the particular organization’s offering.


2. Advertising power

There is much debate and confusion about the extent of advertising's power to influence buyer behavior. Critics of advertising charge that "many of us are being influenced and manipulated, far more than we realize, in the patterns of our everyday lives". Critics believe that the scientific probing into subconscious motives has given advertising agencies unprecedented skill in molding buyer thought processes and purchasing decisions. Others dispute this position. They point to the few messages people really observe out of the thousands they are exposed to. They point to the immunity developed by many to much of the advertising around them. They point to the fact that advertising is only one of several influences on a person's behavior and probably far less important, because it is known to be self-serving, than such influences as peers and personal observation.

It is difficult to know how effective advertising is, except in the more obvious cases.

Direct action advertising, such as mail-order and want advertisement advertising, purports to stimulate immediate sales. Its effectiveness is therefore directly measurable.

Delayed action advertising purports to build up favorable attitudes. There is little doubt that brand advertising has been a major factor in the success of many firms, but one must remember that these firms also offer good products and have good merchandising and trade coverage.

Effective advertising alone would not compensate for bad products or faults in marketing programmes. In fact, it can even hasten the demise of a bad product by accelerating its use and negative reputation. If the company offering is sound, however, advertising can make a significant contribution in the marketing process.

Various lists have been drawn up of the conditions under which advertising is likely to be a significant factor in the marketing process. The contribution of advertising is likely to be greater:


When buyer awareness is minimal.


When industry sales are rising rather than remaining stable or declining.


When the product has features normally not observable to the buyer.


When the opportunities for product differentiation are strong.


When discretionary incomes are high.


3. Defining advertising goals

The wide diversity of occasions for the use of advertising makes it essential that Industry Companies management develop a clear conception of what it specifically wants to achieve through its overall advertising effort as well as through particular advertising campaigns down to specific advertisements. Defining goals is the key requirement for effective advertising planning and the measurement of results. Yet, failure to define advertising goals is the leading deficiency.

The ultimate goal of advertising is to increase company profitability. Because of the difficulty of measuring this, most advertisers settle for more measurable goals.

The possible goals, ranked in terms of ease of measurement (though inversely in terms of importance), are:



Advertisers often set the goal of achieving a certain number of exposures per period to a target audience. An exposure means that a target member of the audience was exposed to the medium carrying the advertisement, not that he actually saw it. Advertisers often get more specific and set goals for exposure reach and exposure frequency.



Advertisers would have more confidence if they knew that the target audience actually heard or saw the advertisement. They may set a goal of achieving a certain level of audience awareness of the message. The campaign's success can be measured through surveys collecting audience advertisement recall or recognition.



A higher-level goal occurs when the advertiser specifies a certain level of favorable attitude that he wants the advertising to achieve in the target audience. Attitudes are of course influenced by other things than the advertising, but the advertiser may want to measure as carefully as possible the attitude impact of the advertising campaign.



Firms would prefer to set a certain sales goal for their advertising to achieve. While the actual sales impact of advertising is difficult to isolate, some progress in measurement is being made.

Advertising goals should be formulated by advertisers as specifically as possible in order to guide the copy development, media selection, and results measurement. The stated goal "to create brand preference" is much weaker than "to establish 30 percent preference for product X among Y million buyers by next year".   

Specific communication goals include:


Announce a special reason for "buying now" (price, premium, etc).


Build familiarity and easy recognition of package or trademark.


Place advertiser in position to select preferred distributors or dealers.


Persuade prospect to visit a showroom or point-of-sale.


Build morale of company salesforce.


Correct false impressions, misinformation or other obstacles to sales.


4. Major advertising decisions

One must examine the following major decisions:


How much should be spent for overall company advertising ?


What message and mode of presentation should be used ?


What media should be used ?


How should the advertising be phased during the year ?


What are the best methods for knowing what the advertising is accomplishing ?




1. Static methods for setting the advertising budget

Each year the industry must decide how much to spend on advertising.

Four of the more common methods in use are described thus:


"Affordable" method

Many companies set the advertising budget on the basis of what they think the company can afford. As possibly may well be quoted by one an average advertising executive:

"Why it's simple. First I go upstairs to the controller and ask how much the company can afford to give me this year. He quotes me a figure. Later, my boss comes to me and asks how much we should spend, and I quote him the same figure. Then we have an advertising appropriation."

Setting budgets in this manner is tantamount to saying that the relationship between advertising expenditure and sales results is at best tenuous. If the company has enough funds, it should spend them on advertising as a form of insurance.

The basic weakness of the affordable approach is that it leads to a fluctuating advertising budget that makes it difficult to plan for long-range market development.


Percentage-of-sales method

Many firms set their advertising expenditures at a specified percentage of sales (current or anticipated) or of the sales price.

A number of advantages are claimed for this method.

First, the percentage-of-sales method means that advertising costs are likely to vary with what the company can "afford". This pleases the more financially minded members of top management who feel that expenses of all types should bear a close relation to the movement of corporate income and the business cycle.

Second, this method encourages management to think in terms of the relationship between advertising cost, selling price, and profit per unit.

Third, the method encourages competitive stability to the extent that competitors spend roughly the same percentage of revenues on advertising.

In spite of these advantages, the percentage-of-sales method has little to justify it on theoretical grounds. It uses circular reasoning in viewing sales as the cause of advertising rather than as the result. It leads to an appropriation set by the availability of funds rather than by the opportunities. It discourages experimentation with counter-cyclical advertising or aggressive spending. The dependence of the advertising budget on year-to-year fluctuations in sales militates against the planning of long range advertising programmes. The method does not provide a logical basis for the choice of a specific percentage, except by what has been done in the past, or what competitors are doing, or what the costs will be. Finally, it does not encourage the constructive development of advertising appropriations on a product-by-product and territory-by-territory basis but instead suggests that all allocations be made at the same percentage of sales.


Competitive-parity method

Some companies set their advertising budgets specifically to match competitor's outlays, that is, to maintain competitive parity.

This thinking is illustrated by the executive who asked a trade source: "Do you have any figures which other companies in our market have used which would indicate what proportion of gross sales should be given over to advertising?"

Two arguments are advanced for this method. One is that competitors' expenditures represent the collective wisdom of the industry. The other is that maintaining a competitive parity helps to prevent advertising wars.

Neither of these arguments is valid. There are no a priori grounds for believing that competition is using more logical methods for determining outlays. Advertising reputations, resources, opportunities, and objectives are likely to differ so much among companies that their budgets are hardly a guide for another firm to follow. Furthermore, there is no evidence that appropriations based on the pursuit of competitive parity do in fact stabilize industry advertising expenditures.

Knowing what competition is spending on advertising is undoubtedly useful information. But it is one thing to know this and another to follow it blindly.



Base Reference Country




Target Company

Base Reference Country







Target Company

Base Reference Country





Target Company

Base Reference Country




 Financial Definitions




Objective-and-task method

The objective-and-task method calls upon an advertiser to develop his budget by:

    a) Defining their advertising objectives as specifically as possible.
    b) Determining the tasks that must be performed to achieve these objectives.
    c) Estimating the costs of performing these tasks.

The sum of these costs is the proposed advertising budget.

The method has strong appeal and popularity among advertisers. Its major limitation is that it does not indicate how the objectives themselves should be chosen and whether they are worth the cost of attaining them.

2. Dynamic models for setting advertising budgets

Managers have designed advanced decision models for setting the advertising budget. The models differ in the advertising situation they address and the type and number of variables they include.

One can consider four of the most realistic models:


Sales-response & decay models

The earliest advertising budgeting models attempted to measure the shape of the advertising sales-response function. Given this function, the profit maximizing advertising outlay can be determined. As for the shape itself, the evidence is mixed. Many analysts hold that the sales / advertising curve is S-shaped. This curve implies initial advertising economies of scale.

Larger appropriations may make feasible the use of expert services and more economical media.

More important than specialization usually is economies of repetition.

