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UNIT-I CONCEPT OF ADVERTISING Advertisement has become an integral part in todays marketing scenario. In earlier times, advertisement was not given as much emphasis as it is being given today. The Institute of Practitioners in Advertising defines the term as: advertising presents the most persuasive possible selling message to the right prospects for the product or service at the lowest possible cost. Here we have a combination of creativity, marketing research & economic media buying. Advertising may cost a lot of money but that cost is justified if it works effectively and economically.

Concept

The word advertising is a Latin word which means to turn attention of people to a specific thing. It is a paid publicity. According to Oxford Dictionary the word to advertise means to make generally or publicly known, describe publicly with a view to increasing sales. Advertising is thus, a mass communication tool, which is essentially in paid form by a firm or an individual and the ultimate purpose of which is to give information, develop attitudes & induce action, which are useful to the advertiser.

Advertising presents and upholds the ideas, commodities and services of a recognized advertiser, which provides as a communication link between the producer and the potential buyers. It gives the information to the would-be buyers who are interested in seeking the information about a product and the manufacturer. Advertising may be taken as the most efficient means of reaching people with product information. Advertising presents a mass persuasion apart from disseminating information to the prospective buyers about the product and the producer. While creating awareness and popularity, it seeks to persuade. It is a more effective and extensive and less expensive way of creating contacts.

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Objectives of advertising

The purpose of advertising is to sell something - a product, a service or an idea. The real objective of advertising is effective communication between goods and clients and increasing awareness. Mathews, Buzzell, Levitt and Frank have listed some specific objectives of advertising.

To make an immediate sale. To build primary demand. To introduce a price deal. To build brand recognition or brand insistence. To help salesman by building an awareness of a product among retailers. To create a reputation for service, reliability or research strength. To increase market share.

Function

A normal characteristic of advertising is to create primary demand for a product category rather than for a specific brand. It is believed that the product advertising must give stress on brand name. Now, we are going to outline the functions of advertising.

To distinguish products from their competitors: There are so many products in the market. Sometime the same types of products are competing in one market.

To communicate product information: Through advertisement one company can send its product information to the target audiences.

To urge product use: Advertisement can create the urge within ourselves for a product. To expand product distribution: When the market demand of a particular product increases, the retailer and distributor are engaged in the sale of that product.

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To increase brand preference: There are various products with various bands. So we are getting the preference to choose the band of a particular product with the help of advertisement.

To reduce overall sale cost: Advertising increases the primary demand in the market. When demand is there and the product is available, automatically the overall price will decrease.

DEFINITION Advertising is any paid form of non personal presentation and promotion of goods, services & ideas by an identified sponsor. SOCIAL, LEGAL, ETHICAL & ECONOMICAL IMPLICATIONS SOCIAL Advertising as a part of firms marketing effort operates in the society. It has to therefore follow the social norms. Deception: it refers not only to the information content in advertising but may also arise from misplace emphasis in presentations. According to federal trade commission of the USA- Advertising as a whole must not create a misleading impression although every statement, separately considered, may be literally truthful Manipulation: - The freedom of choice of consumers is restricted by the power of advertising since it can manipulate buyers into making a decision against their will or interest. Manipulation is done through emotional appeals. These companies can utilize advanced and very scientific advertising techniques and thus make an impression on consumers. Taste: - Sometimes ads are offensive, tasteless, irritating, boring and so on. Sources of distaste, Sexual Appeals, Shock advertising

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Some examples of the Advertisements with social aspects: Grow-more-trees advertisements Drink milk Eat healthy food, eat eggs Mothers milk is best for the baby Say no to drugs every time Get your child vaccinations in times

LEGAL The government in each country has to make sure that advertisements appearing do not flaunt of their rules & regulations. It should not: show anti-national feelings contain misleading information about the product Violate government rules

Some examples of the Advertisements with legal aspects: Get your car checked for pollution Drinks & driving do not mix Weight, price, manufacturing date, date of expiry should be mentioned on the packing case ETHICAL Ethics are the moral standards against which behavior is judged Truth in Advertising Deception is making false or misleading statements. Puffery (commercial exaggeration) is legal. Cannot legislate against emotional appeals
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Advertising to ChildrenIssues Advertising promotes superficiality and materialism in children. Children are inexperienced and easy prey. Persuasion to children creates child-parent conflicts. What does the literature say about kids abilities to process persuasive information?