Each advertising attack starts from the ground that was taken in previous forays, and where no single onslaught can overcome the inertia of existing spending patterns, the hammering of repetition often overcomes skepticism by attrition.

The reasons why diminishing returns to advertising can eventually be expected to set in.

Supposedly the most susceptible prospects are picked off first, and progressively stiffer resistance is detected from layers of prospects who are more skeptical, more stodgy about their present spending patterns, or more attached to competitors.

The rise may also be caused by successive exhaustion of the most vulnerable geographical areas or the most efficient advertising media.

Promotional media that is ideally adapted to the scale and market of the firm are used first.

Other models of the advertising sales-response function assumed that it was concave from the beginning (that is, additional advertising yielded continuously diminishing returns). One the earliest and best of these models developed showed the change in the rate of sales at time t is a function of four factors:

       a) the advertising budget
       b) the sales-response constant
       c) the saturation level of sales
       d) the sales-decay constant

The basic equation is:



r A

M - S






S = rate of sales at time t


= change in the rate of sales at time t s


A =  rate of advertising expenditure at time t


= sales-response constant (defined as the sales generated/advertising spend when S = O)

M = saturation level of sales

Y =  sales decay constant (defined as the fraction of sales lost per time unit when A = O)

The equation states that the change (increase) in the rate of sales will be higher, the higher the sales-response constant, the higher the advertising expenditures, the higher the untapped sales potential, and the lower the decay constant.

The model can be embedded in a long-run profit equation and used to estimate the profit consequences of alternative advertising budget strategies. Its main significance is that it brings together and relates three useful concepts for determining the proper size of the advertising budget.

Some models of sales response to advertising go beyond the above model in the number of factors they postulate.

A notable alternative model shows:


Company sales are a function of the percentage of customers with brand loyalty and the rate of decay in this brand loyalty.


The percentage of customers not committed to this firm or its main competitor.


The size and rate of growth of the total market.


The relative influence of product characteristics, price, advertising, and distribution as selling influences.


The relative influence of the interaction of the product characteristics and advertising as a selling influence.


The relative share and effectiveness of this company's advertising expenditure.

Using this model to describe company sales for the case of two firm competition one can derive an optimal formula for setting advertising expenditures.


Communication Stage models

Communication Stage advertising models arrive at an advertising budget by noting its effects on several intermediate variables that link advertising expenditures to ultimate sales. An example could show how one could establish the necessary advertising budget.

The steps are as follows:


Establish the market-share goal.


Determine the percent of the market that should be reached.


Determine the percent of aware buyers that should be persuaded to try the product. This is the market goal.


Determine the number of advertising impressions per one percent trial rate.


Determine the number of gross rating points that would have to be purchased.


Determine the necessary advertising budget on the basis of the average cost of buying a gross rating point.

This method is essentially an implementation of the objective-and-task method. It has the advantage of requiring management to spell out its assumptions about the relations between funds spent, exposure levels, trials rates, and regular usage. Its major conceptual weakness is that the market-share goal is established at the beginning on the basis of what management wants, rather than as a result derived from a profit maximizing approach to sales.

This deficiency is made up in micro-linkage advertising models like DEMON. DEMON, an acronym for Decision-Mapping via Optimum GO-NO Networks, was developed under the auspices of an advertising agency. The model is oriented toward new products, and most of its logic deals with finding the profit maximizing advertising budget.

Three different marketing decision variables are shown to affect the number of triers:




sales promotion, and



Some percentage of triers become users, and their number, usage rate, and the product's price multiply out to the level of demand in dollars.

Costs can then be netted against revenue to produce an estimate of expected profits.

The effect of advertising on sales is spelled out in the greatest detail. The company's advertising spend first produce a certain number of gross impressions or exposures. These gross impressions come in the form of a certain percentage reached of the target market at a certain average frequency into a number of persons who become aware. Advertisement awareness is defined as the number of people in the target audience who can recall having seen or heard the message, not merely product recall, but rather awareness of the advertising message. The given level of advertisement awareness, along with given levels of sales promotion and distribution, is then expected to create a certain trial rate. The DEMON designers applied least-squares regression techniques to the data over two hundred packaged goods in sixteen product categories to estimate the functional relationship at each stage. With these functional relationships, they are able to test different marketing-mix plans in search of the best one.


Adaptive-control models

Adaptive advertising budgeting models make the assumption that the parameters of the advertising sales-response function are not stable but change through time. If they were stable, it would pay the company to make a big effort to measure the functions as soon and as accurately as possible because the benefits in achieving optimization would extend far into the future. However, there is good reason to believe that the parameters are not stable because of continuously changing competitive activity, advertising copy, product design, and national economic activity. In this case, it would not pay to invest heavily in learning the exact parameters of the sales response function in the current period. Suppose the parameters change slowly through time. Then the best research strategy would be to collect some new information each time about the current parameters and combine this with the old information to produce new estimated parameters for the sales-response function on which the current outlay for promotion can be based.

The manner in which the periodic data can be collected and used to determine an optimal advertising expenditure has been described below. Advertising expenditures should be set each period in such a way as to yield information about the current levels of the sales-response parameters. Suppose the company has picked an advertising expenditure rate for the coming period on the basis of applying profit maximization criteria to its most current information on the sales function. They then decide to spend this rate in all markets except a subset of 2n of them randomly drawn. In n of the test markets the company will plan to spend a deliberately low amount of money, and in the other n they will plan to spend a deliberately high amount of money. This experiment will yield information on the average sales created by the low, medium, and high rates of advertising, and this will provide the best estimate of the current sales-response function. In turn, this estimate is used to determine the best promotional rate for the next period. If this procedure is carried out each period, actual advertising expenditures will track closely to the optimal advertising expenditures.

Several industry competitors are known to set aside matched test markets in which they advertise at substantially higher and lower promotional rates in order to measure the effects of advertising.


Competitive Share models

The preceding models do not explicitly take competitors' expenditures into account. This omission is valid in product sectors where there are many competitors, none of whom is large; or where it is difficult for companies to know what others are spending for advertising. In many situations, however, companies know what others are spending and try to maintain a competitive parity. In these situations the company must take competitive reactions into account in determining their own advertising appropriation.

Under certain assumptions, the problem can be treated with some of the techniques of game theory. Researchers have developed some models to show how fixed advertising budgets should be allocated by two duopolists to different territories under the assumption that each is interested in taking maximum advantage of the other's mistakes. One distinguishes between the case where resulting company sales are proportional to the company's share of advertising expenditures and the case where the company with 50-plus percent of the total advertising takes the whole market (as when a single customer is at stake).

Most models incorporate the fundamental theorem of market-share determination: that market shares in the long run will tend to equal marketing effort shares. The idea that market shares approximate effort shares is frequently expressed by businessmen, viz, "To get a 10 percent share of market, you have to spend roughly 10 percent of all marketing funds". In many markets the correlation is high, but perhaps the reason is the tendency of companies to set their marketing budget as a ration to sales.

Competitive Share determination and interaction is a more dynamic phenomenon than the foregoing discussion suggests.

Competitors may adopt a wait-and-see attitude toward the advertising spending level of the firm. If the firm's sales increase significantly, competitors may increase their own expenditures, cut prices, expand their salesforce, and so on. Each type of reaction would have a different effect on market share. Finally, even if competitors did react by increasing their advertising expenditures, it makes a difference how they spend the additional funds, whether they develop a new copy approach, move toward broader media coverage, or adopt some other strategy. A game theoretic approach seems almost too simple to catch the flavor of the uncertainties and issues posed by competition.

Target Company
Base Reference

Advertising Budget Setting Procedures

Advertising Goal & Target Formulation

Advertising Competitiveness

Advertising Objectives & Tasks

Dynamic Advertising Planning

Performance Grid Definitions

Target Company
Base Reference

Mail & Direct Mail Advertising

Media Advertising

Advertising Materials

Merchandising / POS

Publicity : P.R. : Exhibitions

Performance Grid Definitions




Advertising Message:




The effect of the Company advertising on sales is not simply a function of how much is spent. Even more important may be how it is spent, specifically, what is said, how it is said, where it is said, and how often it is said.

Most of statistical studies of the effect of advertising on sales or attitude have tended to neglect the creative factor. Some analysts rationalize the omission of creative factors with the argument that all large advertising agencies are equally creative, and therefore these are differences in the individual campaigns that advertisers want to note and exploit. The consequence of leaving out the creative factors is that a substantial part of the movement of market shares remain unexplained.

One study claims to have overcome the neglect of the creative factor. A five-year study of sixty-seven different television campaigns led to the development of a multiple regression formula that purportedly explained 73 percent of the fluctuations in market shares. What is most interesting is that one of the three independent variables was a measure of the effectiveness of message content. The study's major conclusion is that a campaign's quality is far more important than the amount of money spent. Whether this is actually so, there is no doubt that differences in creative strategy are very important in advertising success.

Many things can be said about any industry product, but buyers will neither believe nor remember too many claims. Message focus is needed so that the buyer can learn something distinctive about the product. Every advertisement or campaign should be built on a central theme (also called motif, idea, appeal, or selling proposition).

Advertisers go through three stages to develop their message:

        1.   Message Generation
        2.   Message Evaluation and Selection
        3.   Message Execution

1. Message generation

Message generation is the problem of finding effective things to say about the products to the target markets. Essentially the message strategy is determined by the prior decisions on the product concept, product positioning, and other elements of the marketing strategy and objectives. If the product is properly conceived and positioned, the media message is almost predetermined.

At the same time, a product faces many new challenges as it passes through its life cycle. There is a constant need to review the attributes of the product and the benefits sought by the market to determine the timeliness of the message. One can usually carry out buyer research to determine consumer satisfaction with existing products.

Creative people use different methods to generate possible advertising appeals. Many creative people proceed inductively by talking to buyers, distribution channels, experts, and competitors to spot ideas. Buyers are the most important source of good ideas. Their feelings about the strengths and shortcomings of existing products provide the most important clues to creative strategy. Even the way buyers put their satisfactions and dissatisfactions into words can provide orienting ideas for campaigns. Distributors, suppliers, competitors and brain-storming also supply good ideas.

Today there is increasing interest in deductive frameworks for generating advertising appeals. Two such frameworks will be briefly described below.

The first is the framework provided by product positioning theory; whereby the advertiser recognizes that his product currently occupies a certain perceived position in the product space. To alter the market's behavior toward his product, he may adopt one or more of six communication strategies:


Attempt to shift a product's perceived location in the product space in a direction closer to the ideal point of a target market.


Attempt to shift the ideal point of the target market closer to the present position of a product.


Attempt to demonstrate through comparison advertising that rival products are further away from the ideal point than commonly supposed.


Attempt to alter the relative saliency of the existing attributes in the buyer's mind.


Attempt to introduce new attributes into the products space on which a product rates strong.


Attempt to introduce a product into new product spaces and target markets.

Viewing the product positioning opportunities facing a product, provides a rich number of possible communication messages.

The second theory proposes an alternative deductive framework for message generation, implying that buyers are expecting any of four types of reward from an offering:

        a)   Rational rewards
        b)   Sensory rewards
        c)   Social rewards
        d)   Ego satisfaction rewards

Further they may visualize these rewards from:
        e)   Results-of-use experience
        f)   Product-in-use experience
        g)   Incidental-to-use experience

Crossing the four types of rewards with the three types of experiences gives twelve different modes of buyer evaluation to be found concurrently in a market. Advertisers can generate a theme for each of the twelve cells as possible messages for the product.

2. Message Evaluation & Selection

The task of selecting the best message out of a large number of possibilities calls for the introduction of some criteria for judging the market potency of different messages.

The contending appeals can be rated on three scales:
          a)   Desirability
          b)   Exclusiveness
          c)   Believability

The market potency of an appeal is a function of a multiplicative relationship among the three named factors, multiplicative because if any of the three has a low rating the appeal's market potency will be greatly reduced. The appeal must promote the product as being desirable; yet, this is not enough as many products will be making this claim. Thus the statement must also convey exclusivity that does not apply to every other competitive product. Finally, the statement must be either believable or provable. A sample of buyers can rate different product statements on the three scales of desirability, exclusiveness, and believability. Thus message can be rated or ranked for market potency.

Buyer ratings of media appeals are not completely reliable; however, they reflect opinion and not necessarily behavior. One should employ some pretest procedure to determine which final appeals are the strongest.

3. Message Execution

The impact of an advertisement depends not only upon what is said but also upon how it is said. In fact, message execution may be decisive in those markets, such as consumables and supplies, where companies use substantially the same appeals.

Message execution calls for decisions on message structure, that is, the way in which the major arguments will be phrased and phased to achieve maximal impact.

Another step in message execution is copy development; that is, finding the words, pictures, symbols, colors, and tones that lend potency to the chosen theme.

Agencies often provide broad rules to guide their creative personnel.

Among the rules are:

    a)   Design the advertisement to attract attention
    b)   Tailor the message to the media
    c)   Keep the message as simple as possible
    d)   Use words and images that are relevant and familiar to the audience.

The format elements of the advertisement (size, color, headlines, et cetera), can make a large difference in its impact, as well as in its cost. In corporate advertising, the two most prominent factors affecting the level of readership were pictorial color and size, both of which are mechanical variables rather than content variables in the advertising.

4. Creating Advertisements

One typically wants the agency to create and test several alternative ideas before making a selection. The more options created, the higher the probability that the agency will find the best one. Yet the more time it spends creating alternative advertisements, the higher the costs. Therefore it would seem that there must be some optimal number of alternative messages that an agency should try to create and test for the client.

If the agency were paid by the client for the cost of creating advertisements, the agency would create the optimal number. Under the present system, however, the agency does not like to go to the cost of creating and testing many messages. It is concluded that agencies usually create too few advertisement options for clients; thus one does not get a good advertisement but only the best of the few that have been created.

One estimate is that advertising agencies spend from 3-8% of their media income on creating and testing messages, yet one feels they should spend about 15%. The thinking is that agencies should devote a larger part of their budget to finding the best message and much less to buying media. One ponders splitting advertising agencies into two types, purely creative agencies and marketing agencies. One would hire a marketing agency, and this agency in turn hires several creative agencies to create messages from which the best is selected.

Target Company
Base Reference

Message Generation Efficiency

Message Evaluation

Message Execution: Structure

Message Execution: Development

Message Creativity

Performance Grid Definitions




Advertising Timing:




A major advertising decision involves the timing of advertising expenditures throughout the year. We shall distinguish between the macro-scheduling problem and the micro-scheduling problem.

1. Macro-scheduling problem

The macro-scheduling problem involves describing how to allocate advertising expenditures over the year in response to the seasonal pattern of market sales. Suppose market sales of a particular product peak in December and slump in March. Any individual seller in this market has three broad options. The firm can vary its advertising expenditures to follow the seasonal pattern; it can vary its advertising expenditures to oppose the seasonal pattern; or it can hold its expenditures constant throughout the year. The vast majority of firms tend to pursue a policy of seasonal rather than constant or counter-seasonal advertising. Even here, the firm faces options. It has to decide whether its advertising expenditures should lead or coincide with seasonal sales. It also has to decide whether its advertising expenditures should be more intense, proportional, or less intense than the seasonal amplitude of sales.

One model uses methodology to test alternative seasonal advertising policies where a company visualizes advertising as having a lagged impact on customer awareness, which in turn has a lagged impact on supplier sales; and supplier sales have a lagged impact on advertising expenditures. Thus suggesting that these time relationships be studied for the individual company and formulated mathematically into a computer simulation model. The parameters for this model would be estimated from company data supplemented in an effort to assess their differential impacts on company sales, costs, and profits.