ECONOMIC Making Consumers Aware of Products and Services Providing Consumers With Information to Use to Make Purchase Decisions Encouraging Consumption and Fostering Economic Growth Effects on Consumer Choice Differentiation Brand Loyalty Effects on Competition Barriers to entry Economies of scale Effects on product costs and prices Advertising as an expense that increases the cost of products Increased differentiation

SETTING ADVERTISEMENT OBJECTIVES 1. The first step in developing an advertising program is to get the advertising objectives. These objectives must flow from prior decisions on the target market, market positioning and marketing mix. The marketing positioning and marketing mix strategies define the job that advertising must do in the total marketing program. 2. Advertising objectives can be classified as to whether their aim is to inform, persuade or remind. 3. Informative advertising figures heavily in the pioneering stage of a product category, where the objective is to build primary demand.

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4. Persuasive advertising has moved into the category of comparison advertising, which seeks to establish the superiority if one brand through specific comparison with one or more other brands in the product class. 5. Reminder advertising is highly important in the nature stage of the product to keep the consumer thinking about the product. A related from of advertising is reinforcement advertising which seeks to assure current purchasers that they have made a right choice. ADVERTISING AGENCY An advertising agency or ad agency is a service business dedicated to creating, planning and handling advertising (and sometimes other forms of promotion) for its clients. An ad agency is independent from the client and provides an outside point of view to the effort of selling the client's products or services. An agency can also handle overall marketing and branding strategies and sales promotions for its clients. An advertising agency may be a full-service agency or part-service agency. Each has a different outlook and advertising activities. The selection of advertising agencies depends on whether one wants a full-service agency or a part-time agency. The selection is also made on the basis of compatibility of the agency team, agency stability, services, credibility and the agencys problem solving approach. ADVERTISING AGENCY-SELECTION Full service agency or part- time agency The full-service agency is involved completely in the advertising functions. It has a large number of expert employees. The organization is typically useful for performing advertising agencies. It looks upon customers as key clients. It communicates with the prospective purchasers. The distinguishing characteristics of the various agencies lie in the creative skills of the personnel of each organization and in the philosophy of advertising. Larger agencies offer better services. The part-time agency offers service on free of cost or project basis. These agencies perform various outside activities and co-ordinate the activities of the advertiser and media men. Clients have greater control over advertising campaigns. Advertisers
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research agencies generally perform job of part-agencies. The selection of a particular agency depends on its size, its services, knowledge and growth

Compatibility The selection of an advertising agency depends on the compatibility of the agency. The needs of the company determine the fitness of the agency. The advertiser visits several agencies and chooses the best agency on the basis of its merits, demerits, accreditation, its methods of handling the accounts and using the available opportunities.

Agency Team This includes management specialists, market researchers, copywriters, media experts, production managers and art directors. The attitude, thinking, experience and personalities of the team members have positive effects on the selection process.

Agency Stability An agency, which has been long in existence generally, performs efficiently and effectively. The greater the investment in the agency, the more vital the contribution of the agency to the advertising activities. The personnel, finance, management and credit are examined before selecting a suitable advertising agency.

Services The services rendered by the agency are evaluated with a view to choosing the best advertising agency. Cost accounting, general agreements, project estimates, selling attitudes and other services performed by the advertising agencies are considered to evaluate their efficiency and credibility in performing advertising jobs. The greater the range of an agencys services, the more fully it can serve the clients needs. The agency can serve the clients by its potential capacity for advertising, sales promotion, media placement, public relations, market research, sales training and distribution channels.

Creativity

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Creativity is the main element in advertising. If the advertising agency is capable of great creative efforts, it is selected for the purpose. Style, clarity, impact, memorability and action- these are taken into account while evaluating creativity.

Problem-solving approach The agency which has a problem solving approach is considered to be superior and useful. The importance of choosing the right agency cannot be ignored. Caliber, compatibility, balanced services, responsiveness, talent an equitable compensation-these are important factors in selecting an advertising agency.

AGENCY REMUNERATION:

1.

Simple to understand and easy to administer

A remuneration agreement should be simple and clear enough for all involved to understand and execute. A complex and poorly understood agreement may cause too much attention and energy to be diverted to administration and conflict resolution. This does not encourage the development of great advertising or marketing ideas.

2. Fair to both client and agency

A client should expect to pay, and an agency should expect to earn, equitable remuneration, including a fair and transparent profit.

3. Aligning client and agency interests and priorities It is important that the remuneration system be designed to align the agencys aims with the clients priorities and needs. Both parties should feel they are working toward a common goal.
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4. Finalized before agency resources are committed

There is usually an urgency to get started in new relationships. To avoid unnecessary risk to the agency and the client, work should not commence until the terms of the agency agreement are clearly understood by both parties, and heads of agreement at least have been signed. 5. Recorded in a ratified clientagency contract

A written contract provides reassurance and clarity over time. If there is no clear written Agreement there is no basis for dispute resolution. New versions of industry contracts are Available. It is important that all parties understand the contract and the obligations it imposes.