A second model attempts to explore how advertising should be "timed" for frequently purchased, highly seasonal, low-cost consumable products and thus adopts the following product and market assumptions for illustrative purposes:

The long-run demand for the particular product is stable. The product, however, is subject to a seasonal demand. The timing and magnitude of industry advertising expenditures does not affect the seasonal demand. A company's advertising only influences the company's share of industry demand. Advertising has no effect on retailers. There are two dominant competitors who both develop their timing patterns independently of each other, but optimally. The gross margin from sales is constant throughout the year (no price or cost changes). Other brand merchandising variables, such as product characteristics, retail availability, and competing brand prices, maintain a constant relative appeal to customers throughout the sales cycle.

This model shows that the appropriate timing pattern depends upon the degree of advertising carry-over and the amount of habitual behavior in customer product choice. Carry-over refers to the rate at which the effect of an advertising expenditure decays with the passage of time. A carry-over of .75 per month means that the current effect of a past advertising expenditure is 75% of its level last month, whereas a carry-over of only .10 per month means that only 10% of last month's effect is carried over. Habitual behavior, the other variable, indicates how much brand holdover occurs by reason of habit, inertia, or brand loyalty, independently of the level of advertising. High habitual purchasing, say .90, means that 90% of the buyers repeat their purchase of the brand regardless of the marketing stimuli.

The model found that in the case of no advertising carry-over and no habitual purchasing, the decision maker is justified in using a percentage-of-sales rule in budgeting advertising. The optimal timing pattern for advertising expenditures coincides with the expected seasonal pattern of industry sales. But, if there exists any advertising carry-over and/or habitual purchasing, the percentage-of-sales budgeting method is not optimal. In all these cases it would be better to "time" advertising to lead the sales curve. The peak in advertising expenditures should come therefore the trough in sales. Lead time should be greater, the higher the carry-over. Furthermore, advertising expenditures should be steadier, the greater the extent of habitual purchasing.

2. Micro-scheduling problem

The micro-scheduling problem involves how to allocate a set of advertising exposures over a short period of time to obtain the maximum impact. One way to classify the multitude of possible patterns:

Classification of Timing Patterns



Company Pattern

Competitor Pattern


- Level


- Rising


- Falling


- Modulating



- Level


- Rising


- Falling


- Modulating



- Level


- Rising


- Falling


- Modulating



The left side shows that advertising messages for the month can be concentrated in a small part of the month ("burst" advertising), dispersed continuously throughout the month, or dispersed intermittently throughout the month. The right side shows that the advertising messages can be beamed with a level frequency, a rising frequency, a falling frequency, or an alternating frequency. The advertiser's problem is to decide which of these twelve general patterns would represent the most effective phasing of his messages.

The most effective patterns depend upon the advertising communication objectives in relation to the nature of the product, target customers, distribution channels, and other marketing factors. The timing pattern should take into account three general factors:


Buyer turnover expresses the rate at which new buyers appear in the market; the higher this rate, the more continuous the advertising ought to be in order to reach these new buyers.


Purchase frequency is the number of times during the period that the buyer buys the product; the higher the purchase frequency, the more continuous the advertising ought to be to keep the product on the buyer's mind.


The forgetting rate is the rate at which the buyer forgets the product in the absence of stimuli; the higher the forgetting rate, the more continuous the advertising ought to be to keep the product in the buyer's mind.

There is the question of how much the message should be repeated to a particular buyer group to produce learning and retention.

A low number of repetitions may be wasteful, according to research:

It can be reasoned that introductory advertisements make too weak an impression to initiate much interest in buying.

Succeeding advertisements may sometimes be more effective by building up already established weak impressions to the action level.

A high number of repetitions may also be wasteful if they do not bring about any further increase in awareness, message familiarity, or positive product feelings; the number is positively harmful if they bring about boredom or irritation.

In launching a new product, advertisers must make a choice between a campaign based on passage and one based on continuity. A budget of five exposures a week could be used up in one day or presented at the rate of one daily exposure for five days. Those who favor passage feel that the resulting reduction in continuity is more than compensated for by the increased learning that takes place. They cite a finding that information learned more quickly is retained better than information learned more slowly. However, the issue requires more research, and the decision model must take into account product, customer, and competitive factors at the time of product introduction.

Target Company
Base Reference

Advertising Agency: Monitoring

Advertising Agency: Research Techniques

In-House: Advertising Agency Monitoring

In-House: Advertising Monitoring

In-House: Advertising Research Techniques

Performance Grid Definitions




Good planning and control of advertising depends critically on measures of advertising effectiveness, albeit the amount of basic research on advertising effectiveness is exceedingly small.

According to one source: One doubts that there is any other function in industry where management bases so much expenditure on such scanty knowledge. The advertising industry spends 2 % or 3 % of its gross revenues on what it calls "research", and even if this were really true research, the small amount would be surprising. However, one estimates that fewer than a tenth of this amount would be considered research plus development as these terms are defined in the engineering and product research departments of companies; indeed, probably no more than 1/5 of 1% of total advertising expenditure is used to achieve an enduring understanding of how to spend the other 99.8 %.

Most of the measurement of advertising effectiveness is of an applied nature, dealing with specific advertisements and campaigns. Of the applied part, most of the money is spent by agencies on pre-testing the given message or campaign before the launch. Relatively less tends to be spent on post-testing the effect of given campaigns.

The research techniques used to measure advertising effectiveness vary with what one is trying to accomplish. The behavioral change of ultimate interest to the advertiser is the act of purchase. One would expect to find that research on the "sales effect" of advertising predominates. Actually, sales-effect research tends to be meager in comparison with "communication-effect" research, to determine the effect of given advertising on buyers' knowledge, feelings and convictions. One may feel that the links between sales and advertising are too tenuous, complicated and long-term to permit measuring the direct impact. Instead the more short-term communication effects of a given message is measured.

1. Communication Effect Research

Communication Effect research seeks to discover whether the advertising is achieving the intended communication effects. There are various ways to evaluate the communication effectiveness of, say, an individual advertisement. Called copy testing, it occurs before an advertisement appears in the media and after it has been shown. The purpose of pre-testing is to make improvements in the advertising copy to the fullest extent possible prior to its release.

There are three major methods of advertisement pre-testing:


Direct ratings

Here a panel of target customers or advertising experts examine alternative advertisements and fill out rating questionnaires. Sometimes a single question is raised, such as "Which of these advertisements do you think would influence you most to buy the product?" Or a more elaborate form consisting of several rating scales may be used; here the person evaluates the advertisement's attention strength, assigning a number of points up to a maximum. The underlying theory is that an effective advertisement must score high on all of these properties if it is ultimately to stimulate buying action. Too often advertisements are evaluated only on their attention creating or comprehension creating abilities. At the same time, it must be appreciated that direct rating methods are less reliable than harder evidence of an advertisement's actual impact on target customers. Direct rating scales help primarily to screen out poor advertisements rather than identify great advertisements.


Portfolio tests

Respondents are given a dummy portfolio of advertisements and asked to read them. After putting them down, the readers are asked to recall the advertisements they saw, unaided or aided, and to explain each advertisement. The results indicate a message's ability to stand out and its intended message to be understood.


Laboratory tests

Some assess the potential effect of a message by electrically measuring physiological reactions - heart beat, blood pressure, pupil dilation, perspiration. These physiological tests at best measure the attention-getting and arousing power of a message rather than any higher state of consciousness that the message might produce.


Two message post-testing methods tests the actual communication impact of the message after it has appeared in media:


Recall tests

Recall tests take persons who are regular users of the media vehicle and ask them to recall advertisers and products contained an issue under study. They are asked to recall what they can remember. The tester may or may not aid them in their recall. Recall scores are prepared on the basis of their responses and are used to indicate the power of the message to be noticed and retained.


Recognition tests

Recognition tests samples the readers of a given issue of a publication, asking them to point out what they recognize as having seen and/or read. For each advertisement, three different readership scores are prepared from the recognition data:

Noted. The percentage of readers who say they have previously seen the particular advertisement.

Seen/associated. The percentage of readers who say they have seen any part of the advertisement that clearly indicates the names of the product or service of the advertiser.

Read most. The percentage of readers who not only looked at the advertisement, but who say that they read more than half of the total written material.

From this one can evolve the ‘Adnorms’, i.e., average scores for each product class for the year, and separately for men and women for each magazine, to enable advertisers to evaluate themselves in relation to competitors.

It should be noted that most of these efforts rate the attention and comprehension effectiveness of the advertisement and not necessarily its impact on attitude or behavior. The latter are admittedly harder to measure. Too many agencies unfortunately stop short of investing the necessary money to really measure what a message is accomplishing.



The item rating score is given in the range 0 to 12:




Attention Strength:  All readers


Attention Strength:  Target reader


Read-Through Strength


Cognitive Strength


Affective Strength: Particular appeal


Affective Strength: Desired emotion


Behavioral Strength: Suggested follow-through action


Behavioral Strength: Actual follow-through



The total rating score is in the range 0 to 96 with the following results:

0-20 Very Poor

20-40 Mediocre

40-60 Average

60-80 Good

80+ Very Good

2. Sales Effect Research

Communication Effect advertising research undoubtedly helps improve the quality of message content and presentation, but it reveals very little about how much sales may be affected, if at all. What sales conclusion can one draw in learning that a recent campaign has increased brand awareness by 20 percent and brand comprehension by 10 percent? What has one learned about the sales productivity of the advertising spend and therefore how much to allocate?

The sales effect of advertising will be more difficult to measure than the communication effect. Advertising sales effectiveness is easiest to measure in mail-order situations and hardest to measure in brand or corporate-image-building.

Efforts to measure advertising sales impact include:


a) The historical approach involves correlating past company sales with past company advertising expenditures on a current or lagged basis using least-squares regression. Simple regression usually leads to unsatisfactory results, and the researcher tries to introduce additional variables that might explain the behavior of past sales.

Using a single equation with five explanatory variables one can measure the direct and the lagged effects of advertising expenditures on current sales which in turn allows one to calculate short-term and long-term marginal rates of return on the company's advertising spend. Other methods apply multiple-regression to historical data to give advertising impact-on-sales measures for consumables.

These methods have had to cope with the following problems:


auto-correlation of annual advertising and sales series respectively


high inter-correlation among the explanatory variables


compounding of the sales/advertising response coefficient by the fact that many companies set advertising as a percentage of sales


insufficient number of years of data to fit the required number of variables.


b) These problems have led one to rely on a second method of measuring the sales impact of advertising, that of experimental design.

Here one chooses a set of matched markets which normally receive the same advertising / sales expenditure. During the test period however, the company spends, say, 50 percent more than the normal amount in some areas, 50 percent less in another set of areas, and the normal amount in the remaining set or control areas. At the end of the experimental period, the company determines the average sales gains and losses due to additional versus reduced advertising spending. For example, one may find that above-normal advertising expenditure led to increased sales at a diminishing rate and was more un-profitable when it occurred in cities where one already had a large market share. Frequent users of experimental design have managed to estimate fairly accurately the shape of the sales-response function in different types of territories. Some see experimental design as the best way to determine the impact of advertising spend on sales.

Target Company
Base Reference

Attention Strengths

Read-Through Strengths

Cognitive Strengths

Affective Strengths

Behavioral Strengths

Performance Grid Definitions








Persuasive communication makes use of three basic models: firstly, the Rhetorical model, secondly, the Propagandistic model and, thirdly the Negotiation model.

These models are generalized in the communication model, which attempts to understand the communication process in terms of four major elements: communicator, message, channels, and audience. The communicator's planning proceeds in the reverse order, by first determining audience, then channels, message and finally the source effect.

Modern advertising calls for more than developing a good product, pricing it correctly, and making it easily available to the customer. The company that wants more than "walk-in" sales must develop an effective programme of communication and promotion. Every company is cast, by the very nature of customers and competition, into the role of a communicator.

Companies have recognized this and have responded by hiring salesforces to carry persuasive messages; advertising agencies to develop attention-getting ads; sales promotion specialists to develop sales campaigns; and public relations firms to enhance the company's image. Not all companies feel good about all of these things, and some positively act as if promotional expenditures were among the least productive made by the firm. Yet they all continue to spend large and growing sums on promotion. For most companies the question is not whether to promote, but how much to spend and in what ways.

Effective promotion for the industry requires an integrated advertising communications concept. It involves the company answering a single question: What do they want to be?

Whether or not the firm answers this question, it will be something to the public and to its customers. All of its products and actions communicate, and the only question is What is communicated? The firm that has recognized this sees its relationship to the buyer as a courtship. In the best sense, the firm strives to establish an emotionally satisfying relationship between itself and its customers. This is not to say that the buyers will pay less attention to quality, value and price. It is precisely these aspects of the offer that help build the emotional relationship. Wooing the customer with a cheap dinner is not likely to lead to a lasting relationship, and it is the lasting relationship, built through offering real values and effective communication, that more and more companies are coming around to seeking with their customers.




The Company is in continuous communication with others: distribution channels, customers, suppliers, bankers, government, the general public. Some of the communication is casual, some is designed to be informative, and some is designed to be persuasive. The industry is particularly interested in the last: persuasive communication. Persuasive communication is said to take place when a communicator consciously develops his messages to have a calculated impact on the attitude and/or behavior of a target audience.

The persuasion process has been of interest not only to businessmen, but alas to, politicians, missionaries, lawyers, educators, reformers, demagogues, negotiators, administrators and military men. Each field has developed its own theories and vocabulary to describe the process, and consequently have lost sight of the common abilities.

Three basic models of the persuasion process can be distinguished.


The first, Rhetorical model, received its original formulation in the hands of Aristotle over twenty centuries ago in his Rhetoric. It is a model designed for the situation where a speaker is addressing an audience. This applies to a politician addressing an incredulous rabble, a lawyer addressing a brain dead judge, a salesman addressing a skeptical customer. Rhetoric is the faculty of determining the most effective means of persuasion in a given, and probably impossible, case. Rhetoric must begin with an analysis of the audience and the desired responses.

One can distinguish three modes of persuasion available to a speaker; the use of his character to make his speech credible, the excitation of desired emotion in the audience, and proof or apparent proof. Various modern settings for persuasion in the advertising field still draw on these basic principles. In the advertising world we see ads that build or trade on the character of the company, others designed to stimulate audience emotions, and still others documenting the product's superiority. In the sales field we see salesmen who emphasize their company's reputation, others who stir the customers' emotions, and still others who attempt to demonstrate the technical qualities of their product.


The Propagandistic model is formulated for the situation where a company is trying to win potential support for its ideas. Here the persuasion process is seen in much broader terms than simply the use of words. The earliest practitioners were the snake oil salesmen who saw the task of winning converts as one of manipulating words (rhetoric), feelings (atmospheres), and experiences (events) in a way that would capture one's devotion. More recently, the modern company has begun to compete for the support of various groups and has turned to these same instruments. Rhetoric, the most familiar technique, is consciously crafted in advertising personal selling, and public relations. Atmospheric is rather new for the business firm, and expresses itself in the design of buildings and executive offices, corporate identification symbols, product design and packaging, the "look" of the salesman, and so on. It is a recognition that people derive impression from every sign of the corporation or the product. Event management is even newer to the modern company; it means the arrangement of "happenings" that are calculated to induce desired feelings in potential supporters. The modern company, through its public relations people, creates events to make news. The chief executive makes speeches to various influential groups, new products and new outlets are launched with fanfare and ceremony, and so on.


The Negotiation model examines persuasion in the context of a negotiator facing another negotiator. This model is prominent in labor management relations, supplier interface, and sales negotiation. Each negotiator is trying to win the best terms for his constituency; and if he wins, the others loses. A settlement is possible if terms can be found that allow each party to claim a partial victory. The negotiator has two broad persuasion instruments. Inducements are positive motivation and concessions offered to the other party; they include flattery; they include boycott, exposure, and blandishment. In advertising situations, the firm favors an inducement strategy over a threat strategy, although these are still examples of the latter.