6. Flexible enough to accommodate possible changes in the future

It is important that remuneration terms remain flexible to accommodate significant changes in scope of services, budgets, timing of services, mix of resources, new products being developed, new and foreign markets, changing corporate objectives, and product, service, or corporate brands with limited or erratic spending.

7. Involving senior management stewardship, with principles clearly communicated to the teams on both sides Senior managers who are responsible for the effectiveness of marketing communications should be accountable for establishing the objectives and operating mechanics of the agency remuneration system. Those working on the business in both organizations should make themselves responsible for understanding the detail to avoid conflict in their day-to-day dealings. 8. Capable of standing the test of time and being understood by any future marketing Director when he/she joins. As a result of adopting the guiding principles listed above, both client and agency can expect a remuneration agreement that endures over time. It is inevitable that a clients business plans will change from time to time, and in turn, impact the agencys

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scope of service. But the clientagency remuneration agreement should be robust enough to survive.

9. Based on agreed and understood terms and definitions

Agency management and their client counterparts should employ the same words and phrases when discussing agency remuneration arrangements. The terms used can vary in meaning and care should be exercised to ensure that everyone is actually talking the same language.

10. Specified tracking and review dates

Work being done, and expected to be done, should periodically be compared with the original scope of work and service requirements. This needs to be done as part of a formal review and evaluation at least annually. It is recommended that these evaluations are done six monthly, and always on a 360 basis.

OTHER FACTORS

1. COMMISSION This system of basing the agencys remuneration, for advertising, on the commission earned from the media owner is still the basis of most media agreements, and about a quarter of agreements for creative agencies. Historically, in the UK, 15% commission on gross media cost was considered the norm for a full service arrangement when creative and media were provided by the same agency. The 15% agency commission on gross media cost actually amounts to the net cost plus 17.65%,hence the mark-up on non-media costs such as production, so that the commission equals 15%of the gross billed to client. After the emergence of media independents, the agencies responsible for developing the creative work bought less and less media. Today (Paying for Advertising (PFA)2003 fi gures) only 6% of media is bought by the agency producing creative. This split between creative and media agencies allowed clients the fl
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exibility of negotiating on commission level, if they had economies of scale, or less than fullservice requirements. Commission is still the sole basis of 22% of agreements, and used in conjunction with a fee element in a further 14% of cases. Most companies still paying commission use some form of stepped arrangement or sliding scale, and the amount of media commission retained by the agency or rebated to the client is by negotiation. 2. RESOURCE PACKAGE FEES (RPFS) sometimes known as Retainer Fees were developed as An appropriate way to remunerate creative agencies in the period following the splitting out of Media planning and buying from creative. RPFs now account for around two thirds of all agency Agreements and in nearly all cases, the 15% media commission is all rebated to the client. Fees are agreed in advance to cover a period of activity (normally one year), and are paid monthly. Typically a RPF arrangement is based on an agreed detailed scope of work and resource plan for a defined period, seeking to reflect the likely workload requirement of the agency. RPFs are usually based on staff costs (i.e. so many people at X% of their total working year), an allowance for overheads, and an appropriate allocation for profit.The scope of work and agency resource plan should be set out in detail, with the various phases of activities separated out in terms of the input required from people with the required skill sets and seniority to produce deliverables. This will produce a schedule of peoples hours and charge-out rates which can in turn be translated into a total cost to client, billable on a monthly basis. Ideally a RPF agreement should make provision for a longer period so that the base formula does not need to be negotiated every year. But in practice the detailed scope of work changes every year, thus necessitating an adjustment in fee level.

3. VARIABLE FEE BASED ON ACTUAL HOURS

This system is less common in creative agency agreements, but more widely found in other marketing service agreements, e.g. direct marketing, sales promotion and public relations. Fees are based on actual time spent using hourly charge-out rates for individual staff. The charge-out rate will be calculated to cover the employees salary, a percentage of overheads and an allowance for profit. Although this is a similar approach to the RPF model, there is one

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essential difference: the fee paid is calculated after the event (based on hours worked) rather than in advance (on a pre negotiated calculation).

4. SCALE FEE + WIN BONUS Client pays its agency a salary, which is a fi xed percentage of either sales or of the annual marketing budget. In the case of a Scale Fee based on sales, the Win Bonus is built-in; i.e. if sales increase by8% so does the agencys fee. If the Scale Fee is pegged on the marketing budget, the Win Bonus becomes more of a conventional Payment by Results and can be calculated on a mix of subjective and objective elements.