A general model, formulated and researched, is available for improving the industry communication processes.

The Communications Model

The model requires thought about (i) who (ii) says what (iii) in what channel (iv) to whom (v) with what effect.

The model's basic elements:-

               1. Communicator
               2. Message
               3. Channels
               4. Audience

Communicator is the sender or the source of the message.

Message is the meaning being sent and/or received by the audience.

Channels are the ways in which messages can be carried or delivered to audiences.

Audience is the receiver or the destination of the message.

This model ties together many interesting aspects and findings about the communication process in the industry.

It provides guidance to advertising communicators on how to arrange effective messages and media for an intended audience. One can explore the four elements not in the order of the message flow (from communicator to audience) but in terms of the planning flow (from target audience backward through channels to the communicator).

1. Audience

A company communicator must start with the audience because the audience determines what is to be said, how it is to be said, when it is to be said, where it is to be said, and who is to say it. The audience will be an individual, a group, a particular public, or the general public.


Audience response models

The purpose of the communication is to bring about some response from the audience. The response sought may be at the cognitive, affective or behavioral level.

There are three basic alternative models of audience response repertoires:


The AIDA model shows the buyer as passing through successive stages of awareness, interest, desire, and action.


The " hierarchy-of-effects" model shows the buyer as passing through stages of awareness, knowledge, liking, preference, conviction, and purchase.


The " innovation-adoption" model shows the buyer as passing through stages of awareness, interest, evaluation, trial, and adoption.

Most of these differences are semantic. They all see the buyer as capable of three basic levels of response.

The communicator normally assumes that buyers pass through these stages in succession on the way to purchase, however, there is some evidence that the stages can occur in various orders.

One may suggest and distinguish three plausible response models.


Learning response model.

The learning response model is the normal one showing a person passing from cognition, to affect, to behavior. It is chiefly applicable where the buyer feels involved and there are clear differences among alternatives. It applies, for example, to the purchase of durable products. For the advertising manager, it suggests that he must plan a communication campaign to first build product awareness, then comprehension, interest, conviction and finally, motivation to purchase.


Dissonance-attribution response model.

This model describes situations where the buyer goes through a behavioral - affective - cognitive sequence. He buys the product through the advice of some non-media source, then his attitude changes through experience with the object, and then he learns by paying attention to messages supporting that choice. An example would be the purchase of a financial service where an agent recommends a particular policy and company, the person buys it, then his attitude starts changing, and he watches for messages about this company. His attitude changes after the purchase to his own volition. This model applies to situations where the audience is involved but the alternatives are almost indistinguishable. For the advertising manager, it suggests that his main tasks are to induce purchase through effective incentives and to use mass media to reduce dissonance after purchase and promote learning.


Low-involvement response model.

Here the customer is thought to pass from cognition to behavior to attitude change. A proposed sequence for products where there is low involvement or minimal differences between alternatives (e.g. consumables or supplies). Television advertising for these products is a low-involvement learning experience where many messages penetrate the person's normal perceptual defences (because of his low involvement) and create cognitive shifts such as awareness but not attitude change. In the purchase situation, the customer recognizes the product, buys it, and a change in attitude occurs after use. According to this model, the function of advertising communication is to build product awareness and to support favorable attitudes after purchase.



Audience characteristics

The advertising communicator must ascertain the specific characteristics of his target audience as they relate to achieving the type of response he wants. If the communicator wants to research the audience's present level of awareness and comprehension, its cognitive capacity and its media habits. If he wants to improve attitudes toward the product, he will want to research the audience's present attitudes and its persuade-ability. If he wants to motivate purchase, he will want to research its present level of interest, its willingness to take risks, and its purchasing power.

The relation of many of these audience characteristics to buying response behavior must be specifically researched. Consider audience persuade-ability. If audience persuade-ability is high, then attitude-changing communications would be feasible. For example, intelligence is widely thought to be negatively correlated with persuade-ability, but the evidence is inconclusive. Women have been found to be more persuadable than men, but men who feel socially inadequate also show this trait. Persons who accept external standards to guide their behavior and who have a weak-self-concept appear to be more persuadable. Persons who are low in self- confidence are also thought to be more persuadable. However, research shows a curvilinear relation between self-confidence and persuade-ability, with those moderate in self-confidence being the most persuadable. In general, the communicator should consider this research, look for audience traits that correlate with differential persuade-ability, and use them to guide his audience targeting and communication.

Target Company
Base Reference

Audience Response Rating

Audience Characteristic Recognition Rating

Audience Image Recognition Rating

Channel Personal Influence Rating

Channel Non-Personal Influence Rating

Performance Grid Definitions



Audience image

One of the most important steps in audience analysis is to assess the audience's currently held image of the company, its products, and its competitors. This helps the company recognize what it must aim for in terms of communication objectives. There are many techniques for measuring audience images, but here one can describe the popular one known as the semantic differential.

Images are the simplified impressions people hold of an otherwise complex entity.

Images are built on three factors:

    1.  Evaluation (the good-bad qualities of the image)
    2.  Potency (strong-weak qualities)
    3.  Activity (active-passive qualities)

To develop a corporate-image profile, subjects are asked to rate a company on various scales made up of polar adjectives reflecting these factors. The ratings of many persons are averaged. Each company will emerge with a certain average standing on each scale. A comparison can be made of its image or "semantic differential" relative to competitors on each scale.

Consider the hypothetical scales and results for two companies;  a = the company and  b = competitor

Company 'a' emerges with a profile showing average public- mindedness, and it seems a little weak and possibly passive.

Company 'b' strikes the public as highly self-seeking, powerful, and dynamic. A company can take steps to repair the aspects of its image that it regards as weak, largely through advertising, publicity, and corporate-identification programmes Its success, however, depends on how well it also changes the underlying reality that produced the image.


2. Channels

Once the target audiences are specified, the Industry Companies communicator can think about the best channels for reaching them.

Channels of influence are of two broad types:

               i. Personal

               ii. Non-personal


Personal Channels influence is a means of direct contact with target individuals or groups.

Three types can be distinguished.


Advocate channels consist of salesmen or other company representatives in personal contact with the buyer trying to influence him.


Expert channels consist of independent persons (consultants, authorities) exercising an influence on the buyer by dint of their expertise.


Social channels consist of the buyer's associates, neighbors, friends, or family who may exercise an influence. This last channel is also known as word-of-mouth influence, and it may be the strongest of the three personal channels, especially in the consumer-products area.


Non-personal Channels influence channels are media that carry influence without involving direct contact.

Three types of non-personal media can be distinguished.


Mass and selective media consist of newspaper, magazines, radio, television and billboards that people might buy or perceive. Mass media is aimed at large, often undifferentiated audiences; selective media is more specialized in reach and focus.


Atmospheres are designed environments calculated to create desirable feelings in persons regarding a company or a product.


Events are designed occurrences.



Personal influence channels

There has been much discussion of the relative effectiveness of personal versus non-personal influence in changing attitude and behavior. Most observers believe that personal influence is generally the more potent of the two. Thus, while non-personal media can create awareness and interest in a buyer, it usually takes a salesman to close the sale. Or a favorable reference to a product by a friend may do more to bring about the purchase than a dozen advertising exposures.

Personal influence, especially social influence, would appear to be especially potent in two cases:


Where the product is expensive, risky, or purchased infrequently. In such cases, the buyer is likely to be a high information-seeker. He will probably go beyond mass-media information and seek out the product experiences and opinions of knowledgeable persons.


Where the product has a significantly social, as opposed to private character. Products such as automobiles, clothing, and even beer and cigarettes have significant brand differentiation that implies something about the status or taste of the individual. Here he is likely to choose brands acceptable to his group.

The more decisive influence of social channels, as against mass media, in creating opinion has been well documented and a greater number of persons are influenced by discussions in their peer groups than by mass media.

Word-of-mouth or personal communication from an immediate and trusted source is typically more influential than media communication from a remote and trusted source, despite the prestige of the latter.

This should normally incline the advertising manager to favor personal influence channels, especially social channels, over mass media. Unfortunately, the advertising management has little direct control over social influence channels. They cannot "hire" neighbors and friends to speak favorably about their product. Ironically what little control they have comes through the mass media.

Personal influence may be more effective than persuasive mass communication, but at present mass communications seems the most effective means of stimulating personal influence.

Thus the relationship and relative influence of personal influence and mass communication is more complicated than it at first appears. Mass communications affect personal attitudes and behavior through a two-step flow-of-communication process. "Ideas often flow from television and print to opinion leaders and from these to the less active sections of the population".

If true, this hypothesis has several significant implications:


First, it says that mass media's influence on mass opinion is not as direct, powerful, and automatic as supposed. It is mediated by opinion leaders, persons who are members of primary groups and whose opinions tend to be sought out in one or more areas. Opinion leaders are more exposed to mass media than the people they influence. They are the carriers of the messages to people who are less exposed to media, thus extending the influence of the mass media; or they may carry altered or no messages, thus acting as gatekeepers.


Second, the hypothesis challenges the notion that persons are influenced in their consumption styles primarily from a "trickle-down" effect from the higher-status classes. Since people primarily interact with others in their own social class, they pick up their fashion and other ideas in this way - from people like themselves who are opinion leaders.


Third, an implication is that the mass communicator may accomplish his message dissemination more efficiently by using a lower advertising budget and directing it specifically at opinion leaders, letting them carry the message to others. In many markets, however, opinion leaders and the people whom they influence are very much alike. It is hard to identify opinion leaders, aim communications specifically at them, and trust that they will say positive things about the product.

Although the two-step flow-of-communication hypothesis opened up some important new understandings about the flow of influence, it also has certain difficulties as a theory, and it could be misleading interpreted literally.

The following qualifications must be made :


Opinion leadership is not dichotomous trait. It is a matter of degree. All group members may have some opinion leadership in certain areas of consumption.


Opinion followers do not get their information only from opinion leaders. They too are in touch with mass media, albeit a little less so.


An effective mass-media strategy might be to aim it at everyone and stimulate opinion seeking; this is a useful way to use opinion leaders.

Industry companies can take some steps to stimulate personal influence channels to work on their behalf, even if their actual control is somewhat limited.

Among the things they can do are:


Observe whether certain individuals or companies seem to stand out as influential in their groups and devote extra effort to them, either through personal attention, direct mail, or advertising.


Create opinion leaders out of certain persons, by supplying them with the product on attractive terms, or selecting them as company representatives.


Work through community influences such as key individuals, politicians, public figures, celebrities, et cetera.


Let the advertising feature interpersonal discussion of products or testimonials by influential as part of the content.


Develop advertising that is high in "conversational value".


Choose salesmen who are of the same general social status as their prospects.


Non-Personal influence channels

Non-personal influence channels tend to have a less insistent presence than personal influence, meaning that audience members can more easily avoid or tune them out. Even during high-saturation campaigns, many members of the audience will not be reached.

Three psychological processes, commonly referred to as factors of perceptual defence, operate to cut down the reach and impact of mass media.


Selective attention means that a person notes only a small fraction of all the media vehicles and only a small fraction of their content.


Selective distortion means that he may perceive the content differently than intended, as it is filtered through his needs and values.


Selective retention means that he remembers certain things better than others, again because of his needs and values.

These selective processes have led one to minimize the persuasive impact of the mass media, quite contrary to years ago when the mass media was seen as brainwashing with total influence over the mind. The current view is that mass media does not accomplish persuasion (in the sense of changing minds) so much as learning and reinforcement.


3. Message

One may argue that effective communication calls for specifying the target audience and determining the major channels for reaching this audience. The third step is to design product messages that are appropriate to the audience and the channels.

Message design requires the communicator's emphatic understanding of the audience. For the sent message to be the received message, it must be encoded in a way that is meaningful to the receiver.

Messages are essentially signs. The sender should select signs that will be familiar to the receiver. He is better able to do so, the greater the overlap in the field of experience of the two parties. The source can encode, and the destination can decode, only in terms of the experience each has had. Imagine what this implies for communicators from one stratum of society (advertising executives, teachers, et cetera), who are trying to encode meaningful messages for members of another stratum.

A communicator wants to choose a message that has ideal stimulus value (message function) and construct the message for maximal impact (message structure).



Message function

What can a single message possibly do to a buyer? According to some - not very much. No single advertisement is likely to produce absolute 'belief' in a product. Rather, each advertisement is likely to make its most significant contribution by 'nudging' the consumer onto and along the path of the adoption process. Most communicators expect to achieve extended effects as a result of a series of messages reaching the buyer at discretely separated intervals.


Message Effects

Messages can attempt to convey information, alter perceptions, stimulate desires, produce conviction, direct action, and give reassurance. The choice of message depends often on the state of the audience. Each message works on a different set of principles.

We can illustrate this by considering one type of message, the one that intends to stimulate a desire for a product.

Suppose a new product is introduced into the marketplace and the company wants to encourage people to try it. What can they say about the new product to break through their existing product choice patterns? Naturally they want to talk in terms of the new product's benefits to buyers. But the other products make the same claims. The general principle that should guide their message development is to create cognitive dissonance in the receiver. Two elements of knowledge are in a dissonant relationship if they contradict or do not square with each other. Dissonance ... being psychologically uncomfortable will motivate the person to try to reduce dissonance and achieve consonance. They will try to eliminate the tension in one of several ways, one of which is to buy and try the product.

For example, the industry may say that tests have proved conclusively that their product does something better than any other products on the market. People using other products for their presumed effectiveness will now question their usual product. "Is the new product really better?" As they hear this claim repeated, the tension increases, because their present product or the new product must be better, they cannot both be "best". Their tension heightens their sensitivity to product advertisements and conversations about products. They will try to eliminate the tension by either dismissing the claim as an advertising agent's gimmick or buying the product to see for themselves.

The latter step, of course, is what the industry wants.

The industry may attempt to increase dissonance at a more basic level. They may find that many people are not overly concerned with product benefits, in which case the claim of 'better features or benefits' does not get at the real issue. The job is then to challenge the complacency people feel about this issue. They must show that the benefits are real and important. This calls for a fear-building message to create tension and anxiety about the product features. The tension generated by the fear appeal will lead the person to pay more attention to the benefits and the proper product.

The use of fear or threat messages has a long history in advertising, as it has in other realms of human action, such as politics. It used to be held that the message's effectiveness increased with the level of fear presented. The more fear-building, the more tension, and the greater the drive to reduce the tension. Yet, one study in which they tested the effectiveness of different fear levels in a specifically directed message, indicated that the strong fear appeal was less effective than a moderate one in fostering adherence to an expedient action. For a while, this finding became the standard, that neither extremely strong nor weak fear appeals were as effective as moderate ones.

One supports this position by hypothesizing two types of effects as fear increases:


There are the facilitating effects that are most often overlooked in advertising. If fear can heighten drive, there is the possibility of greater attention and interest in the product and message than if no drive were aroused .

But fear also brings the important characteristics of inhibition into the picture . If fear levels are too high, there is the possibility of defensive avoidance of the ad, denial of the threat, selective exposure or distortion of the ad's meaning, or a view of the recommendations as being inadequate to deal with so important a fear.


Others have found cases where high fear appeals appear maximally effective. This may mean that the buyers have different tolerances to fear, and the level of the fear message should be set separately for different segments. Further, if the fear message is to be maximally effective, the communication should promise to relieve in a believable and efficient way the fear it arouses; otherwise the buyers will ignore or minimize the threat.

Thus far one has looked at messages that are effective because they create unpleasant appeals, and thus tension.