5. PROJECT FEES

Project Fees are an alternative to fixed annual fees, with fees being determined on an individual project basis. This system is usually not suited to longer-term arrangements, although they are becoming more common in roster agreements as a mechanism for specifying nonrepeating tasks. Project Fees are widely used in the provision of ad hoc or supplementary services, and in specialist fields such as direct marketing, public relations and sales promotion. They are highly suitable for clients who are keen to work with agencies on projects or ideas which are additional to their main advertising requirements. This method should normally attract a higher level of charge than a RPF, as it does not give the agency the security of a notice period or a specific initial tenure. Usually the fee covers the planning and creative process with production or implementation being charged additionally as part of a total project budget. 6. CONCEPT FEE

The Concept Fee is a one-off fee agreed to cover the cost of developing the creative concept of a campaign. It is based on the estimated value of an idea to the clients business and its anticipated use in an agreed context over an agreed period of time. Concept Fees are best suited when the client has a requirement for a specifi c piece of work that does not fi t within its existing clientagency agreement.Concept Fees, like Project Fees, generally attract a premium rate due to the short-term tenure of the assignment. Usage of the concept outside of the agreed
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parameters will attract a further fee. An important factor is the overall understanding of the issue of Intellectual Property Rights (IPRs) which legally reside with the creator of the concept, unless otherwise assigned. The agency holds the IPRs and the Concept Fee means that the agency is paid in a similar fashion to musicians and artists for usage of these materials. Payment can be for outright ownership or on a licence basis to the client. The purchase or licensing of the concept should be enshrined in a contractual agreement that specifies when, where and how the concept can be used. 7. LICENSING FEE PAYING FOR COPYRIGHT AND INTELLECTUAL PROPERTY RIGHTS This differs from the Concept Fee in one important regard. Under a Licensing Agreement the client may choose to pay the agency for concept development at a reduced rate than that paid under the Concept Fee basis and then agrees to pay a License Fee for the finished concept once it has been approved. Conventional contractual arrangements provide for a client to own IPRs in material it has paid for. The agency retains IPRs until it has been paid for the relevant materials. But this approach assumes a commission or RPF scenario where these rights are bought by the client as part of the overall agreement. Licensing Fees highlight the importance of big ideas and concepts by making provision for them to be paid for and used under license. Under such an agreement there will normally be a reduced level of Retainer/Service fee. Licensing Fees are a common feature of client agreements with digital agencies.

8. HYBRID METHODS The client and agency may often find the fairest remuneration will be a mixture of remuneration types. Thus, while there are seven main methods of remuneration, there are other elements that are quite often employed. For example, production mark-ups and Payment by Results can be used in combination with one or more of the primary methods. However, hybrid methods still need to be guided by the principles of being simple to understand and administer, and flexible enough to accommodate change.

9. PRODUCTION MARK-UP
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Often erroneously termed production commission, production mark-up was historically one of the fundamental elements of agency revenue (and is still a feature of the sales promotion world). In its capacity as the clients agent the agency buys a substantial volume of products and services on the clients behalf. Production mark-up represents payment by the client to the agency for supervising and controlling quality. In the media commission era it was customary for the agency to mark up all third party purchases originally by 17.65% on the net invoice to produce a mark-up. As the industry moved to a fee remuneration norm, production mark-up was reduced, and in many cases it has disappeared completely with agencies deriving their supervisory and quality control income from the main fee. In PFA 2003 average production mark-up paid was 12.8%, but only 26% of the sample still rewards their agency on this basis. In other marketing services production mark-up is still prevalent.

10. PAYMENTS BY RESULTS SCHEMES Payment by Results (PBR) schemes are incorporated in an increasing number of client agency contracts (44% of creative agency agreements according to PFA 2003), with an incentive based on achieving mutually agreed Key Performance Indicators (KPIs) and goals. The intention is to devise a win/win situation with better, more measurable outcomes for the client and the potential for a significantly higher return for the agency. PBR schemes work best over a number of years as this timeline allows for better measurement of results. The agreed goals and KPIs may be qualitative, quantitative, or a mix of both. They must be meaningful, achievable, and measurable. The goals should be considered very carefully to ensure that any focus on shortterm objectives is not at the expense of long-term brand building. The suitability of this form of incentive will depend on the availability of meaningful data and the flexibility of the marketing budget. It is important that agreed PBR payments are allowed for in the budget. And within the clients financial systems ADVERTISING CAMPAIGN

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An advertising campaign is a series of advertisement messages that share a single idea and theme which make up an integrated marketing communication (IMC). Advertising campaigns appear in different media across a specific time frame. The critical part of making an advertising campaign is determining a champion theme as it sets the tone for the individual advertisements and other forms of marketing communications that will be used. The campaign theme is the central message that will be communicated in the promotional activities. The campaign themes are usually developed with the intention of being used for a substantial period but many of them are short lived due to factors such as being ineffective or market conditions and/or competition in the marketplace and marketing mix.

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