Does this means that pleasant messages will be less effective? If a pleasant message has any effect, it must work on a principle other than cognitive dissonance. The theory of the pleasant message is that the recipient is less likely to avoid it and will pick up a pleasant association that he will transfer to the product. Thus a product advertisement showing a person enjoying the benefits provides a vicarious model for the type of response the person can expect to carry over good feelings to the product.

An unsettled issue is whether high, moderate, or low pleasantness in a message works best. Many observers feel that intensity of appeal is more important than the type of appeal, and favor high pleasantness or high unpleasantness over any intermediate levels. Thus the relative effectiveness of unpleasant versus pleasant messages and of levels within them is still in need of more definitive research.


Message structure

The stimulus value of a message is affected not only by the choice and intensity of appeal but also by the manner in which the message is structured. Research has shed much light on such classic issues in rhetoric as conclusion drawing, one-versus two-sided arguments, and order of presentation.

Conclusion drawing raises the question of whether the communicator should draw a definite conclusion for the audience or leave it to them. In a laboratory-type experiment it was found that more than twice as many persons changed in the direction advocated when the conclusion was stated than when they were left to form their own conclusions.

However, other studies produced conflicting results, and it appears that some situations are unfavorable to conclusion drawing:


If the communicator is seen as untrustworthy, the audience may resent the attempt to influence them.


If the issue is simple, or the audience is intelligent, the audience may be annoyed at the attempt to explain the obvious.


If the issue is highly personal, the audience may resent the communicator's interference.

Sometimes drawing too explicit a conclusion, especially in the area of new products, can overly limit the product's acceptance.

Some stimulus ambiguity can play a definite role in leading to a broader market definition and more spontaneous uses of new products. It permits more people to read their own meaning into the product. Conclusion drawing seems better suited for complex or specialized products where a single and clear use is intended.

One or Two sided arguments raise the question of whether the communicator should only praise the product or also mention or anticipate some of its short-comings.

Intuitively, it would appear that the best effect is gained by a one sided presentation: this is the predominant approach in sales presentations, political contests, and child rearing. Yet the answer is not so clear-cut. It depends on such things as the initial position of the audience's level of education, and the audience's exposure to subsequent communication. One sided messages tend to work best with audiences that are initially favorably predisposed to the communicator's position, whereas two sided arguments tend to work best with audiences who are opposed.

A seller of a new product whose other products are well accepted might think of favorably mentioning the existing products and then going on to praise his new product. Two sided messages tend to be more effective with better educated audiences. A salesman dealing with expert buyers might not pretend his product has it all over competing products but mention more factually where it excels and where it lags. Two sided messages tend to be more effective with audiences who are likely to be exposed to counterpropaganda. By mentioning a minor shortcoming in his product, a salesman takes the edge off this mention when it comes from a competitor, much as a small discomforting inoculation now prevents a greater sickness later. But he must be careful to inoculate only enough negative vaccine to make the buyer resistant to counterpropaganda, not to his own product.

Order of presentation raises the question of whether a communicator should present his strongest arguments first or last. In the case of a one sided message, presenting the strongest argument first has the advantage of establishing attention and interest. This may be especially important in newspaper and other media where the audience does not attend to the entire message. However, it means an anticlimactic presentation. If the audience is captive, as in a sales presentation or conference, then a climatic presentation may be more effective. Studies have yielded both findings, and one can say only that the strongest arguments do not belong in the middle of the message.

In the case of a two sided message, the issue is whether to present the positive argument first (primacy effect) or last (recent effect). If the audience is initially opposed, it would appear that the communicator would be smarter to start with the other side's argument. This will tend to disarm the audience and allow him to conclude with his strongest argument. It does not appear that either the primacy or the recent effect dominates in all or most situations, and more research is needed into the underlying processes.


3. Communicator

The communicator influences the audience directly through his choice of message and channels and directly through how one is perceived by the audience. The latter is called the source effect.


Source credibility

Advertising managers have known for years that messages delivered by highly credible sources will add to the persuasiveness of the message itself. But what factors underlie source credibility?

The three factors most often identified are:

   a. Expertness
   b. Trustworthiness
   c. ‘Likability’


Expertness is related to the qualifications the person is perceived to possess for having knowledge of what he is claiming. Doctors, scientists, and professors rank high on expertise.


Trustworthiness is related to how disinterested the source is perceive to be. Friends are perceived to be more trustworthy than strangers or salespeople.


‘Likability’ is related to how attractive the source is to the audience. Likability is a special affective quality that resides in the personality of the source. The most highly credible source, then, would be a person who scored high on all three dimensions. If such a message carrier could not be found, it would be helpful to know the relative influence of expertness, trustworthiness, and likability on message acceptance, this will of course vary for different products and situations.

Source credibility plays a critical role during periods of shortages or rapid inflation. In a shortage the seller has to put his customers on allocation and they are suspicious of his fairness. In an inflation the seller has to raise prices which may easily appear excessive. In both cases the seller must strive to make his actions credible to his customers. For example, customers are more inclined to believe the statements of salesmen with whom they have dealt a long time than those of new salesmen. Customers will be more convinced when they hear experts explain the allocations or price increases. The company must seek source enhancement strategies to avoid losing the goodwill and confidence of its customers.


Source incongruity

If a person has a positive attitude toward a source and a message, or a negative attitude toward both, a state of congruity is said to exist.

But what happens if he holds one attitude toward the source and the opposite toward the message?

Suppose, for example, the person hears a celebrity (who he likes) praise a brand (that he dislikes). One can postulate that attitude change will take place in the direction of increasing the amount of congruity between the two evaluations. In this example, the person will end up respecting the celebrity somewhat less and respecting the brand somewhat more. If this happens on further occasions with other negatively valued brands, he will eventually develop a negative evaluation of the celebrity and maintain his negative attitudes toward the brand.

The principle of congruity says that the communicator can use his good image to reduce some negative feelings toward a brand, but in the process may lose some of his trusted standing, especially if he does this often.

Target Company
Base Reference

Message Function Rating

Message Structure Rating

Source Expertness

Source Trustworthiness

Source ‘Likability’

Performance Grid Definitions




Advertising Scenarios:



 Financial Definitions





The ADVERTISING STRATEGY SCENARIOS section gives a series of Forecasts for the Company and the industry using a number of assumptions relating to the advertising decisions available to the management of the Company.

The forecast given shows the effects of advertising improvements which Advertising Management is likely to recommend:


  • Base Forecast  Scenarios

  • Marketing Expenditure

  • Variable Marketing Cost Objectives

  • General Marketing Process Cost Objectives

  • Advertising Cost Objectives

  • Promotional Expenditure

Managers in the Company will, in both the short-term and the long-term, have vital decisions to make regarding the advertising performance, margins and profitability and these decisions will need to be evaluated in light of the customers, markets, competitors, products, industry and internal factors. The scenarios given isolate a number of the most important factors and provide balance sheet forecasts for each of the scenarios.



Market & Revenue Comparisons:  Scenarios


Target Company

Base Reference Market





BEST REVENUE FORECAST Scenario Product Share




PRODUCT LAUNCH: Scenario Product Share




BEST MARKET FORECAST Scenario Product Share


WORST MARKET FORECAST Scenario Product Share


PRODUCT LAUNCH: Scenario Product Share

   Market Definitions  



Financial Comparisons: Scenarios


Target Company

Base Reference Industry



MEDIAN  FORECAST : Margins & Ratios

BEST  FORECAST : Financials

BEST  FORECAST : Margins & Ratios

WORST  FORECAST : Financials

WORST  FORECAST : Margins & Ratios


PRODUCT LAUNCH: Margins & Ratios


MEDIAN  FORECAST : Margins & Ratios

BEST  FORECAST : Financials

BEST  FORECAST : Margins & Ratios

WORST  FORECAST : Financials

WORST  FORECAST : Margins & Ratios


PRODUCT LAUNCH: Margins & Ratios



 Financial Definitions



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